United Airlines Announces First Quarter 2020 Financial Results - United Hub

United Airlines Announces First Quarter 2020 Financial Results

April 30, 2020

CHICAGO, April 30, 2020 /PRNewswire/ -- United Airlines (UAL) today announced first quarter 2020 financial results with a net loss of $1.7 billion, and an adjusted net loss¹ of $639 million. The company also outlined U.S. airline industry-leading efforts to manage through the most disruptive global crisis in the history of aviation. The company's total liquidity as of the close of business on Wednesday, April 29, 2020 was approximately $9.6 billion, including $2 billion under its undrawn revolving credit facility. The company currently expects daily cash burn² to average between $40 million and $45 million during the second quarter of 2020.

"Throughout the COVID-19 crisis we have maintained our focus - first on the safety of our customers and our people and second on swiftly taking action to keep United operating. We have been at the forefront of warning how deep of an impact we expect this crisis could have and how long we expect it could last. We've also led the industry in taking decisive steps to mitigate the operational and financial impacts of COVID-19 -- making deep schedule reductions, drastically reducing spending and aggressively raising liquidity," said Chief Executive Officer, Oscar Munoz. "While we are still in the midst of this crisis, we will not hesitate to make difficult decisions we believe will ensure the long term success of our company. When demand returns, we believe we'll be positioned to bounce back strongly and quickly because of our early and aggressive efforts to fight the worst financial crisis in aviation history."

COVID-19 Actions

The company took early and aggressive action intended to mitigate the impact of COVID-19 to position the company to bounce back quickly and make United stronger when demand returns.

  • First U.S. airline to make aggressive capacity reductions.
  • Suspended share repurchase program on Feb. 24, 2020, after spread of COVID-19 to Italy and terminated the program on April 24, 2020.
  • First U.S. airline to actively raise additional liquidity to manage the crisis. Since early March, the company raised $4.0 billion of new liquidity in three secured term loan facilities, new aircraft financings and an equity offering (excludes CARES Act Payroll Support Program funding and any Loan Program loans) as of the close of business April 29, 2020.
  • The company entered into an agreement with a subsidiary of BOC Aviation Limited for lease financing of six Boeing 787-9 and 16 Boeing 737 MAX 9 aircraft that are currently subject to purchase agreements between United and The Boeing Company and are scheduled to deliver in 2020, including two Boeing 787-9 aircraft that were delivered in April.
  • First U.S. airline to announce chief executive officer and president forgoing 100% of respective base salaries.
  • First U.S. airline to announce all other officers of the company will take salary reductions, with every officer base salary reduced by 50%.
  • Suspended merit salary increases for management and administrative employees and instituted a hiring freeze.
  • Offered voluntary unpaid leaves of absence for U.S.-based employees -- with more than 20,000 employees now participating.
  • Non-employee directors of the company waived 100% of cash compensation for the second and third quarters of 2020.
  • First major U.S. airline to require all flight attendants to wear masks on duty.
  • Postponed projects deemed non-critical to operation.
  • Slashed spending on vendors and outside contractors.
  • Reduced planned full-year adjusted capital expenditures by approximately $2.5 billion, bringing expected full-year adjusted capital expenditures to below $4.5 billion.3
  • Plan to only take delivery of aircraft that have financing in place.

Government Support

  • United has entered into an agreement to receive approximately $5.0 billion from the U.S. Treasury Department through the Payroll Support Program under the CARES Act in the form of a $3.5 billion grant and a $1.5 billion 10-year loan which will be used to protect the salaries and benefits of employees through Sept. 30, 2020. In connection with this funding, UAL will issue warrants to purchase approximately 4.6 million shares of UAL common stock to the federal government. The first installment of approximately $2.5 billion was received by United on April 21, 2020 and warrants to purchase approximately 2.3 million shares of UAL common stock were issued.
  • The company submitted an application to the Loan Program under the CARES Act. Under the Loan Program, the company expects to have the ability through Sept. 30, 2020 to borrow up to approximately $4.5 billion from the U.S. Treasury Department for a term of up to five years, with any loans issued expected to be senior secured obligations of the company. If the company borrows any amounts under the Loan Program, UAL expects to issue to the U.S. Treasury Department warrants to purchase shares of UAL common stock, with the number of warrants dependent on total borrowings.

First Quarter Results

  • Reported first quarter net loss of $1.7 billion, diluted loss per share of $6.86, and pre-tax loss of $2.1 billion.
  • Reported first quarter adjusted net loss of $639 million, adjusted diluted loss per share of $2.57, and adjusted pre-tax loss of $1.0 billion.¹

Additional COVID-19 Actions

Employees

  • Committed to no involuntary furloughs or reduced pay rates in the U.S. through Sept. 30, 2020.
  • Diligently enacting safety and social distancing measures designed to mitigate the spread of COVID-19 and ensure the workplace is clean and safe.
  • Utilizing temperature checks for airport employees and Flight Attendants prior to beginning work.
  • Simplified catering on flights to all shelf-stable and packaged food, and sealed and canned beverages; suspended buy on board.
  • Adjusted flight attendant jump seat locations so crew members don't have to sit directly next to or across from each other.
  • Granting additional paid days off for front line employees at several airports to limit their potential exposure to COVID-19.
  • Covering all testing costs associated with COVID-19 for anyone enrolled in a United medical plan, reduced copays for telemedicine visits.

Customers

  • Waiving change fees for tickets purchased through May 31, 2020 for twelve months and waiving redeposit fees for MileagePlus award travel scheduled through May 31, 2020.
  • Extended MileagePlus Premier status to 2022.
  • Utilizing electrostatic spraying to disinfect aircraft interiors, and expect to spray every operated flight by mid-June.
  • In May, start testing touchless kiosks for printing bag tags and checking bags, eliminating the need to touch the screen.
  • Made several modifications to the boarding process, including: customers scanning their own tickets prior to boarding, boarding fewer customers at a time and boarding from back to front.
  • Continue to provide the only commercial air service between Australia and the United States and Israel and the United States.
  • Enacting social distancing on flights for flight attendants and customers, including blocking middle seats.

Community

  • Since March 19, United Cargo has operated more than 800 cargo-only flights worldwide, bringing more than 28 million pounds of food and supplies to destinations worldwide.
  • Operated more than 130 repatriation flights bringing more than 18,500 Americans home who were stranded abroad.
  • Donated more than 173,327 pounds of food to food banks, hospitals and other organizations from United's catering facilities and Polaris lounges.
  • In 2019, launched Miles on a Mission, which allows members to donate miles to organizations including those that now support COVID-19 efforts.
  • Working with governments worldwide to assist moving people/supplies.
  • Partnered with California, New Jersey and New York City to provide free round-trip flights for medical volunteers traveling to heavily impacted cities, and to date have booked flights for more than 1,000 volunteers and 800 medical professionals.
  • Houston employees led effort to convert Houston cargo facility into food distribution center to aid the Houston Food Bank's efforts to feed families in need during the COVID-19 crisis.

Earnings Call

UAL will hold a conference call to discuss first-quarter 2020 financial results as well as its financial and operational outlook for second quarter and full year 2020, on Friday, May 1, at 9:00 a.m. CT/10:00 a.m. ET. 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.

About United

United's shared purpose is "Connecting People. Uniting the World." 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 in this release, including statements regarding the potential impacts of the COVID-19 pandemic and steps we plan to take in response thereto, 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," "remains," "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: the existing global COVID-19 pandemic and the outbreak of any other disease or similar public health threat that affects travel demand or travel behavior; the final terms of borrowing pursuant to the Loan Program under the CARES Act, if any, and the effects of the grant and promissory note through the Payroll Support Program under the CARES Act; the costs and availability of financing; our significant amount of financial leverage from fixed obligations and ability to seek additional liquidity and maintain adequate liquidity; our ability to comply with the terms of our various financing arrangements; the material disruption of our strategic operating plan as a result of COVID-19, and our ability to execute our strategic operating plans in the long term; 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 or significant data 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, as a result of the COVID-19 pandemic or otherwise; 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, which involve significant challenges and risks, particularly given the impact of the COVID-19 pandemic; 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; 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; our ability to realize the full value of our intangible assets and long-lived assets; any impact to our reputation or brand image; 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, 2019, as updated by our Current Report on Form 8-K dated April 21, 2020, 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.

1 Excludes special charges, nonoperating credit losses and unrealized gains and losses on investments. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the tables accompanying this release.

2 Cash burn is defined as: Net cash from operations, less investing and financing activities. Proceeds from the issuance of new debt (excluding expected aircraft financing), government grants associated with the Payroll Support Program of the CARES Act and issuance of new stock are not included in this figure.

3 Non-cash capital expenditures are not determinable at this time. Accordingly, the Company is not providing capital expenditure guidance on a GAAP basis.

-tables attached-

UNITED AIRLINES HOLDINGS, INC

STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)




Three Months Ended

March 31,


%

Increase/

(Decrease)

(In millions, except per share data)


2020


2019


Operating revenue:







Passenger


$

7,065



$

8,725



(19.0)


Cargo


264



286



(7.7)


Other operating revenue


650



578



12.5


Total operating revenue


7,979



9,589



(16.8)









Operating expense:







Salaries and related costs


2,955



2,873



2.9


Aircraft fuel


1,726



2,023



(14.7)


Regional capacity purchase


737



688



7.1


Landing fees and other rent


623



588



6.0


Depreciation and amortization


615



547



12.4


Aircraft maintenance materials and outside repairs


434



408



6.4


Distribution expenses


295



360



(18.1)


Aircraft rent


50



81



(38.3)


Special charges (B)


63



18



NM


Other operating expenses


1,453



1,508



(3.6)


Total operating expense


8,951



9,094



(1.6)









Operating income (loss)


(972)



495



NM









Operating margin


(12.2)

%


5.2

%


NM









Nonoperating income (expense):







Interest expense


(171)



(188)



(9.0)


Interest capitalized


21



22



(4.5)


Interest income


26



29



(10.3)


Unrealized gains (losses) on investments, net (B)


(319)



17



NM


Miscellaneous, net (B)


(699)



(8)



NM


Total nonoperating expense


(1,142)



(128)



NM









Income (loss) before income taxes


(2,114)



367



NM









Pre-tax margin


(26.5)

%


3.8

%


NM









Income tax expense (benefit) (D)


(410)



75



NM


Net income (loss)


$

(1,704)



$

292



NM









Diluted earnings (loss) per share


$

(6.86)



$

1.09



NM


Diluted weighted average shares


248.5



268.3



(7.4)









NM Not meaningful







UNITED AIRLINES HOLDINGS, INC.

PASSENGER REVENUE INFORMATION AND STATISTICS


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



1Q 2020

Passenger

Revenue


1Q 2019

Passenger

Revenue
(a)


Reporting
Adjustments
(b)


1Q 2019

Passenger

Revenue
(b)


Passenger

Revenue

vs.

1Q 2019
(b)


PRASM
vs. 1
Q 2019
(b)


Yield vs.
1Q 2019
(b)


Available

Seat Miles

vs.

1Q 2019


1Q 2020
Available
Seat
Miles


1Q 2020
Revenue
Passenger
Miles

Domestic

$

4,504



$

5,367



$

57



$

5,424



(17.0%)


(15.2%)


(1.2%)


(2.2%)


35,936


25,508





















Atlantic

1,073



1,331



(27)



1,304



(17.7%)


(14.8%)


(7.3%)


(3.4%)


10,265


7,029

Pacific

688



1,121



(33)



1,088



(36.8%)


(11.3%)


0.2%


(28.6%)


7,795


5,475

Latin America

800



906



3



909



(12.0%)


(6.6%)


4.0%


(5.8%)


6,942


5,217

International

2,561



3,358



(57)



3,301



(22.4%)


(10.3%)


(0.4%)


(13.5%)


25,002


17,721





















Consolidated

$

7,065



$

8,725



$



$

8,725



(19.0%)


(12.8%)


(0.5%)


(7.2%)


60,938


43,229





















(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 first quarter 2019 passenger revenue presented in the table above reallocates these ancillary items using the revised allocation.

Select operating statistics are as follows:




Three Months Ended
March 31,


%

Increase/

(Decrease)




2020


2019



Passengers (thousands)


30,359



36,454



(16.7)



Revenue passenger miles (millions)


43,229



53,097



(18.6)



Available seat miles (millions)


60,938



65,645



(7.2)



Passenger load factor:








Consolidated


70.9

%


80.9

%


(10.0)


pts.

Domestic


71.0

%


82.6

%


(11.6)


pts.

International


70.9

%


78.7

%


(7.8)


pts.

Passenger revenue per available seat mile (cents)


11.59



13.29



(12.8)



Total revenue per available seat mile (cents)


13.09



14.61



(10.4)



Average yield per revenue passenger mile (cents)


16.34



16.43



(0.5)



Cargo ton miles


683



805



(15.2)



Aircraft in fleet at end of period


1,388



1,348



3.0



Average stage length (miles)


1,399



1,448



(3.4)



Average full-time equivalent employees


90,766



88,730



2.3



Average aircraft fuel price per gallon


$

1.90



$

2.05



(7.3)



Fuel gallons consumed (millions)


910



985



(7.6)




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, 2019, for definitions of these statistics.

UNITED AIRLINES HOLDINGS, INC

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(In millions)

March 31, 2020


December 31, 2019

ASSETS




Current assets:




Cash and cash equivalents

$

3,442



$

2,762


Short-term investments

1,779



2,182


Receivables, less allowance for credit losses (2020 — $30; 2019 — $9)

792



1,364


Aircraft fuel, spare parts and supplies, less obsolescence allowance (2020 — $446; 2019 — $425)

1,070



1,072


Prepaid expenses and other

822



814


Total current assets

7,905



8,194






Total operating property and equipment, net

31,811



30,170


Operating lease right-of-use assets

4,853



4,758






Other assets:




Goodwill

4,523



4,523


Intangibles, less accumulated amortization (2020 — $1,454; 2019 — $1,440)

2,945



3,009


Restricted cash

106



106


Notes receivable, less allowance for credit losses (2020 — $549)

149



671


Investments in affiliates and other, net

763



1,180


Total other assets

8,486



9,489


Total assets

$

53,055



$

52,611






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Advance ticket sales

$

5,309



$

4,819


Accounts payable

2,436



2,703


Frequent flyer deferred revenue

1,355



2,440


Accrued salaries and benefits

1,647



2,271


Current maturities of long-term debt

4,055



1,407


Current maturities of finance leases

59



46


Current maturities of operating leases

688



686


Other

538



566


Total current liabilities

16,087



14,938






Other long-term liabilities and deferred credits:




Long-term debt

13,198



13,145


Long-term obligations under finance leases

369



220


Long-term obligations under operating leases

5,060



4,946


Frequent flyer deferred revenue

4,133



2,836


Postretirement benefit liability

775



789


Pension liability

1,514



1,446


Deferred income taxes

1,322



1,736


Other

1,179



1,024


Total other long-term liabilities and deferred credits

27,550



26,142


Stockholders' equity

9,418



11,531


Total liabilities and stockholders' equity

$

53,055



$

52,611


UNITED AIRLINES HOLDINGS, INC.

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)


(In millions)

Three Months Ended
March 31,


2020


2019

Cash Flows from Operating Activities:




Net cash provided by operating activities

$

63



$

1,915






Cash Flows from Investing Activities:




Capital expenditures

(1,959)



(1,609)


Purchases of short-term and other investments

(541)



(724)


Proceeds from sale of short-term and other investments

927



768


Other, net

1



(15)


Net cash used in investing activities

(1,572)



(1,580)






Cash Flows from Financing Activities:




Proceeds from issuance of short-term debt

2,500




Proceeds from issuance of long-term debt

348



646


Payments of long-term debt

(235)



(250)


Repurchases of common stock

(353)



(513)


Principal payments under finance leases

(18)



(20)


Capitalized financing costs

(35)



(17)


Other, net

(18)



(29)


Net cash provided (used) in financing activities

2,189



(183)


Net increase in cash, cash equivalents and restricted cash

680



152


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

2,868



1,799


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

$

3,548



$

1,951






Investing and Financing Activities Not Affecting Cash:




Property and equipment acquired through the issuance of debt

$

109



$

92


Right-of-use assets acquired through operating leases

30



51


Property and equipment acquired through finance leases

19



8


Lease modifications and lease conversions

439



36






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
March 31, 2020

Net Operating Profit After Tax ("NOPAT")


Pre-tax income

$

1,433


Adjustments:


Special charges and unrealized losses on investments, net:


Impairment of assets

213


Severance and benefit costs

10


Nonoperating credit loss on BRW Aviation Holding LLC and BRW Aviation LLC ("BRW") term loan and related guarantee

697


Unrealized losses on investments, net

183


(Gains) losses on sale of assets and other special charges

68


Pre-tax income excluding special charges and unrealized losses on investments, net (Non-GAAP)

2,604


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

709


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

127


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

(47)


less: Income taxes paid

(20)


NOPAT (Non-GAAP)

$

3,373






Average Invested Capital (five-quarter average)


Total assets

$

52,131


less: Non-interest bearing liabilities (b)

(18,432)


Average invested capital (Non-GAAP)

$

33,699




ROIC (Non-GAAP)

10.0

%





(a)

Income tax benefit measured based on the effective cash tax rate. The effective cash tax rate is calculated by dividing net cash taxes paid by pre-tax income excluding special charges and unrealized (gains) losses on investments, net. For the three months ended March 31, 2020, the effective cash tax rate was 0.8%.

(b)

Non-interest bearing liabilities include advance ticket sales, frequent flyer deferred revenue, deferred income taxes and other non-interest bearing liabilities.

UNITED AIRLINES 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 adjusted operating income (loss), adjusted operating margin, adjusted pre-tax income (loss), adjusted pre-tax margin, adjusted net income (loss), adjusted diluted earnings (loss) per share and CASM, excluding special charges, third-party business expenses, fuel, and profit sharing, among others. UAL believes that adjusting for special charges and for nonoperating credit losses is useful to investors because these items are not indicative of UAL's ongoing performance. UAL believes that adjusting for unrealized (gains) losses on investments, net is useful to investors because those unrealized gains or losses may not ultimately be realized on a cash basis. UAL believes that adjusting for interest expense related to finance leases of Embraer ERJ 145 aircraft is useful to investors because of the accelerated recognition of interest expense.


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 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 and fuel sales, 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 operating cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.


Reconciliations of reported non-GAAP financial measures to the most directly comparable GAAP financial measures are included below.




Three Months Ended
March 31,


%

Increase/

(Decrease)



2020


2019


CASM (cents)







Cost per available seat mile (CASM) (GAAP)


14.69



13.85



6.1


Special charges (B)


0.10



0.02



NM


Third-party business expenses


0.08



0.05



60.0


Fuel expense


2.83



3.08



(8.1)


Profit sharing, including taxes




0.05



(100.0)


CASM, excluding special charges, third-party business expenses, fuel, and profit sharing (Non-GAAP)


11.68



10.65



9.7



NM Not Meaningful

UNITED AIRLINES HOLDINGS, INC.

NON-GAAP FINANCIAL RECONCILIATION (Continued)



Three Months Ended
March 31,



Increase/
(Decrease)


%
Increase/
(Decrease)

(in millions)

2020


2019



Operating expenses (GAAP)

$

8,951



$

9,094



$

(143)



(1.6)


Special charges (B)

63



18



45



NM


Operating expenses, excluding special charges

8,888



9,076



(188)



(2.1)


Adjusted to exclude:








Third-party business expenses

44



30



14



46.7


Fuel expense

1,726



2,023



(297)



(14.7)


Profit sharing, including taxes



33



(33)



(100.0)


Adjusted operating expenses (Non-GAAP) (A)

$

7,118



$

6,990



$

128



1.8










Operating income (loss) (GAAP)

$

(972)



$

495



$

(1,467)



NM


Adjusted to exclude:








Special charges (B)

63



18



45



NM


Adjusted operating income (Non-GAAP) (A)

$

(909)



$

513



$

(1,422)



NM


Operating margin

(12.2)

%


5.2

%


(17.4)



pts.


Adjusted operating margin (Non-GAAP) (A)

(11.4)

%


5.3

%


(16.7)



pts.










Pre-tax income (loss) (GAAP)

$

(2,114)



$

367



$

(2,481)



NM


Adjusted to exclude:








Special charges (B)

63



18



45



NM


Nonoperating credit loss on BRW term loan and related guarantee (B)

697





697



NM


Unrealized (gains) losses on investments, net (B)

319



(17)



336



NM


Interest expense on ERJ 145 finance leases (C)



21



(21)



NM


Adjusted pre-tax income (loss) (Non-GAAP) (A)

$

(1,035)



$

389



$

(1,424)



NM


Pre-tax margin

(26.5)

%


3.8

%


(30.3)



pts.


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

(13.0)

%


4.1

%


(17.1)



pts.










Net income (loss) (GAAP)

$

(1,704)



$

292



$

(1,996)



NM


Adjusted to exclude:








Special charges (B)

63



18



45



NM


Nonoperating credit loss on BRW term loan and related guarantee (B)

697





697



NM


Unrealized (gains) losses on investments, net (B)

319



(17)



336



NM


Interest expense on ERJ 145 finance leases (C)



21



(21)



NM


Income tax benefit related to adjustments above, net of valuation allowance

(14)



(5)



(9)



NM


Adjusted net income (loss) (Non-GAAP) (A)

$

(639)



$

309



$

(948)



NM










Diluted earnings (loss) per share (GAAP)

$

(6.86)



$

1.09



$

(7.95)



NM


Adjusted to exclude:








Special charges (B)

0.25



0.07



0.18



NM


Nonoperating credit loss on BRW term loan and related guarantee (B)

2.81





2.81



NM


Unrealized (gains) losses on investments, net (B)

1.29



(0.07)



1.36



NM


Interest expense on ERJ 145 finance leases (C)



0.08



(0.08)



NM


Income tax benefit related to adjustments, net of valuation allowance

(0.06)



(0.02)



(0.04)



NM


Adjusted diluted earnings (loss) per share (Non-GAAP) (A)

$

(2.57)



$

1.15



$

(3.72)



NM



NM Not Meaningful

UNITED AIRLINES HOLDINGS, INC.

NON-GAAP FINANCIAL RECONCILIATION (Continued)


UAL believes that adjusting capital expenditures for assets acquired through the issuance of debt and finance leases is useful to investors in order to appropriately reflect the total amounts spent on capital expenditures. UAL also believes that adjusting net cash provided by operating activities for capital expenditures, adjusted capital expenditures, and aircraft operating lease additions is useful to allow investors to evaluate the company's ability to generate cash that is available for debt service or general corporate initiatives.




Three Months Ended
March 31,

Capital Expenditures (in millions)


2020


2019

Capital expenditures (GAAP)


$

1,959



$

1,609


Property and equipment acquired through the issuance of debt


109



92


Property and equipment acquired through finance leases


19



8


Adjusted capital expenditures (Non-GAAP)


$

2,087



$

1,709







Free Cash Flow (in millions)





Net cash provided by operating activities (GAAP)


$

63



$

1,915


Less capital expenditures


1,959



1,609


Free cash flow, net of financings (Non-GAAP)


$

(1,896)



$

306







Net cash provided by operating activities (GAAP)


$

63



$

1,915


Less adjusted capital expenditures (Non-GAAP)


2,087



1,709


Less aircraft operating lease additions


21




Free cash flow (Non-GAAP)


$

(2,045)



$

206


UNITED AIRLINES HOLDINGS, INC.

NOTES (UNAUDITED)


(B) Special charges and unrealized (gains) losses on investments, net include the following:




Three Months Ended
March 31,

(In millions)


2020


2019

Operating:





Impairment of assets


$

50



$

8


Severance and benefit costs




6


(Gains) losses on sale of assets and other special charges


13



4


Total operating special charges


63



18


Nonoperating credit loss on BRW term loan and related guarantee


697




Nonoperating unrealized (gains) losses on investments, net


319



(17)


Total special charges, credit losses and unrealized (gains) losses on investments, net


1,079



1


Income tax benefit, net of valuation allowance


(14)




Total special charges, credit losses and unrealized (gains) losses on investments, net of income taxes


$

1,065



$

1



Impairment of assets: During the three months ended March 31, 2020, the company recorded a $50 million impairment for its China routes. The company conducted impairment reviews of certain intangible assets in the first quarter of 2020, which consisted of a comparison of the book value of those assets to their fair value calculated using the discounted cash flow method. Due to the COVID-19 pandemic and the subsequent suspension of flights to China, the company determined that the value of its China routes had been impaired.


During the three months ended March 31, 2019, the company recorded an $8 million fair value adjustment for aircraft purchased off lease.


Severance and benefit costs: During the three months ended March 31, 2019, the company recorded $2 million 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 and management severance of $4 million.


Gains (loss) on sale of other assets and other special charges: During the three months ended March 31, 2020, the company recorded a $10 million one-time special charge related to the wind-down of the capacity purchase agreement with Trans States Airlines, LLC and $3 million for costs related to the transition of fleet types within other regional carrier contracts.


Nonoperating credit loss on BRW term loan and related guarantee: During the three months ended March 31, 2020, the company recorded a $697 million expected credit loss allowance for the BRW term loan and related guarantee. United recorded the allowance based on United's assessment of Avianca Holdings S.A.'s ("AVH") financial uncertainty due to its high level of leverage and the fact that the airline has currently ceased operations due to the COVID-19 pandemic. BRW's equity and BRW's holdings of AVH equity are secured as a pledge under the BRW term loan, which is currently in default.


Unrealized (gains) losses on investments, net: During the three months ended March 31, 2020, the company recorded losses of $319 million primarily for the $293 million decrease in the market value of its investment in Azul Linhas Aéreas Brasileiras S.A. ("Azul") and $24 million for the decrease in fair value of the AVH share call options, AVH share appreciation rights, and AVH share-based upside sharing agreement (collectively, the "AVH Derivative Assets") that United obtained as part of the BRW term loan agreement and related agreements with Kingsland Holdings Limited.


During the three months ended March 31, 2019, the company recorded gains of $14 million for the change in market value of its investment in Azul and gains of $3 million for the change in fair value of certain the AVH Derivative Assets.


(C) Interest expense related to finance leases of Embraer ERJ 145 aircraft


During the third quarter of 2018, United entered into an agreement with the lessor of 54 Embraer ERJ 145 aircraft to purchase those aircraft in 2019. The provisions of the new lease agreement resulted in a change in accounting classification of these new leases from operating leases to finance leases up until the purchase date. The company recognized $21 million of additional interest expense in the three months ended March 31, 2019 as a result of this change.


(D) Effective tax rate


The company's effective tax rate for the three months ended March 31, 2020 and 2019 was 19.4% and 20.4%, respectively. The provision for income taxes is based on the estimated annual effective tax rate which represents a blend of federal, state and foreign taxes and includes the impact of certain nondeductible items and the impact of a change in the company's mix of domestic and foreign earnings. The first quarter 2020 rate was impacted by a $66 million valuation allowance related to unrealized capital losses.


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

A Message from United CEO Scott Kirby

May 27, 2020

CHICAGO, May 27, 2020 /PRNewswire/ -- J. Scott Kirby, Chief Executive Officer, today issued the following message to nearly 100,000 United Airlines (NASDAQ: UAL) employees:

Hello everybody.

In my message to you last week, I talked about doing everything in my power as CEO to make sure we are in a position to bounce back more quickly than any of our competitors once the virus is defeated and demand begins to recover.

That means we have to continue to plan for the worst. But at the same time, we also have to be prepared for the best. After all, the one thing I am absolutely confident in is that our customers want to fly again and reconnect with people and places around the world. And part of preparing for the best means thinking about the short-term adjustments that we have to make to get through the crisis as well as the long-term structural changes that will allow us to thrive once again.

So today, I am asking Greg Hart to take the lead on those big picture issues. During my tenure here at United, Greg has been the rock that I could always count on as our Chief Operations Officer (COO). Despite having hubs in the most difficult weather/ATC markets of any airline anywhere in the world, we moved to the top of the industry in all of the operational metrics. We also invested in the customer experience and have been making the largest, recent improvements in Customer Satisfaction of any airline in the country.

But being the COO of United is a tough, 24x7 job. Greg told me last year that he wanted to start preparing for retirement but he agreed to spend the next 12-18 months grooming his successors. And while none of us could have anticipated the COVID-19 crisis, it accelerates a need for leadership in new areas.

Specifically, I'm asking Greg to step back from his role as COO and instead focus on critical medium and long term issues - in particular, setting the stage for United to be the world leader in innovation with respect to safety, hygiene, and operating efficiency. Additionally, I'll be relying on him to continue his work on one of our most important objectives - developing strategies to allow flexibility in our cost structure, including labor costs. Our costs are not designed for the near-term uncertainty of travel demand. Demand could be down 30% or it could be down 70%. The way to best survive this crisis is to be able to nimbly adjust the size of the airline, including labor costs, to meet demand and importantly, be ready to bounce back quickly when the virus is defeated. We believe we are working on ideas that no other airline in the world is considering. Greg is uniquely qualified to be a leader not just for United, but in world-wide aviation, taking us all to the next level on these issues that are so critical to our future.

And so that means that it's time for other members of Greg's team to step up, in a way that is consistent with our succession planning, to help run the operation while Greg focuses on more broad, fundamental, structural changes to our business.

Jon Roitman, currently our Senior Vice President of Airport and Network Operations, will step into the role of Senior Vice President and Chief Operations Officer effective June 1. Jon is the embodiment of our core4 culture and no one has a better sense of the inner-workings of our operation. We've made some tough choices as an organization and even tougher decisions may come in the near-term, so it's more critical than ever that we have a leader of Jon's caliber waking up every day thinking solely about how we stay a step ahead of this virus and its impact on our operation. In addition to his current responsibilities, Jon will expand his role to include Flight Operations, Technical Operations and Safety. I am confident that Jon will rise to this challenge.

As part of these moves, Sarah Murphy, Senior Vice President of United Express, and Jan Krems, Vice President of Cargo, will move into Andrew Nocella's organization and Toby Enqvist, Senior Vice President and Chief Customer Officer, will report to Brett Hart.

There are tough times ahead. But there are also glimmers of hope – our schedule is expected to be down 75 percent in July, a slight improvement over May and June. While we can't quite see the light at the end of the tunnel yet, it's not pitch black in here anymore.

But there is more work to be done and I'm confident that today's leadership changes will put United in an even better position to drive our near-term, operational goals, while at the same time create an environment where we can fly past our competitors when demand returns.

Thank you for all you do every day to take care of our customers and one another.

Stay safe and we'll talk soon,

Scott
Scott Kirby, CEO

About United

United's shared purpose is "Connecting People. Uniting the World." 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 in this release are forward-looking and thus reflect the Company's 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 the Company's 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," "remains," "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 the Company on the date of this release. The Company undertakes 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.

The Company's actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: the Company's ability to execute its strategic operating plan, including its 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 its operations in certain countries; demand for travel and the impact that global economic and political conditions have on customer travel patterns; the Company's capacity decisions and the capacity decisions of its competitors; competitive pressures on pricing and on demand; changes in aircraft fuel prices; disruptions in the Company's supply of aircraft fuel; the Company's ability to cost-effectively hedge against increases in the price of aircraft fuel, if it decides to do so; the effects of any technology failures, cybersecurity or significant data breaches; disruptions to services provided by third-party service providers; potential reputational or other impact from adverse events involving the Company's aircraft or operations, the aircraft or operations of its regional carriers or its code share partners or the aircraft or operations of another airline; the Company's 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 the Company's fleet; disruptions to the Company's regional network; the impact of regulatory, investigative and legal proceedings and legal compliance risks; the success of the Company's 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 the Company has alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; costs associated with any modification or termination of the Company's aircraft orders; disruptions in the availability of aircraft, parts or support from its suppliers; the Company's ability to maintain satisfactory labor relations and the results of any collective bargaining agreement process with its union groups; any disruptions to operations due to any potential actions by the Company's labor groups; labor costs; the existing outbreak of coronavirus and the outbreak of any other disease or similar public health threat that affects travel demand or travel behavior; the impact of any management changes; extended interruptions or disruptions in service at major airports where the Company operates; 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; the Company's ability to maintain adequate liquidity; the Company's ability to comply with the terms of its various financing arrangements; the Company's ability to realize the full value of its intangible assets and long-lived assets; any impact to the Company's reputation or brand image and other risks and uncertainties set forth under Part I, Item 1A., "Risk Factors," of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 as well as other risks and uncertainties set forth from time to time in the reports it files with the SEC.

 

SOURCE United Airlines

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

United Turns Old Uniforms Into Masks for Employees

May 27, 2020

CHICAGO, May 27, 2020 /PRNewswire/ -- United Airlines delivered 7,500 face coverings over the past week to front line employees at San Francisco International Airport and the airline's San Francisco Maintenance Base that were made from 12,284 pounds of uniforms United upcycled. United worked with upcycling partner, Looptworks to produce masks that would supplement the supply of face coverings that the airline already provides all employees and customers. Download images and broll here.

United Airlines to Present at the Bernstein 36th Annual Strategic Decisions Conference

May 22, 2020

CHICAGO, May 22, 2020 /PRNewswire/ -- United Airlines will present at the Bernstein Strategic Decisions Conference on Thursday, May 28. The presentation will begin at 1:00 p.m. CT / 2:00 p.m. ET.

The live webcast will be available on the investor relations section of United's website at ir.united.com. The company will archive the video webcast on the website within 24 hours of the presentation, and the webcast will be available for a limited time.

About United

United's shared purpose is "Connecting People. Uniting the World." 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".

 

SOURCE United Airlines

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

United Launches United CleanPlus: A New Standard of Cleanliness and Safety in Partnership with Clorox and Cleveland Clinic

May 20, 2020

CHICAGO, May 20, 2020 /PRNewswire/ -- Today, United Airlines is introducing United CleanPlus: the company's commitment to putting health and safety at the forefront of the entire customer experience, with the goal of delivering an industry-leading standard of cleanliness. United CleanPlus brings together a most trusted brand in surface disinfection - Clorox - and the country's top medical experts - Cleveland Clinic - to inform and guide United's new cleaning, safety and social distancing protocols that includes touchless kiosks in select locations for baggage check-in, sneeze guards, mandatory face coverings for crew and customers, and giving customers options when flights are more full. Specifically, Clorox products will be used at United's hub airports and medical experts from the Cleveland Clinic will advise on new technologies, training development and quality assurance programming.

By establishing collaborations with world-renowned leaders in surface disinfection and health like Clorox and Cleveland Clinic, United customers can travel with more confidence knowing that the airline's protocols have been informed by trusted experts.

"Safety has always been our top priority, and right now in the midst of an unprecedented crisis, it's our singular customer focus," said United CEO, Scott Kirby, in a video message to customers today. "We recognize that COVID-19 has brought cleanliness and hygiene standards to the front of customers' minds when making travel decisions, and we're not leaving a single stone unturned in our pursuit to better protect our customers and employees."

United Airlines to Present at the 13th Annual Wolfe Research Global Transportation & Industrials Conference

May 15, 2020

CHICAGO, May 15, 2020 /PRNewswire/ -- United Airlines will present at the 13th Annual Wolfe Research Global Transportation & Industrials Conference on Tuesday, May 19. The presentation will begin at 1:00 p.m. CT / 2:00 p.m. ET.

The live webcast will be available on the investor relations section of United's website at ir.united.com. The company will archive the audio webcast on the website within 24 hours of the presentation, and the webcast will be available for a limited time.

About United

United's shared purpose is "Connecting People. Uniting the World." 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".

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

Brett J. Hart Named President of United Airlines

May 11, 2020

CHICAGO, May 11, 2020 /PRNewswire/ -- United Airlines (NASDAQ: UAL) today announced that effective May 20, 2020, Brett J. Hart, Executive Vice President and Chief Administrative Officer, will be appointed President of United Airlines Holdings, Inc. – a continuation of the company's leadership succession plan announced in early December with current CEO Oscar Munoz transitioning to Executive Chair and current President Scott Kirby becoming CEO following the Annual Meeting of Shareholders on May 20, 2020.

"Brett is a well-established and widely respected leader who has established a strong track record, over the last decade, helping United navigate complex challenges across all areas of our business," Munoz said. "He is recognized inside and outside of the airline industry for his leadership and has played a central role in shaping our strategy, culture and leading our community engagement around the world."

United Airlines Announces Proposed Senior Secured Notes Offering

May 06, 2020

CHICAGO, May 6, 2020 /PRNewswire/ -- Today, United Airlines, Inc. ("United") announced that it intends to commence a private offering to eligible purchasers of $2.25 billion in aggregate principal amount of two series of notes, the senior secured notes due 2023 and the senior secured notes due 2025 (the "Notes"), subject to market and other conditions. The Notes will be guaranteed by United's parent company United Airlines Holdings, Inc.

United intends to use the net proceeds from the offering of the Notes to repay the $2.0 billion aggregate principal amount outstanding under the term loan facility that United entered into on March 9, 2020 and, to the extent that any net proceeds remain, for general corporate purposes. The final terms and amounts of the Notes are subject to market and other conditions and may be materially different than expectations.

The Notes will be secured initially by first priority security interests in a designated pool of 360 aircraft owned by United.

This press release is neither an offer to sell nor the solicitation of an offer to buy the Notes or any other securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offering, solicitation or sale would be unlawful. The Notes are being offered only to qualified institutional buyers in an offering exempt from registration in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and outside the United States in reliance on Regulation S under the Securities Act. The Notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements of the Securities Act or any applicable state securities laws. This press release is being issued pursuant to and in accordance with Rule 135c under the Securities Act.

United Airlines Launches #GivingTuesdayNow Campaigns to Support Charities That Rely on Travel

May 04, 2020

CHICAGO, May 4, 2020 /PRNewswire/ -- United Airlines today launched new, Giving Tuesday Now campaigns aimed at helping non-profits that rely on travel during the COVID-19 crisis. The airline will match all donations up to 500,000 miles through its Miles on a Mission crowdsourcing platform to help charities like:

  • Fayette Cares needs miles to get domestic violence victims to safe locations
  • COSIG, Inc. brings homeless veterans and those with disabilities to Virginia for housing and career training opportunities
  • Combined Arms provides transportation for veterans who want to volunteer
  • Project HOPE uses miles to deliver PPE and medical equipment to America's health workers and underserviced communities globally
  • Rise Against Hunger uses miles for travel to countries in critical need for food distribution and life-changing aid

"In this time of crisis, essential travel is critical for many like veterans, domestic violence victims and others needing to reunite with family or otherwise find shelter during COVID-19," said Sharon Grant, vice president and chief community engagement officer at United Airlines. "We are proud to provide a platform for organizations helping to meet this need and match donations our members contribute to these critical causes."

United Airlines Joins Governor's "Stay Home. Save Lives. Check In." Initiative to Ensure the Well-being of Older Californians

April 24, 2020

SAN FRANCISCO, April 24, 2020 /PRNewswire/ -- United Airlines is teaming up with Listos California – a campaign by the Governor's Office of Emergency Services that helps vulnerable Californians prepare for disasters – to help address the significant health risks faced by older state residents isolated during the COVID-19 pandemic.

United Airlines to Hold Webcast of First-Quarter 2020 Financial Results

April 24, 2020

CHICAGO, April 24, 2020 /PRNewswire/ -- United Airlines will hold a conference call to discuss first-quarter 2020 financial results on Friday, May 1, at 9:00 a.m. CT/10:00 a.m. ET. A live, listen-only webcast of the conference call will be available at ir.united.com. The company will issue its first-quarter and second-quarter investor update after market close on Thursday, April 30.

The webcast will be available for replay within 24 hours of the conference call and then archived on the website for three months.

About United

United's shared purpose is "Connecting People. Uniting the World." 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".


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

UAL Announces Pricing of Public Offering of Common Stock

April 21, 2020

CHICAGO, April 21, 2020 /PRNewswire/ -- United Airlines Holdings, Inc. (NASDAQ:UAL) today announced the pricing of an underwritten public offering of 39,250,000 shares of its common stock, at a public offering price of $26.50 per share. Morgan Stanley and Barclays are acting as the underwriters of the offering. The Company has also granted to the underwriters a 30-day option to purchase up to 3,925,000 additional shares. The proceeds from the offering will be used for general corporate purposes. Subject to the satisfaction of customary conditions, the offering is expected to close on April 24, 2020.

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