United Airlines Reports Fourth-Quarter and Full-Year 2017 - United Hub

United Airlines Reports Fourth-Quarter and Full-Year 2017 Performance

January 23, 2018

CHICAGO, Jan. 23, 2018 /PRNewswire/ -- United Airlines (UAL) today announced its fourth-quarter and full-year 2017 financial results. 

  • UAL reported fourth-quarter net income of $580 million, diluted earnings per share of $1.99, pre-tax earnings of $600 million and pre-tax margin of 6.4 percent. Excluding special charges and income tax adjustments, UAL reported fourth-quarter net income of $408 million, diluted earnings per share of $1.40, pre-tax earnings of $631 million and pre-tax margin of 6.7 percent.
  • UAL reported full-year net income of $2.1 billion, diluted earnings per share of $7.02, pre-tax earnings of $3.0 billion and pre-tax margin of 7.9 percent. Excluding special charges and income tax adjustments, UAL reported full-year net income of $2.1 billion, diluted earnings per share of $6.76, pre-tax earnings of $3.2 billion and pre-tax margin of 8.4 percent.
  • UAL repurchased $553 million of its common shares in the fourth quarter, bringing the full-year share repurchases to $1.8 billion and completing the company's July 2016 $2 billion share repurchase program. The company's board of directors authorized a new $3 billion share repurchase program in December.
  • During 2017, United consistently notched operational bests in on-time arrivals and completions while seeing the fewest cancellations and the best baggage performance in company history.
  • Employees earned $349 million in profit sharing for 2017.

"I am incredibly proud of how our employees delivered in 2017, achieving our best-ever operational performance. Reliability is an important pillar in our continued focus on further improving the customer experience," said Oscar Munoz, chief executive officer of United Airlines. "Looking ahead, we are committed to improving profitability over the long-term by building on the strong foundation we have laid over the past two years. Everyone at United is excited to enter 2018 with a clear set of priorities and a renewed sense of purpose around unlocking the full potential of United Airlines."

Fourth-Quarter and Full-Year Revenue

For the fourth quarter of 2017, revenue was $9.4 billion, an increase of 4.3 percent year-over-year. Fourth-quarter 2017 consolidated passenger revenue per available seat mile (PRASM) was up 0.2 percent compared to the fourth quarter of 2016. Cargo revenue was $304 million in the fourth quarter of 2017, an increase of 21.6 percent year-over-year primarily due to higher international freight volume and yields. For the full year of 2017, total revenue was $37.7 billion, an increase of 3.2 percent year-over-year.

"Everything we do at United is underpinned by a commitment to deliver top tier operational reliability," said Scott Kirby, president of United Airlines. "Thanks to the drive and dedication of our employees, we have significantly raised the bar in this area, delivering a record-setting operational performance in 2017. Looking ahead, our focus will be on continuing to improve customer service and expanding United's network to offer customers more choice."

Fourth-Quarter and Full-Year Costs

Total operating expense was $8.7 billion in the fourth quarter, up 8.2 percent year-over-year. Consolidated unit cost per available seat mile (CASM) increased 4.0 percent compared to the fourth quarter of 2016 due largely to higher fuel and labor expense. Fourth-quarter consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, increased 1.5 percent year-over-year, driven mainly by higher labor expense. For the full year, consolidated CASM increased 2.8 percent compared to full-year 2016 due largely to higher fuel and labor expense. Excluding special charges, third-party business expenses, fuel and profit sharing, consolidated CASM increased 3.1 percent compared to the prior year primarily due to expenses resulting from labor agreements ratified in 2016.

"We are encouraged by our financial results in the fourth quarter which capped a year of strong earnings. Additionally, throughout the year we made significant investments in the business while continuing to return cash to our shareholders through $1.8 billion of share repurchases," said Andrew Levy, executive vice president and chief financial officer of United Airlines. "In 2018, we will continue to focus on cost control, invest strategically into the business and utilize our new $3 billion share repurchase authorization to return cash to our shareholders."

 Capital Allocation

UAL generated $728 million in operating cash flow during the fourth quarter of 2017 and ended the quarter with $5.8 billion in unrestricted liquidity, including $2.0 billion of undrawn commitments under its revolving credit facility. UAL generated $3.4 billion in operating cash flow for the full year. The company continued to invest in its business through capital expenditures of $1.1 billion in the fourth quarter and a total of $4.0 billion for the full year. Adjusted capital expenditures, measured as capital expenditures including assets acquired through the issuance of debt and capital leases, airport construction financing, and excluding fully reimbursable projects, were $1.0 billion during the fourth quarter and $4.7 billion for the full year in 2017. The company contributed $419 million to its pension plans and made debt and capital lease principal payments of $1.0 billion during 2017.

For the 12 months ended Dec. 31, 2017, the company's pre-tax income was $3.0 billion and return on invested capital (ROIC) was 13.8 percent. In the fourth quarter, UAL purchased $553 million of its common shares at an average price of $59.61 per share. During 2017, UAL purchased $1.8 billion of its common shares at an average price of $66.30 per share. The company completed its July 2016 $2 billion share repurchase program and announced authorization for a new $3 billion share repurchase program, which represents approximately 14 percent of the company's market capitalization based on the closing stock price on Jan. 22, 2018.

UAL management will host an Investor Event at 4:30pm ET today to discuss fourth-quarter and full-year 2017 earnings, outline 2018 priorities, provide an update on United's network strategy and deliver a financial update. During this presentation, UAL will provide full-year 2018 guidance including earnings per share and establish long-term earnings targets. Please visit ir.united.com to access the first-quarter 2018 investor update, the webcast of the event and the company's presentation made available during the webcast, the entirety of which will be available on the website at the conclusion of the event.

Fourth-Quarter and Full-Year Highlights

Operations and Employees

  • Achieved a record-setting year for operational reliability, including best on-time departure performance, fewest cancellations, and best baggage handling performance.
  • The fourth quarter saw a record-breaking performance during the busy holiday travel season.
    • In December, United was first place among competitors in mainline on-time departures, completion factor, and on-time arrivals.
    • In November, United set company performance records during the busy Thanksgiving travel week, landing its best-ever Thanksgiving completion factor and twice breaking on-time performance records in the midst of the busiest travel days of the year.
  • Employees earned incentive payments of approximately $30 million for achieving operations performance goals in the fourth quarter, marking a full year of earned bonuses totaling approximately $87 million.
  • The company earned its seventh consecutive perfect 100 percent score on the Human Rights Campaign's Corporate Equality Index and a spot on the organization's list of "Best Places to Work for LGBT Equality."
  • Recognized as a Top 100 Best Places to Work in the U.S. by the Glassdoor Employees' Choice Awards.
  • Announced the appointment of Regional Presidents for California and New York/New Jersey, demonstrating our commitment to these communities and our hubs.
  • In response to the catastrophic weather events Harvey, Irma and Maria, United and its employees came together to keep the operation moving and take part in relief efforts, delivering more than 1.7 million pounds of relief supplies to impacted areas, and together with customers and employees, raised and contributed more than $9 million to community assistance.

Network and Fleet

  • Last year, announced 44 new domestic routes from the company's seven U.S. mainland hubs, and increased service on 11 routes to the Hawaiian Islands from Denver, Chicago, Los Angeles and San Francisco – offering more nonstop service to Hawaiian destinations than any other carrier. 
  • Announced 13 new international routes in 2017 including its newest route San Francisco to Papeete, Tahiti starting seasonally in October 2018.
  • By increasing its nonstop service from six hub cities to nine ski destinations, United offers customers the most service to the most ski destinations across the U.S.
  • During 2017, took delivery of 19 new Boeing aircraft, including twelve 777-300ER, three 787-9, four 737-800 and eight used Airbus aircraft including two A320 and six A319.
  • Announced an agreement with Boeing to convert 100 current 737 MAX orders into 737 MAX 10 aircraft starting in late 2020.
  • Announced an agreement with Airbus to modify its A350 order resulting in a conversion of the model type from the A350-1000 to the A350-900, an increase in the order size from 35 to 45 aircraft and a deferral of the first delivery to late 2022.
  • Retired the company's iconic Boeing 747 fleet with a final farewell flight between San Francisco and Honolulu.

Customer Experience

  • Took several actions to improve the overall customer experience – including providing more tools to employees to assist customers and increasing compensation for denied boarding.
  • Rolled out system-wide new Customer Solutions Desk with a dedicated team to develop creative solutions to assist customers in reaching their final destinations when their travel plans don't go as expected.
  • Decreased involuntary denied boardings by 92% since April, and in December only had 13 involuntary denied boardings.
  • Upgraded the Houston and Newark terminal experience with the opening of OTG experience, opened new security lanes with automated security bins at Chicago and Newark, and opened the brand new upgraded Los Angeles United Club along with new Global Services lobbies in Houston, Newark and Los Angeles.
  • Improved the customer experience at Houston George Bush Intercontinental Airport by offering customers shorter, more convenient connection times and better access to more destinations through "rebanking" of the hub. UAL will "rebank" Chicago O'Hare beginning in February of 2018.
  • Unveiled new enhancements to United's award-winning mobile app including bag tracking feature, ability to change and cancel flights in the app, add MileagePlus and United Club cards to the Apple Wallet, and allow customers to access boarding passes for 19 other carriers.
  • Became the first airline to give customers access to flight information and other amenities skills for Amazon Alexa, Google Assistant and Fitbit Ionic smartwatch.
  • Continued to improve the mobile tools used by employees, including the first release of the "in the moment" care app, and new functionality in flight attendant tools to better serve customers.
  • The company received the CIO 100 award, an acknowledged mark of enterprise excellence in business technology.
  • Launched a new online portal, United Jetstream, in an effort to simplify the travel management process and give corporate and agency customers an intuitive suite of self-service tools.

About United

United Airlines and United Express operate approximately 4,500 flights a day to 338 airports across five continents. In 2017, United and United Express operated more than 1.6 million flights carrying more than 148 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, Newark/New York, San Francisco and Washington, D.C. United operates 744 mainline aircraft and the airline's United Express carriers operate 518 regional aircraft. The airline is a founding member of Star Alliance, which provides service to 191 countries via 28 member airlines. For more information, visit united.com, follow @United on Twitter or connect on Facebook. The common stock of United's parent, United Continental Holdings, Inc., is traded on the NYSE under the symbol "UAL".

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
Certain statements included in this release are forward-looking and thus reflect our current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as "expects," "will," "plans," "anticipates," "indicates," "believes," "forecast," "guidance," "outlook," "goals" and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this release are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: our ability to comply with the terms of our various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our operational plans and revenue-generating initiatives, including optimizing our revenue; our ability to control our costs, including realizing benefits from our resource optimization efforts, cost reduction initiatives and fleet replacement programs; costs associated with any modification or termination of our aircraft orders; our ability to utilize our net operating losses; our ability to attract and retain customers; potential reputational or other impact from adverse events in our operations; demand for transportation in the markets in which we operate; an outbreak of a disease that affects travel demand or travel behavior; demand for travel and the impact that global economic and political conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets); economic and political instability and other risks of doing business globally; our ability to cost-effectively hedge against increases in the price of aircraft fuel if we decide to do so; any potential realized or unrealized gains or losses related to fuel or currency hedging programs; the effects of any hostilities, act of war or terrorist attack; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the effects of any technology failures or cybersecurity breaches; disruptions to our regional network; the costs and availability of aviation and other insurance; industry consolidation or changes in airline alliances; the success of our investments in airlines in other parts of the world; competitive pressures on pricing and on demand; our capacity decisions and the capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation and other actions (including Open Skies agreements and environmental regulations); the impact of regulatory, investigative and legal proceedings and legal compliance risks; the impact of any management changes; labor costs; our ability to maintain satisfactory labor relations and the results of any collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; weather conditions; and other risks and uncertainties set forth under Part I, Item 1A., "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission.

-tables attached-

UNITED CONTINENTAL HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)

(In millions, except per share data) Three Months Ended
December 31, 2017
Three Months Ended
December 31, 2016
%
Increase/
(Decrease)
Year Ended
December 31, 2017
Year Ended
December 31, 2016
%
Increase/
(Decrease)
Operating revenue:
Passenger:
Mainline
$6,582 $6,295 4.6 $26,552 $25,414 4.5
Operating revenue: Passenger: Regional 1,498 1,466 2.2 5,852 6,043 (3.2)
Operating revenue: Passenger: (B) Total passenger revenue 8,080 7,761 4.1 32,404 31,457 3.0
Operating revenue: Cargo 304 250 21.6 1,035 876 18.2
Operating revenue: Other operating revenue 1,054 1,041 1.2 4,297 4,223 1.8
Operating revenue:Other operating revenue: Total operating revenue 9,438 9,052 4.3 37,736 36,556 3.2
Operating expense:
Salaries and related costs
2,704 2,568 5.3 11,045 10,275 7.5
Operating expense: Aircraft fuel(C) 1,875 1,555 20.6 6,913 5,813 18.9
Operating expense: Landing fees and other rent 570 553 3.1 2,240 2,165 3.5
Operating expense: Regional capacity purchase 580 552 5.1 2,232 2,197 1.6
Operating expense: Depreciation and amortization 539 504 6.9 2,149 1,977 8.7
Operating expense: Aircraft maintenance materials and outside repairs 479 448 6.9 1,856 1,749 6.1
Operating expense: Distribution expenses 328 316 3.8 1,349 1,303 3.5
Operating expense: Aircraft rent 145 159 (8.8) 621 680 (8.7)
Operating expense: Special charges (D) 31 (31) NM 176 638 NM
Operating expense: Other operating expenses 1,458 1,423 2.5 5,657 5,421 4.4
Operating expense: Total operating expenses 8,709 8,047 8.2 34,238 32,218 6.3
Operating income: Operating income 729 1,005 (27.5) 3,498 4,338 (19.4)
Operating margin: 7.7% 11.1% (3.4) pts. 9.3% 11.9% (2.6) pts.
Operating margin, excluding special charges (A) (Non-GAAP) 8.1% 10.8% (2.7) pts. 9.7% 13.6% (3.9) pts.
Nonoperating income (expense):
Interest expense
(171) (148) 15.5 (643) (614) 4.7
Nonoperating income (expense): Interest capitalized 20 24 (16.7) 84 72 16.7
Nonoperating income (expense): Interest income 16 11 45.5 57 42 35.7
Nonoperating income (expense): Miscellaneous, net (D) 6 (8) NM 3 (19) NM
Nonoperating income (expense): Total nonoperating expense (129) (121) 6.6 (499) (519) (3.9)
Income before income taxes: Income before income taxes 600 884 (32.1) 2,999 3,819 (21.5)
Pre-tax margin:Pre-tax margin 6.4% 9.8% (3.4) pts. 7.9% 10.4% (2.5) pts.
Pre-tax margin: Pre-tax margin, excluding special charges and reflecting hedge adjustments (A) (Non-GAAP) 6.7% 9.5% (2.8) pts. 8.4% 12.2% (3.8) pts.
Income tax expense: Income tax expense (E) 20 487 (95.9) 868 1,556 (44.2)
Net income: Net income $580 $397 46.1 $2,131 $2,263 (5.8)
Earnings per share: Earnings per share, diluted $1.99 $1.26 57.9 $7.02 $6.85 2.5
Weighted average shares: Weighted average shares, diluted 291.8 315.7 (7.6) 303.6 330.3 (8.1)
  1. NM means Not Meaningful
Statistics:

NM Not meaningful

 

UNITED CONTINENTAL HOLDINGS, INC.
STATISTICS
Statistics: Three Months Ended
December 31, 2017
Three Months Ended
December 31, 2016
%
Increase/
(Decrease)
Year Ended
December 31, 2017
Year Ended
December 31, 2016
%
Increase/
(Decrease)
Mainline:
Passengers (thousands)
26,926 25,590 5.2 108,017 101,007 6.9
Mainline:Revenue passenger miles (millions) 47,192 45,608 3.5 193,444 186,181 3.9
Mainline:Available seat miles (millions) 57,866 55,440 4.4 234,576 224,692 4.4
Mainline:Cargo ton miles (millions) 910 790 15.2 3,316 2,805 18.2
Mainline:Passenger revenue per available seat mile (cents) 11.37 11.35 0.2 11.32 11.31 0.1
Mainline:Average yield per revenue passenger mile (cents) 13.95 13.80 1.1 13.73 13.65 0.6
Mainline:Aircraft in fleet at end of period 744 737 0.9 744 737 0.9
Mainline:Average stage length (miles) 1,775 1,804 (1.6) 1,806 1,859 (2.9)
Mainline:Average daily utilization of each aircraft (hours: minutes) 10:16 9:54 3.7 10:27 10:06 3.5
Regional:
Passengers (thousands)
10,487 10,433 0.5 40,050 42,170 (5.0)
Regional:Revenue passenger miles (millions) 5,957 5,930 0.5 22,817 24,128 (5.4)
Regional:Available seat miles (millions) 7,162 7,078 1.2 27,810 28,898 (3.8)
Regional:Passenger revenue per available seat mile (cents) 20.92 20.71 1.0 21.04 20.91 0.6
Regional:Average yield per revenue passenger mile (cents) 25.15 24.72 1.7 25.65 25.05 2.4
Regional:Aircraft in fleet at end of period 518 494 4.9 518 494 4.9
Regional:Average stage length (miles) 558 560 (0.4) 558 564 (1.1)
Consolidated (Mainline and Regional):
Passengers (thousands)
37,413 36,023 3.9 148,067 143,177 3.4
Consolidated (Mainline and Regional)Revenue passenger miles (millions) 53,149 51,538 3.1 216,261 210,309 2.8
Consolidated (Mainline and Regional)Available seat miles (millions) 65,028 62,518 4.0 262,386 253,590 3.5
Consolidated (Mainline and Regional)Passenger load factor 81.7% 82.4% (0.7) pts. 82.4% 82.9% (0.5) pts.
Consolidated (Mainline and Regional)Domestic 85.2% 85.2% 85.2% 85.4% (0.2) pts.
Consolidated (Mainline and Regional)Internal 77.2% 78.9% (1.7) pts. 78.9% 80.0% (1.1) pts.
Consolidated (Mainline and Regional)Passenger revenue per available seat mile (cents) 12.43 12.41 0.2 12.35 12.40 (0.4)
Consolidated (Mainline and Regional)Total revenue per available seat mile (cents) 14.51 14.48 0.2 14.38 14.42 (0.3)
Consolidated (Mainline and Regional)Average yield per revenue passenger mile (cents) 15.20 15.06 0.9 14.98 14.96 0.1
Consolidated (Mainline and Regional)Aircraft in fleet at end of period 1,262 1,231 2.5 1,262 1,231 2.5
Consolidated (Mainline and Regional)Average stage length (miles) 1,431 1,441 (0.7) 1,460 1,473 (0.9)
Consolidated (Mainline and Regional)Average full-time equivalent employees (thousands) 85.6 84.8 0.9 86.0 83.9 2.5
Note:See Part II, Item 6 Selected Financial Data of the company's annual report on Form 10-K for the year ended December 31, 2016 for the definition of these statistics.

 

 

 

UNITED CONTINENTAL HOLDINGS, INC.
SUMMARY FINANCIAL METRICS (A)

(In millions, except per share data) Three Months Ended
December 31, 2017
Three Months Ended
December 31, 2016
%
Increase/
(Decrease)
Year Ended
December 31, 2017
Year Ended
December 31, 2016
%
Increase/
(Decrease)
Operating income: Operating income $729 $1,005 (27.5) $3,498 $4,338 (19.4)
Operating margin:Operating margin: 7.7% 11.1% (3.4) pts. 9.3% 11.9% (2.6) pts.
Operating income, excluding special charges (Non-GAAP) 760 974 (22.0) 3,674 4,976 (26.2)
Operating margin, excluding special charges (Non-GAAP) 8.1% 10.8% (2.7) pts. 9.7% 13.6% (3.9) pts.
Adjusted EBITDA, excluding special charges and reflecting hedge adjustments (a) (Non-GAAP) $1,305 $1,474 (11.5) $5,826 $6,939 (16.0)
Adjusted EBITDA margin, excluding special charges and reflecting hedge adjustments (a) (Non-GAAP) 13.8% 16.3% (2.5) pts. 15.4% 19.0% (3.6) pts.
Pre-tax income $600 $884 (32.1) $2,999 $3,819 (21.5)
Pre-tax margin 6.4% 9.8% (3.4) pts. 7.9% 10.4% (2.5) pts.
Pre-tax income, excluding special charges and reflecting hedge adjustments (a) (Non-GAAP) 631 857 (26.4) 3,175 4,462 (28.8)
Pre-tax margin, excluding special charges and reflecting hedge adjustments (a) (Non-GAAP) 6.7% 9.5% (2.8) pts. 8.4% 12.2% (3.8) pts.
Net income: Net income $580 $397 46.1 $2,131 $2,263 (5.8)
Net income: Net income, excluding special charges and reflecting hedge adjustments (a) (Non-GAAP) 408 562 (27.4) 2,052 2,857 (28.2)
Diluted earnings per share: Diluted earnings per share $1.99 $1.26 57.9 $7.02 $6.85 2.5
Diluted earnings per share: Diluted earnings per share, excluding special charges and reflecting hedge adjustments (a) (Non-GAAP) 1.40 1.78 (21.3) 6.76 8.65 (21.8)
Net cash provided by operating activities: Net cash provided by operating activities $728 $658 10.6 $3,413 $5,542 (38.4)
Capital expenditures: Capital expenditures $1,098 $880 24.8 $3,998 $3,223 24.0
Capital expenditures: Adjusted capital expenditures (Non-GAAP) 1,046 1,078 (3.0) 4,729 3,347 41.3
Free cash flow: Free cash flow, net of financings (Non-GAAP) $(370) $(222) NM $(585) $2,319 NM
Free cash flow: Free cash flow (Non-GAAP) (318) (420) NM (1,316) 2,195 NM
(a) Hedge adjustments include prior period gains (losses) on fuel derivative contracts settled in the current period. See note D for further information.
(b) The company recorded a special income tax benefit adjustment of $192 million in 2017 and a special income tax expense adjustment of $180 million in 2016. See note E for further information on the income tax adjustments.

 

 

 

UNITED CONTINENTAL HOLDINGS, INC.
RETURN ON INVESTED CAPITAL (ROIC)

ROIC - Non-GAAP is a financial measure that we believe provides useful supplemental information for management and investors by measuring the effectiveness of our operations' use of invested capital to generate profits.
(in millions) Twelve Months Ended
December 31, 2017
Return On Invested CapitalNet Operating Profit After Tax (NOPAT)
Pre-tax income
$2,999
Return On Invested CapitalSpecial charges (D):
Severance and benefit costs
116
Return On Invested Capital
Impairment of assets
25
Return On Invested Capital
(Gains) losses on sale of assets and other special charges
35

Pre-tax income excluding special charges and reflecting hedge adjustments - Non-GAAP
3,175

add: Interest expense (net of income tax benefit) (a)
639

add: Interest component of capitalized aircraft rent (net of income tax benefit) (a)
302

add: Net interest on pension (net of income tax benefit) (a)
41

less: Income taxes paid
(20)

NOPAT - Non-GAAP
$4,137
Return On Invested CapitalInvested Capital (five-quarter average)
Total assets
$41,753

add: Capitalized aircraft operating leases (b)
4,585

less: Non-interest bearing liabilities (c)
(16,394)

Average invested capital - Non-GAAP
$29,944

Return On Invested Capital - Non-GAAP
13.8%
  • (a) Income tax benefit measured based on the effective cash tax rate. The effective cash tax rate is calculated by dividing cash taxes paid by pre-tax income excluding special charges and reflecting hedge adjustments. For the twelve months ended December 31, 2017, the effective cash tax rate was 0.6%.
  • (b) The purpose of this adjustment is to capitalize the impact of aircraft operating leases. The company uses a multiple of seven times its annual aircraft rent expense to estimate the potential capitalized value and related liability of its aircraft. This is a simplified method used by many rating agencies and financial analysts to assist with the impact of operating leases on financial measures like return on invested capital.
  • (c) Non-interest bearing liabilities include advance ticket sales, frequent flyer deferred revenue, deferred income taxes and other non-interest bearing liabilities.

 

 

 

UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION

(A) UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (GAAP) and Non-GAAP financial measures, including operating income (loss) excluding special charges, income (loss) before income taxes excluding special charges and reflecting hedge adjustments, net income (loss) excluding special charges and reflecting hedge adjustments, net earnings (loss) per share excluding special charges and reflecting hedge adjustments, and CASM, as adjusted, among others.

CASM is a common metric used in the airline industry to measure an airline's cost structure and efficiency. UAL reports CASM excluding special charges, third-party business expenses, fuel and profit sharing. UAL believes that adjusting for special charges is useful to investors because special charges are non-recurring charges not indicative of UAL's ongoing performance. UAL also believes that excluding third-party business expenses, such as maintenance, ground handling and catering services for third parties, fuel sales and non-air mileage redemptions, provides more meaningful disclosure because these expenses are not directly related to UAL's core business. UAL also believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management's performance excluding the effects of a significant cost item over which management has limited influence. UAL excludes profit sharing because this exclusion allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry. In addition, the company believes that adjusting for prior period gains and losses on fuel derivative contracts settled in the current period is useful because the adjustments allow investors to better understand the cash impact of settled fuel derivative contracts in a given period.

Pursuant to SEC Regulation G, UAL has included the following reconciliations of reported Non-GAAP financial measures to comparable financial measures reported on a GAAP basis.

Statistics: Three Months Ended
December 31, 2017
Three Months Ended
December 31, 2016
%
Increase/
(Decrease)
Nine Months Ended
December 31, 2017
Nine Months Ended
December 31, 2016
%
Increase/
(Decrease)
CASM Mainline Operations (cents)
Cost per available seat mile (CASM)
12.90 12.43 3.8 12.59 12.22 3.0
Cost per available seat mile (CASM)Special charges (D) 0.06 (0.06) NM 0.07 0.29 NM
Cost per available seat mile (CASM)Third-party business expenses 0.12 0.13 (7.7) 0.12 0.11 9.1
Cost per available seat mile (CASM)Fuel expense 2.68 2.33 15.0 2.46 2.16 13.9
CASM Mainline OperationsCASM, excluding special charges, third-party business expenses and fuel 10.04 10.03 0.1 9.94 9.66 2.9
CASM Mainline OperationsProfit sharing per available seat mile 0.08 0.22 (63.6) 0.15 0.28 (46.4)
CASM Mainline OperationsCASM, excluding special charges, third-party business expenses, fuel, and profit sharing 9.96 9.81 1.5 9.79 9.38 4.4
CASM Consolidated Operations (cents)Cost per available seat mile (CASM) 13.39 12.87 4.0 13.05 12.70 2.8
CASM Mainline Operations (cents)Special charges (D) 0.04 (0.05) NM 0.07 0.25 NM
CASM Mainline Operations (cents)Third-party business expenses 0.12 0.11 9.1 0.10 0.10
CASM Mainline Operations (cents) Fuel expense 2.88 2.49 15.7 2.64 2.29 15.3
CASM Mainline Operations (cents) CASM, excluding special charges, third-party business expenses and fuel 10.35 10.32 0.3 10.24 10.06 1.8
CASM Mainline Operations (cents) Profit sharing per available seat mile 0.07 0.19 (63.2) 0.13 0.25 (48.0)
CASM Mainline Operations (cents) CASM, excluding special charges, third-party business expenses, fuel, and profit sharing 10.28 10.13 1.5 10.11 9.81 3.1

 

UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION (Continued)
(In millions) Three Months Ended
December 31, 2017
Three Months Ended
December 31, 2016
$
Increase/
(Decrease)
%
Increase/
(Decrease)
Year Ended
December 31, 2017
Year Ended
December 31, 2016
$
Increase/
(Decrease)
%
Increase/
(Decrease)
Operating expenses $8,709 $8,047 $662 8.2 $34,238 $32,218 $2,020 6.3
Operating expensesSpecial charges (D) 31 (31) 62 NM 176 638 (462) NM
Operating expenses, excluding special charges Operating expenses, excluding special charges 8,678 8,078 600 7.4 34,062 31,580 2,482 7.9
Operating expenses, excluding special chargesThird-party business expenses 72 69 3 4.3 277 257 20 7.8
Operating expenses, excluding special chargesFuel expense 1,875 1,555 320 20.6 6,913 5,813 1,100 18.9
Operating expensesProfit sharing, including taxes 45 122 (77) (63.1) 349 628 (279) (44.4)
Operating expensesOperating expenses, excluding fuel, profit sharing, special charges and third-party business expenses $6,686 $6,332 $354 5.6 $26,523 $24,882 $1,641 6.6
Operating income $729 $1,005 $(276) (27.5) $3,498 $4,338 $(840) (19.4)
Operating incomeLess: Special charges (D) 31 (31) 62 NM 176 638 (462) NM
Operating incomeOperating income, excluding special charges $760 $974 $(214) (22.0) $3,674 $4,976 $(1,302) (26.2)
Operating incomeIncome before income taxes $600 $884 $(284) (32.1) $2,999 $3,819 $(820) (21.5)
Operating incomeSpecial charges and hedge adjustments before income taxes (D) 31 (27) 58 NM 176 643 (467) NM
Operating incomeIncome before income taxes and excluding special items $631 $857 $(226) (26.4) $3,175 $4,462 $(1,287) (28.8)
Operating incomeNet income $580 $397 $183 46.1 $2,131 $2,263 $(132) (5.8)
Operating incomeSpecial charges and hedge adjustments, net of tax (D) (172) 165 (337) NM (79) 594 (673) NM
Operating incomeNet income, excluding special charges and reflecting hedge $408 $562 $(154) (27.4) $2,052 $2,857 $(805) (28.2)
Diluted earnings per shareDiluted earnings per share $1.99 $1.26 $0.73 57.9 $7.02 $6.85 $0.17 2.5
Diluted earnings per shareSpecial charges and hedge adjustments 0.11 (0.09) 0.20 NM 0.58 1.95 (1.37) NM
Diluted earnings per shareTax effect related to special charges and hedge adjustments (0.70) 0.61 (1.31) NM (0.84) (0.15) (0.69) NM
Diluted earnings per shareDiluted earnings per share, excluding special items $1.40 $1.78 $(0.38) (21.3) $6.76 $8.65 $(1.89) (21.8)

 

UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION (Continued)

UAL provides financial metrics, including earnings before interest, taxes, depreciation and amortization (EBITDA), that we believe provide useful supplemental information for management and investors by measuring profit and profit as a percentage of total operating revenues. Adjusted EBITDA is EBITDA excluding special charges that are non-recurring and that management believes are not indicative of UAL's ongoing performance. Adjusted EBITDA also includes hedge adjustments to reflect the cash impact of fuel derivative contracts settled in the current period.

EBITDA
(In millions)
Three Months Ended
December 31, 2017
Three Months Ended
December 31, 2016
Year Ended
December 31, 2017
Year Ended
December 31, 2016
Net income:
Net income
$580 $397 $2,131 $2,263
Net income Adjusted for:Depreciation and amortization 539 504 2,149 1,977
Net income Adjusted for:Interest expense 171 148 643 614
Net income Adjusted for:Interest capitalized (20) (24) (84) (72)
Net income Adjusted for:Interest income (16) (11) (57) (42)
Net income Adjusted for:Income tax expense(E) 20 487 868 1,556
Net income Adjusted for:Special charges and hedge adjustments before income taxes (D) 31 (27) 176 643
Adjusted EBITDA, excluding special charges and reflecting hedge adjustments - Non-GAAPAdjusted EBITDA, excluding special charges and reflecting hedge adjustments - Non-GAAP $1,305 $1,474 $5,826 $6,939

UAL believes that adjusting capital expenditures for assets acquired through the issuance of debt and capital leases, airport construction financing and excluding fully reimbursable projects is useful to investors in order to appropriately reflect the non-reimbursable funds spent on capital expenditures. UAL also believes that adjusting net cash provided by operating activities for capital expenditures and adjusted capital expenditures is useful to allow investors to evaluate the company's ability to generate cash that is available for debt service or general corporate initiatives.

Capital Expenditures
(In millions)

Three Months Ended


December 31, 2017
Three Months Ended
December 31, 2016
Year Ended
December 31, 2017
Year Ended
December 31, 2016
Capital expenditures:Capital expenditures $1,098 $880 $3,998 $3,223
Capital expenditures:Property and equipment acquired through the issuance of debt and capital leases 17 271 935 386
Capital expenditures:Airport construction financing 1 23 42 91
Capital expenditures:Fully reimbursable projects (70) (96) (246) (353)
Capital expenditures:Adjusted capital expenditures – Non-GAAP $1,046 $1,078 $4,729 $3,347
Free Cash Flow
(In millions)
Free Cash Flow:Net cash provided by operating activities $728 $658 $3,413 $5,542
Free Cash Flow:Less capital expenditures 1,098 880 3,998 3,223
Free Cash Flow:Free cash flow, net of financings - Non-GAAP $(370) $(222) $(585) $2,319
Free Cash Flow:Net cash provided by operating activities $728 $658 $3,413 $5,542
Free Cash Flow:Less adjusted capital expenditures – Non-GAAP 1,046 1,078 4,729 3,347
Free Cash Flow:Free cash flow - Non-GAAP $(318) $(420) $(1,316) $2,195

 

UNITED CONTINENTAL HOLDINGS, INC.
NOTES (UNAUDITED)
(B) Select passenger revenue information is as follows (in millions):
Notes (Unaudited): 4Q 2017
Passenger
Revenue
(millions)
Passenger Revenue
vs.
4Q 2016
PRASM
vs.
4Q 2016
Yield
vs.
4Q 2016
Available Seat Miles
vs.
4Q 2016
Mainline:Mainline $3,626 7.3% 0.3% 0.1% 7.1%
Regional:Regional 1,453 2.7% 1.0% 1.9% 1.7%
Domestic:Domestic 5,079 6.0% (0.1%) 0.0% 6.0%
Atlantic:Atlantic 1,312 5.3% 1.3% 1.5% 4.0%
Pacific:Pacific 986 (4.3%) (2.9%) 0.6% (1.4%)
Latin America:Latin America 703 1.6% (0.6%) 2.6% 2.3%
International:International 3,001 1.1% (0.4%) 1.9% 1.4%
Consolidated:Consolidated 8,080 4.1% 0.2% 0.9% 4.0%
Mainline:Mainline $6,582 4.6% 0.2% 1.1% 4.4%
Regional:Regional 1,498 2.2% 1.0% 1.7% 1.2%
Consolidated:Consolidated 8,080        

 

UNITED CONTINENTAL HOLDINGS, INC.
NOTES (UNAUDITED)

(C) UAL's results of operations include fuel expense for both mainline and regional operations.
(In millions, except per gallon) Three Months Ended
December 31, 2017
Three Months Ended
December 31, 2016
%
Increase/
(Decrease)
Nine Months Ended
December 31, 2017
Nine Months Ended
December 31, 2016
%
Increase/
(Decrease)
Mainline fuel expense excluding hedge impacts Mainline fuel expense excluding hedge impacts $1,551 $1,270 22.1 $5,770 $4,640 24.4
Hedge losses reported in fuel expense (a) (20) NM (2) (217) NM
Total mainline fuel expenseTotal mainline fuel expense 1,551 1,290 20.2 5,772 4,857 18.8
Regional fuel expense Regional fuel expense 324 265 22.3 1,141 956 19.4
Consolidated fuel expenseConsolidated fuel expense $1,875 $1,555 20.6 $6,913 $5,813 18.9
Mainline fuel consumption (gallons)Mainline fuel consumption (gallons) 820 804 2.0 3,357 3,261 2.9
Mainline average aircraft fuel price per gallonMainline average aircraft fuel price per gallon $1.89 $1.60 18.1 $1.72 $1.49 15.4
Mainline average aircraft fuel price per gallon excluding hedge losses recorded in fuel expenseMainline average aircraft fuel price per gallon excluding hedge losses recorded in fuel expense $1.89 $1.58 19.6 $1.72 $1.42 21.1
Regional fuel consumption (gallons)Regional fuel consumption (gallons) 160 158 1.3 621 643 (3.4)
Regional average aircraft fuel price per gallonRegional average aircraft fuel price per gallon $2.03 $1.68 20.8 $1.84 $1.49 23.5
Consolidated fuel consumption (gallons)Consolidated fuel consumption (gallons) 980 962 1.9 3,978 3,904 1.9
Consolidated average aircraft fuel price per gallonConsolidated average aircraft fuel price per gallon $1.91 $1.62 17.9 $1.74 $1.49 16.8
Consolidated average aircraft fuel price per gallon excluding hedge losses recorded in fuel expenseConsolidated average aircraft fuel price per gallon excluding hedge losses recorded in fuel expense $1.91 $1.60 19.4 $1.74 $1.43 21.7
  • (a) UAL allocates 100 percent of losses from settled hedges that were designated for hedge accounting to mainline fuel expense.
 

(a)   UAL allocates 100 percent of losses from settled hedges that were designated for hedge accounting to mainline fuel expense.

 

 

 

UNITED CONTINENTAL HOLDINGS, INC.
NOTES (UNAUDITED)

(D) Special charges, hedge adjustments and income tax include the following:
(In millions) Three Months Ended
December 31, 2017
Three Months Ended
December 31, 2016
Year Ended
December 31, 2017
Year Ended
December 31, 2016
Operating:
Severance and benefit costs
$15 $10 $116 $37
Operating:Impairment of assets 10 25 412
Operating:Labor agreement costs (60) 64
Operating:Cleveland airport lease restructuring 74
Operating:(Gains) losses on sale of assets and other special charges 6 19 35 51
Operating:Subtotal 31 (31) 176 638
Other nonoperating (gains) losses:Other nonoperating (gains) losses (1)
Total special charges:Total special charges 31 (31) 176 637
Income tax benefit related to special charges:Income tax benefit related to special charges (11) 12 (63) (229)
Total special charges, net of income taxes:Total special charges, net of income taxes 20 (19) 113 408
Income tax adjustments (E) (192) 180 (192) 180
Hedge adjustments: prior period gains on fuel derivative contracts settled in the current period:Hedge adjustments: prior period gains on fuel derivative contracts settled in the current period 4 6
Total special charges and hedge adjustments, net of income taxes:Total special charges and hedge adjustments, net of income taxes $(172) $165 $(79) $594

 

Special charges, hedge adjustments and income tax adjustments

 

Severance and benefit costs: During the three months and year ended December 31, 2017, the company recorded $10 million ($6 million net of taxes) and  $83 million ($53 million net of taxes), respectively, of severance and benefit costs related to a voluntary early-out program for its technicians and related employees represented by the International Brotherhood of Teamsters (the "IBT"). In the first quarter of 2017, approximately 1,000 technicians and related employees elected to voluntarily separate from the company and will receive a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through early 2019.  Also during the three months and year ended December 31, 2017, the company recorded $5 million ($3 million net of taxes) and $33 million ($21 million net of taxes), respectively, of severance primarily related to its management reorganization initiative.

 

During the three months and year ended December 31, 2016, the company recorded $10 million ($6 million net of taxes) and $37 million ($24 million net of taxes), respectively, of severance and benefit costs related to a voluntary early-out program for the company's flight attendants and other severance agreements.

 

Impairment of assets: In the fourth quarter of 2017, the company recorded a $10 million ($6 million net of taxes) impairment charge related to obsolete spare parts inventory.  During 2017, United recorded a $15 million ($10 million net of taxes) intangible asset impairment charge related to a maintenance service agreement.

 

In April 2016, the Federal Aviation Administration ("FAA") announced that, effective October 30, 2016, it would designate Newark Liberty International Airport ("Newark") as a Level 2 schedule-facilitated airport under the International Air Transport Association Worldwide Slot Guidelines. The designation was associated with an updated demand and capacity analysis of Newark by the FAA. In the second quarter of 2016, the company determined that the FAA's action impaired the entire value of its Newark slots because the slots are no longer the mechanism that governs take-off and landing rights. Accordingly, the company recorded a $412 million special charge ($264 million net of taxes) to write off the intangible asset.

 

Labor agreement costs and related items: In 2016, the fleet service, passenger service, storekeeper and other employees represented by the International Association of Machinists and Aerospace Workers (IAM) ratified seven new contracts with the company which extended the contracts through 2021. Also in 2016, the technicians and related employees represented by the International Brotherhood of Teamsters (IBT) ratified a six-year joint collective bargaining agreement which extended the contract through 2022. During 2016, the company recorded $171 million ($110 million net of taxes) of special charges primarily for payments in conjunction with the IAM and IBT agreements described above. As part of the ratified contract with the IBT, the company amended some of its technicians and related employees' postretirement medical plans. The amendments triggered curtailment accounting, resulting in the recognition of a one-time $60 million gain ($38 million net of taxes) for accelerated recognition of a prior service credit in one of the plans. Also, as part of the ratified contract with the Association of Flight Attendants, the company amended two of its flight attendant postretirement medical plans. The amendments triggered curtailment accounting, resulting in the recognition of a one-time $47 million gain ($30 million net of taxes) for accelerated recognition of a prior service credit.

 

Cleveland airport lease restructuring: During 2016, the City of Cleveland agreed to amend the company's lease, which runs through 2029, associated with certain excess airport terminal space (principally Terminal D) and related facilities at Hopkins International Airport. The company recorded an accrual for remaining payments under the lease for facilities that the company no longer uses and will continue to incur costs under the lease without economic benefit to the company. This liability was measured and recorded at its fair value when the company ceased its right to use such facilities leased to it pursuant to the lease. The company recorded a special charge of $74 million ($47 million net of taxes) related to the amended lease.

 

Hedge adjustments: Prior to 2017, the company used certain combinations of derivative contracts that were economic hedges but did not qualify for hedge accounting under U.S. generally accepted accounting principles.  As with derivatives that qualified for hedge accounting, the economic hedges and individual contracts were part of the company's program to mitigate the adverse financial impact of potential increases in the price of fuel. The company recorded changes in the fair value of the various contracts that were not designated for hedge accounting to Nonoperating income (expense): Miscellaneous, net in the statements of consolidated operations. During the three months and year ended December 31, 2016, for fuel derivative contracts that settled in the three months and year ended December 31, 2016, the company recorded mark-to-market gains of $4 million and $6 million, respectively, in prior periods.

 

(E) Effective tax rate: The company's effective tax rate for the three months and year ended December 31, 2017 was 3.5% and 29.0%, respectively.  The company's effective tax rate for the three months and year ended December 31, 2016 was 55.1% and 40.7%, respectively. The rate for both 2017 periods was impacted by a one-time, $192 million benefit due to the passage of the Tax Cuts and Jobs Act in the fourth quarter of 2017. The rate for both 2016 periods was impacted by a special tax expense of $180 million.  In 2016, the company recorded approximately $180 million of deferred income tax expense adjustments in AOCI, which related to losses on fuel hedges designated for hedge accounting. Accounting rules required the adjustments to remain in AOCI as long as the company had fuel derivatives designated for cash flow hedge accounting. In 2016, we settled all of our fuel hedges and have not entered into any new fuel derivative contracts for hedge accounting. Accordingly, the company reclassified the $180 million to income tax expense in 2016.

 

The effective tax rates for the 2017 and 2016 periods represented a blend of federal, state and foreign taxes and the impact of certain nondeductible items. The effective tax rate for the three months and year ended December 31, 2017 reflects the impact of a change in the mix of domestic and foreign earnings.

 

 

 

SOURCE United Airlines

For further information: United Airlines Worldwide Media Relations, +1-872-825-8640, media.relations@united.com

United Airlines Raises Full Year 2019 Adjusted Diluted Earnings Per Share Guidance

October 15, 2019

CHICAGO, Oct. 15, 2019 /PRNewswire/ -- United Airlines (UAL) today announced that it has achieved third quarter diluted earnings per share (EPS) of $3.99 and adjusted diluted EPS2 of $4.07, and raised its full year 2019 adjusted diluted EPS1 guidance, with a new range of $11.25 to $12.25.

"Thanks to the outstanding efforts of our employees, United extended our streak of expanding pre-tax margin on a quarterly basis. It provides us further confidence to raise our full year 2019 adjusted diluted EPS guidance, putting us ahead of pace to achieve our goal of $11 to $13 in adjusted diluted EPS by the end of 2020," said Oscar Munoz, CEO of United Airlines. "While headwinds affected the sector as a whole this quarter, United's team once again demonstrated a robust ability to overcome adverse cost pressure, managing to continue growing our network while investing in winning our customers' loyalty through smart enhancements to the United experience."

  • Reported third quarter net income of $1.0 billion, diluted earnings per share of $3.99, pre-tax earnings of $1.3 billion and pre-tax margin of 11.9 percent, expanding pre-tax margin 2.3 points versus the third quarter of 2018.
  • Reported third quarter adjusted net income of $1.0 billion, adjusted diluted EPS of $4.07, adjusted pre-tax earnings of $1.4 billion and adjusted pre-tax margin of 12.1 percent, expanding adjusted pre-tax margin 2.5 points versus the third quarter of 2018.²
  • Consolidated third quarter passenger revenue per available seat mile (PRASM) increased 1.7 percent year-over-year.
  • Consolidated third quarter unit cost per available seat mile (CASM) decreased 0.9 percent year-over-year.
  • Consolidated third quarter CASM, excluding special charges, third party business expenses, fuel and profit sharing, increased 2.1 percent year-over-year.
  • Repurchased $363 million of its common shares in the third quarter of 2019 at an average purchase price of $88.22 per share.
  • Raised $1.2 billion in Enhanced Equipment Trust Certificates at a record low blended interest rate of 2.8% in connection with the financing of certain aircraft.

 

1 Excludes special charges and the mark-to-market impact of financial instruments, the nature of which are not determined at this time, and imputed interest on certain finance leases. Accordingly, UAL is not providing earnings guidance on a GAAP basis.

2 Excludes special charges, the mark-to-market impact of financial instruments and imputed interest on certain finance leases. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the tables accompanying this release.

For more information on UAL's fourth quarter and full year 2019 guidance, please visit ir.united.com for the company's investor update.

Third Quarter 2019 Highlights
Customer Experience

  • Announced MileagePlus award miles never expire, giving members a lifetime to use miles on flights, experiences, hotels and more.
  • Announced partnership with CLEAR which includes a free or discounted CLEAR membership for U.S. based MileagePlus members.
  • MileagePlus members between the ages of 18 to 22 receive a 10% discount on domestic flights when booked through the United mobile app by Dec. 31, 2019.
  • Announced improvements to United PassPlus, the airline's prepaid program that offers discounts, fixed fares and amenities to both individual and corporate customers.
  • Customers are now provided three inflight snack options on domestic flights regardless of departure time, including the Stroopwafel.
  • Customers can now pre pay for bags as soon as their ticket is issued. Previously customers had to wait until check-in to pay for their bags.
  • MileagePlus loyalty program was awarded Favorite Frequent-Flyer Program for the fourth time by Trazee Awards and the United Explorer Card from Chase was awarded Favorite Credit Card for the second consecutive year.

Operations

  • Achieved No. 1 in on-time departures in all hubs where United faces large hub competitors: Denver, Chicago and Los Angeles.
  • Completed introduction of ConnectionSaver to all of seven domestic hubs, saving over 35,000 connections in the quarter.

Employees

  • Honored with being recognized by search site indeed.com as a "Top 50 Workplace" for 2019.
  • Recognized for fourth consecutive year as a top-scoring company and best place to work for disability and inclusion with a perfect score of 100% on the 2019 Disability Equality Index.
  • Expects to hire about 8,000 people by the end of 2019.

Network

  • Announced 12 new and expanded international routes from Chicago, Denver, New York/Newark and San Francisco including Nice, France; Palermo, Italy; and Curacao.
  • Announced nonstop service to Tokyo Haneda with routes from Chicago, Los Angeles, New York/Newark and Washington, D.C., beginning March 28, 2020.
  • Resumed daily nonstop service between New York/Newark and Delhi and Mumbai on September 6.

Fleet

  • Launched Boeing 767-300ER ultra-premium United Polaris business class configuration on all flights between New York/Newark and London-Heathrow starting Sept. 15, 2019.
  • Took delivery of six used Airbus A319 aircraft and nine new Embraer E175 aircraft.

Community

  • Launched Crowdrise fundraising campaign for those affected by Hurricane Dorian.
  • Operated a Boeing 787-8 Dreamliner crewed exclusively by women to the largest airshow in the world, EAA AirVenture in Oshkosh, Wisconsin, to symbolize the airline's commitment to supporting women in aviation.

Investor Day

On March 5, 2020 United will host an investor event in New York. More details will be provided at a later date.

Earnings Call

UAL will hold a conference call to discuss its third-quarter 2019 financial results and its financial and operational outlook for fourth-quarter and full-year 2019 on Wednesday, October 16, 2019, at 9:30 a.m. Central time /10:30 a.m. Eastern time. A live, listen-only webcast of the conference call will be available at ir.united.com. The webcast will be available for replay within 24 hours of the conference call and then archived on the website for three months.

Every customer. Every flight. Every day.

In 2019, United is focusing more than ever on its commitment to its customers, looking at every aspect of its business to ensure that the carrier keeps customers' best interests at the heart of its service. In addition to today's announcement, this year United:

  • Announced that MileagePlus award miles will never expire
  • Gave Economy customers a choice of complimentary snacks on domestic flights
  • Made DIRECTV free for every customer on more than 200 aircraft
  • Released a new version of the award-winning, most downloaded app in the airline industry
  • Launched a new tool called ConnectionSaver, dedicated to improving the experience for customers with connecting flights
  • Partnered with CLEAR on free or discounted memberships for MileagePlus members
  • Announced PlusPoints, new upgrade benefits for MileagePlus Premier members
  • And introduced products in its amenity kits made exclusively for the airline by luxury skincare line Sunday Riley

About United

United's shared purpose is "Connecting People. Uniting the World." We are more focused than ever on our commitment to customers through a series of innovations and improvements designed to help build a great experience: Every customer. Every flight. Every day. Together, United Airlines and United Express operate approximately 4,900 flights a day to 358 airports across five continents. In 2018, United and United Express operated more than 1.7 million flights carrying more than 158 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C. United operates 788 mainline aircraft and the airline's United Express carriers operate 560 regional aircraft. United is a founding member of Star Alliance, which provides service to 195 countries via 26 member airlines. For more information, visit united.com, follow @United on Twitter and Instagram or connect on Facebook. The common stock of United's parent, United Airlines Holdings, Inc., is traded on the Nasdaq under the symbol "UAL".

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements included in this release are forward-looking and thus reflect our current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as "expects," "will," "plans," "anticipates," "indicates," "believes," "estimates," "forecast," "guidance," "outlook," "goals," "targets" and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this release are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: our ability to execute our strategic operating plan, including our growth, revenue-generating and cost-control initiatives; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets); risks of doing business globally, including instability and political developments that may impact our operations in certain countries; demand for travel and the impact that global economic and political conditions have on customer travel patterns; our capacity decisions and the capacity decisions of our competitors; competitive pressures on pricing and on demand; changes in aircraft fuel prices; disruptions in our supply of aircraft fuel; our ability to cost-effectively hedge against increases in the price of aircraft fuel, if we decide to do so; the effects of any technology failures or cybersecurity breaches; disruptions to services provided by third-party service providers; potential reputational or other impact from adverse events involving our aircraft or operations, the aircraft or operations of our regional carriers or our code share partners or the aircraft or operations of another airline; our ability to attract and retain customers; the effects of any terrorist attacks, international hostilities or other security events, or the fear of such events; the mandatory grounding of aircraft in our fleet; disruptions to our regional network; the impact of regulatory, investigative and legal proceedings and legal compliance risks; the success of our investments in other airlines, including in other parts of the world; industry consolidation or changes in airline alliances; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; costs associated with any modification or termination of our aircraft orders; disruptions in the availability of aircraft, parts or support from our suppliers; our ability to maintain satisfactory labor relations and the results of any collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; labor costs; an outbreak of a disease that affects travel demand or travel behavior; the impact of any management changes; extended interruptions or disruptions in service at major airports where we operate; U.S. or foreign governmental legislation, regulation and other actions (including Open Skies agreements, environmental regulations and the United Kingdom's withdrawal from the European Union); the seasonality of the airline industry; weather conditions; the costs and availability of aviation and other insurance; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to comply with the terms of our various financing arrangements; our ability to realize the full value of our intangible assets and long-lived assets; and other risks and uncertainties set forth under Part I, Item 1A., "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission.

-tables attached-

On January 1, 2019, United Airlines Holdings, Inc. ("UAL") adopted Accounting Standards Update No. 2016-02, Leases ("Topic 842"). As such, certain previously reported 2018 figures are adjusted in this report on a basis consistent with Topic 842.

UNITED AIRLINES HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)



Three Months Ended

September 30,


%

Increase/



Nine Months Ended

September 30,


%

Increase/


(In millions, except per share data)

2019


2018


(Decrease)



2019


2018


(Decrease)


Operating revenue:














Passenger

$

10,481



$

10,120



3.6




$

29,692



$

28,150



5.5



Cargo

282



296



(4.7)




863



903



(4.4)



Other operating revenue

617



587



5.1




1,816



1,759



3.2



Total operating revenue

11,380



11,003



3.4




32,371



30,812



5.1

















Operating expense:














Salaries and related costs

3,063



2,930



4.5




8,993



8,534



5.4



Aircraft fuel

2,296



2,572



(10.7)




6,704



6,927



(3.2)



Regional capacity purchase

721



676



6.7




2,124



1,999



6.3



Landing fees and other rent

645



618



4.4




1,893



1,822



3.9



Depreciation and amortization

575



545



5.5




1,682



1,607



4.7



Aircraft maintenance materials and outside repairs

490



455



7.7




1,319



1,333



(1.1)



Distribution expenses

432



427



1.2




1,234



1,162



6.2



Aircraft rent

67



109



(38.5)




221



355



(37.7)



Special charges (B)

27



17



NM




116



186



NM



Other operating expenses

1,591



1,467



8.5




4,645



4,293



8.2



Total operating expense

9,907



9,816



0.9




28,931



28,218



2.5

















Operating income

1,473



1,187



24.1




3,440



2,594



32.6

















Operating margin

12.9

%


10.8

%


2.1


pts.


10.6

%


8.4

%


2.2


pts.

Adjusted operating margin (Non-GAAP) (A)

13.2

%


10.9

%


2.3


pts.


11.0

%


9.0

%


2.0


pts.















Nonoperating income (expense):














Interest expense

(191)



(172)



11.0




(570)



(497)



14.7



Interest capitalized

22



16



37.5




65



46



41.3



Interest income

36



28



28.6




103



70



47.1



Miscellaneous, net (B)

9



(1)



NM




32



(118)



NM



Total nonoperating expense

(124)



(129)



(3.9)




(370)



(499)



(25.9)

















Income before income taxes

1,349



1,058



27.5




3,070



2,095



46.5

















Pre-tax margin

11.9

%


9.6

%


2.3


pts.


9.5

%


6.8

%


2.7


pts.

Adjusted pre-tax margin (Non-GAAP) (A)

12.1

%


9.6

%


2.5


pts.


9.8

%


7.6

%


2.2


pts.















Income tax expense (D)

325



225



44.4




702



434



61.8



Net income

$

1,024



$

833



22.9




$

2,368



$

1,661



42.6

















Diluted earnings per share

$

3.99



$

3.05



30.8




$

9.04



$

5.98



51.2



Diluted weighted average shares

256.4



273.6



(6.3)




262.0



278.0



(5.8)




NM Not meaningful

 

UNITED AIRLINES HOLDINGS, INC.

PASSENGER REVENUE INFORMATION AND STATISTICS


Passenger revenue information is as follows (in millions, except for percentage changes):



3Q 2019

Passenger

Revenue


3Q 2018

Passenger

Revenue (a)


Reporting
Adjustments
(b)


3Q 2018

Passenger

Revenue
(b)


Passenger

Revenue

vs.

3Q 2018
(b)


PRASM
vs.
3Q 2018
(b)


Yield vs.
3Q 2018
(b)


Available

Seat Miles

vs.

3Q 2018


3Q 2019
Available
Seat
Miles


3Q 2019
Revenue
Passenger
Miles

Domestic

$

6,554



$

6,253



$

56



$

6,309



3.9%


2.1%


2.3%


1.7%


42,670


36,940





















Atlantic

1,963



1,933



(38)



1,895



3.6%


0.8%


1.0%


2.8%


15,219


13,216

Pacific

1,121



1,163



(30)



1,133



(1.1)%


(3.4)%


(4.0)%


2.3%


10,858


9,038

Latin America

843



771



12



783



7.7%


7.2%


5.9%


0.4%


6,329


5,435

International

3,927



3,867



(56)



3,811



3.0%


0.9%


0.5%


2.2%


32,406


27,689





















Consolidated

$

10,481



$

10,120



$



$

10,120



3.6%


1.7%


1.6%


1.9%


75,076


64,629


(a) As previously reported.

(b) During the third quarter of 2019, United implemented a new revenue accounting software system which allowed it to more precisely determine the geographic regions associated with certain ancillary passenger revenue items. Prior to July 2019, those ancillary revenue items were determined using an allocation method that was based on revenue from passenger travel. While the total passenger revenue is not impacted, the geographic totals for each period are not comparable year-over-year due to the change. The third quarter 2018 passenger revenue presented in the table above, and utilized in the year-over-year comparisons displayed, was adjusted using the third quarter 2019 percentages.

 

Select operating statistics are as follows:



Three Months Ended

September 30,


%

Increase/

(Decrease)



Nine Months Ended

September 30,


%

Increase/

(Decrease)



2019


2018





2019


2018




Passengers (thousands)

43,091



42,886



0.5




122,137



118,439



3.1



Revenue passenger miles (millions)

64,629



63,393



1.9




180,727



173,187



4.4



Available seat miles (millions)

75,076



73,681



1.9




213,961



206,360



3.7



Passenger load factor:














Consolidated

86.1

%


86.0

%


0.1


pts.


84.5

%


83.9

%


0.6


pts.

Domestic

86.6

%


86.7

%


(0.1)


pts.


85.7

%


85.7

%



pts.

International

85.4

%


85.2

%


0.2


pts.


82.9

%


81.6

%


1.3


pts.

Passenger revenue per available seat mile (cents)

13.96



13.73



1.7




13.88



13.64



1.8



Total revenue per available seat mile (cents)

15.16



14.93



1.5




15.13



14.93



1.3



Average yield per revenue passenger mile (cents)

16.22



15.96



1.6




16.43



16.25



1.1



Cargo ton miles

804



851



(5.5)




2,440



2,523



(3.3)



Aircraft in fleet at end of period

1,348



1,306



3.2




1,348



1,306



3.2



Average stage length (miles)

1,473



1,454



1.3




1,464



1,453



0.8



Average full-time equivalent employees

90,591



89,022



1.8




90,071



87,112



3.4



Average aircraft fuel price per gallon

$

2.02



$

2.32



(12.9)




$

2.08



$

2.23



(6.7)



Fuel gallons consumed (millions)

1,134



1,111



2.1




3,221



3,101



3.9




Note: See Part II, Item 6, Selected Financial Data, of UAL's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, for definitions of these statistics.

 

UNITED AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(In millions)

September 30, 2019


December 31, 2018

ASSETS




Current assets:




Cash and cash equivalents

$

2,959



$

1,694


Short-term investments

2,167



2,256


Receivables, less allowance for doubtful accounts

1,617



1,426


Aircraft fuel, spare parts and supplies, less obsolescence allowance

1,065



985


Prepaid expenses and other

725



733


Total current assets

8,533



7,094






Total operating property and equipment, net

29,332



27,399


Operating lease right-of-use assets

4,937



5,262






Other assets:




Goodwill

4,523



4,523


Intangibles, less accumulated amortization

3,114



3,159


Restricted cash

100



105


Notes receivable, net

529



516


Investments in affiliates and other, net

1,131



966


Total other assets

9,397



9,269


Total assets

$

52,199



$

49,024






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Advance ticket sales

$

5,515



$

4,381


Accounts payable

2,848



2,363


Frequent flyer deferred revenue

2,537



2,286


Accrued salaries and benefits

2,104



2,184


Current maturities of long-term debt

1,243



1,230


Current maturities of finance leases

92



123


Current maturities of operating leases

778



719


Other

574



553


Total current liabilities

15,691



13,839






Other long-term liabilities and deferred credits:




Long-term debt

12,900



12,215


Long-term obligations under finance leases

186



224


Long-term obligations under operating leases

4,941



5,276


Frequent flyer deferred revenue

2,682



2,719


Postretirement benefit liability

836



1,295


Pension liability

1,087



1,576


Deferred income taxes

1,594



828


Other

981



1,010


Total other long-term liabilities and deferred credits

25,207



25,143


Stockholders' equity

11,301



10,042


Total liabilities and stockholders' equity

$

52,199



$

49,024


 

UNITED AIRLINES HOLDINGS, INC.

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)


(In millions)

Nine Months Ended

September 30,


2019


2018

Cash Flows from Operating Activities:




Net cash provided by operating activities

$

5,728



$

5,035






Cash Flows from Investing Activities:




Capital expenditures

(3,336)



(2,496)


Purchases of short-term and other investments

(2,168)



(1,975)


Proceeds from sale of short-term and other investments

2,282



1,979


Investment in affiliates

(36)



(139)


Proceeds from sale of property and equipment

47



30


Loans made to others

(10)



(10)


Other, net

(10)



104


Net cash used in investing activities

(3,231)



(2,507)






Cash Flows from Financing Activities:




Proceeds from issuance of long-term debt

1,109



1,241


Payments of long-term debt

(726)



(1,519)


Repurchases of common stock

(1,431)



(1,010)


Principal payments under finance leases

(105)



(57)


Capitalized financing costs

(51)



(31)


Other, net

(29)



(17)


Net cash used in financing activities

(1,233)



(1,393)


Net increase in cash, cash equivalents and restricted cash

1,264



1,135


Cash, cash equivalents and restricted cash at beginning of the period

1,799



1,591


Cash, cash equivalents and restricted cash at end of the period

$

3,063



$

2,726






Investing and Financing Activities Not Affecting Cash:




Property and equipment acquired through the issuance of debt

$

306



$

125


Operating lease conversions to finance lease

36



52


Right-of-use assets acquired through operating leases

344



537


Property and equipment acquired through finance leases

8




 

<

UNITED AIRLINES HOLDINGS, INC.

RETURN ON INVESTED CAPITAL (ROIC)—Non-GAAP


ROIC is a non-GAAP financial measure that UAL believes provides useful supplemental information for management and investors by measuring the effectiveness of the company's operations' use of invested capital to generate profits.


(in millions)

Twelve Months Ended

September 30, 2019

Net Operating Profit After Tax ("NOPAT")


Pre-tax income

$

3,623


Adjustments:


Special charges and mark-to-market ("MTM") gains on financial instruments: