UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 3, 2015
UNITED CONTINENTAL HOLDINGS, INC.
UNITED AIRLINES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-06033 | 36-2675207 | ||
| Delaware | 001-10323 | 74-2099724 | ||
| (State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
| of incorporation) | Identification Number) |
| 233 S. Wacker Drive, Chicago, IL | 60606 | |
| 233 S. Wacker Drive, Chicago, IL | 60606 | |
| (Address of principal executive offices) | (Zip Code) |
(827) 825-4000
(827) 825-4000
Registrant’s telephone number, including area code
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 7.01 Regulation FD Disclosure
John D. Rainey, Executive Vice President and Chief Financial Officer of United Continental Holdings, Inc., the holding company whose primary subsidiary is United Airlines, Inc., will speak at the 2015 J.P. Morgan Aviation, Transportation and Industrials Conference on March 3, 2015. Attached hereto as Exhibit 99.1 are slides that will be presented at that time.
The information in this Item 7.01, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
| Exhibit No. |
Description | |
| 99.1* | United Continental Holdings, Inc. slide presentation delivered on March 3, 2015 | |
| * | Furnished herewith electronically. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| UNITED CONTINENTAL HOLDINGS, INC. UNITED AIRLINES, INC. | ||
| By: | /s/ Brett J. Hart | |
| Name: | Brett J. Hart | |
| Title: | Executive Vice President, General Counsel and Secretary | |
Date: March 3, 2015
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1* | United Continental Holdings, Inc. slide presentation delivered on March 3, 2015 | |
| * | Furnished herewith electronically. |
 JP
Morgan Aviation, Transportation and
Industrials Conference
United Continental Holdings, Inc.
John
Rainey
–
Executive
Vice
President
and Chief Financial Officer
March 3, 2015
Exhibit 99.1 |
 Safe
Harbor Statement 2
Certain statements included in this investor update are forward-looking and thus reflect our current
expectations and beliefs with respect to certain current and future events and financial
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” 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 report are based upon information available to us on the date of this report.
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; our ability to utilize our net operating losses; our ability to
attract and retain customers; 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 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; 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; disruptions to our regional network; the costs and availability of
aviation and other insurance; industry consolidation or changes in airline alliances; 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); labor costs; our ability to maintain satisfactory labor
relations and the results of the collective bargaining agreement process with our union groups;
any disruptions to operations due to any potential actions by our labor groups; weather
conditions; the possibility that expected merger synergies will not be realized or will not be realized within the
expected time period; and other risks and uncertainties set forth under Part I, Item 1A., Risk Factors,
of UAL’s Annual Report on Form 10-K, as well as other risks and uncertainties set forth
from time to time in the reports we file with the SEC. |
 Return
on invested capital Pre-tax margin
FY2015E
8.0%
FY2012
FY2014
12.9%
FY2013
10.0%
FY2013
FY2012
1.6%
5.1%
FY2015E
FY2014
2.6%
3
10.5%
FY2014
FY2012
FY2013
FY2015E
5.8%
3.7%
Cash
return
on
capital
1
3
Revenue and cost initiatives driving improved earnings
1: Percentage of operating cash flow to invested capital
For a GAAP to Non-GAAP reconciliation, see Appendix A
|
 Improving long-term shareholder value
4
CASM growth less than inflation
Cash flow allocation
Capacity discipline
Execute on revenue initiatives |
 Capacity discipline
5
Consolidated
1.5% -
2.5%
4% -
6%
Latin
Pacific
3% -
5%
Atlantic
1% -
3%
Domestic
0.5% -
1.5%
Adding slimline economy seats
Increasing utilization of aircraft
Upgauging regional fleet
Efficient growth in 2015
2015
capacity
growth
1
1: Full year capacity year-over-year growth as of January 22, 2015 Investor
Update |
 Improving long-term shareholder value
6
CASM growth less than inflation
Cash flow allocation
Capacity discipline
Execute on revenue initiatives |
 Several
initiatives in place to improve revenue performance
7
Enhance
revenue
management
Improve
reliability
Optimize the
network
Expand
ancillary
revenue
Upgauge &
simplify
Express
operation
Expect to achieve PRASM down 1% to up 1% for first-quarter 2015
|
 Enhancing the value of the network
8
8
Seasonal
shaping
Re-banking Denver (3Q14), Houston (3Q14); Chicago (2Q15)
to improve passenger flow and optimize connection times
Increasing gauge while reducing departures to increase
revenue and improve operations
Consolidating
frequencies
Re-banking
Increasing seasonal shaping to better align service to
seasonal demand trends |
 Seasonal shaping
9
9
+39%
July 2015
February 2015
Seasonal shaping
System capacity (M ASMs)
July 2012
+21%
February 2012
Seasonal
shaping
Consolidating
frequencies
Re-banking |
 Consolidating frequencies
10
10
Gauge
6%
Departures
Capacity
(4%)
1.5% -
2.5%
2015 frequency consolidation
Year-over-year change
Seasonal
shaping
Consolidating
frequencies
Re-banking |
 Reducing dependence on smaller regional aircraft, while
increasing average gauge
11
YE 2012
44%
56%
United fleet mix |
 Reducing dependence on smaller regional aircraft, while
increasing average gauge
12
United fleet mix
YE 2015E
~40%
~60%
YE 2012
44%
56% |
 Reducing dependence on smaller regional aircraft, while
increasing average gauge
13
YE 2015E
~40%
~60%
YE 2012
44%
56%
United fleet mix
Seats per
departure
95
103 |
 Reducing dependence on smaller regional aircraft, while
increasing average gauge
14
69%
YE 2015E
~20%
~30%
~50%
YE 2012
31%
Regional fleet mix
United fleet mix
70 seats
50 seats or fewer
76 seats
YE 2015E
~40%
~60%
YE 2012
44%
56%
Seats per
departure
95
103 |
 2010
1
+7% CAGR
2015E
2014
2013
2012
2011
$3.5+
15
Ancillary revenue
($B)
1: 2010 results are pro-forma
Continuing to grow ancillary revenue, providing better
choice and experience to our customers
New products
Powerful and nimble
technology platforms
Dynamic pricing
capabilities
Expand availability
$3.2
$3.0
$2.8
$2.5
$2.4
$2.2
2017
Goal |
 Improving long-term shareholder value
16
CASM growth less than inflation
Cash flow allocation
Capacity discipline
Execute on revenue initiatives |
 Demonstrating strong cost performance
17
2014
1.3%
Non-fuel CASM
1
Year-over-year change
1: Excluding special charges, fuel, third-party and profit sharing expense. For a
GAAP to Non-GAAP reconciliation, see Appendix A |
 Demonstrating strong cost performance
18
2014
1.3%
0% -
1%
2015E
Non-fuel CASM
1
Year-over-year change
1: Excluding special charges, fuel, third-party and profit sharing expense.
2015E as of January 22, 2015 Investor Update. For a GAAP to Non-GAAP
reconciliation, see Appendix A |
 Demonstrating strong cost performance; on track to
achieve $1B in non-fuel annual savings by 2017
19
2014
1.3%
0% -
1%
2015E
Non-fuel CASM
1
Year-over-year change
2015E
2014
Project Quality non-fuel
savings
($M)
$800
$380
1: Excluding special charges, fuel, third-party and profit sharing expense.
2015E as of January 22, 2015 Investor Update. For a GAAP to Non-GAAP
reconciliation, see Appendix A |
 Productivity improvements will drive $500M in annual
savings by 2017
20
+3%
2017
goal
2013
>3%
2015E
2014
1: Percent change in YOY consolidated ASMs per FTE (full-time equivalent)
Productivity
(ASMs per FTE)
1
On
track
for
15%
-
20%
improvement
2017
vs.
2013 |
 Current fuel environment
21
Brent spot price
($/barrel)
$99
(36%)
Current spot
1
2014 average
$63
1: As of February 27, 2015 fuel forward curve |
 Current fuel environment
22
$1 drop in oil reduces annual fuel
expense by ~$93M
2
1: As of February 27, 2015 fuel forward curve
2: $1/barrel decrease, excluding impact of hedge losses
Brent spot price
($/barrel)
$99
(36%)
Current spot
1
2014 average
$63 |
 Current fuel environment
23
2Q -
4Q
1Q
2015 expected hedge loss
1
($M)
Brent spot price
($/barrel)
$63
$99
Current spot
1
(36%)
2014 average
$1 drop in oil reduces annual fuel
expense by ~$93M
2
1: As of February 27, 2015 fuel forward curve
2: $1/barrel decrease, excluding impact of hedge losses
$518
$183 |
 Improving long-term shareholder value
24
CASM growth less than inflation
Cash flow allocation
Capacity discipline
Execute on revenue initiatives |
 Balanced capital allocation
25
Liquidity
balance
Capital
investment
Debt reduction
Pension
funding
Shareholder
compensation
Maintain
unrestricted
liquidity
balance
of
$5B
-
$6B,
including
revolver
Average
capital
expenditure
of
$2.7B
-
$2.9B
over
next
3
to
4
years
Achieve ~$15B gross debt target and improve leverage ratios
Continue to fund in excess of minimum required to ensure
manageable pension obligations
Complete $1B share repurchase program and continue to
evolve shareholder compensation |
 Investing in the business while maintaining capital
discipline
26
Liquidity
balance
Pension
funding
Shareholder
compensation
Debt reduction
Capital
investment
$2.7 -
$2.9
$2.8 -
$3.0
Average
gross
annual
capital
expenditures
1
Next 3 –
4 years ($B)
1: Capital expenditures include net purchase deposits and exclude fully reimbursable
capital projects January 2015
guidance
November 2013
guidance |
 Continuing to pay down
debt and de-risk the business 27
Liquidity
balance
Capital
investment
Debt reduction
Pension
funding
Shareholder
compensation
Total
debt
outstanding
1
($B)
1: Includes annualized aircraft rent capitalized at 7x
2: 2010 data is pro-forma
Source: SEC filings
2013
2012
2010
2
$20.1
2014
$18.3
Target
$22.3
~$15B
In 2014 pre-paid more than $1.5B of debt
On April 1
st
, will pre-pay approximately $300M
of 6% notes due 2026
$19.0 |
 Funding pension in excess of minimum required
28
Liquidity
balance
Capital
investment
Debt reduction
Pension
funding
Shareholder
compensation
2013
2014
2012
2010
1
Unfunded pension liability
($B)
Plan to fund at least $400M, substantially all of
which is in excess of minimum required
1: 2010 data is pro-forma
Source: SEC filings
$1.6
$2.4
$1.5
$2.2 |
 United
is well positioned among peers 29
Liquidity
balance
Capital
investment
Pension
funding
Shareholder
compensation
2014 debt, pension, and post-retirement
obligations
1
($B)
Debt reduction
AAL
$34.3
DAL
UAL
$26.4
$22.5
Debt
Pension & post-retirement
$15.0
$7.7
$18.3
$11.4
$26.6
$4.2
1: Year-end 2014 gross debt including aircraft rent capitalized at 7x, pension and
post-retirement liability. Source: SEC filings; pension and postretirement obligations
obtained from Note 8 – Pension and Other Postretirement Plans, Note 11. Employee Benefit
Plans and Note 13. Retirement Benefits from UAL’s, DAL’s and AAL’s 2014 Form
10-K, respectively. |
 Improving long-term shareholder value
30
CASM growth less than inflation
Cash flow allocation
Capacity discipline
Execute on revenue initiatives |
 Consolidated CASM
2014
2013
Percentage
Change
Operating expense
$36,528
$37,030
(1.4)
Special charges
443
520
NM
Third-party business expenses
534
694
(23.1)
Aircraft fuel and related taxes
11,675
12,345
(5.4)
Profit sharing
235
190
23.7
Operating expense excluding above items
$23,641
$23,281
1.5
ASMs -
consolidated
246,021
245,354
0.3
CASM (cents)
14.85
15.09
(1.6)
CASM, excluding special charges
14.67
14.88
(1.4)
CASM, excluding special charges and third-party business expenses
14.45
14.60
(1.0)
CASM, excluding special charges, third-party business expenses and fuel
9.70
9.57
1.4
CASM, excluding special charges, third-party business expenses, fuel and profit
sharing 9.61
9.49
1.3
Source: Item 6 of UAL's 2014 Form 10-K
NM: not meaningful
Pre-tax margin
2014
2013
2012
Income (loss) before income taxes
$1,128
$539
($724)
Add: Special charges
517
520
1,323
Add: Economic Hedge Adjustments
327
(45)
See note 1
Adjusted income before income taxes
1,972
1,014
599
Operating Revenues
$38,901
$38,279
$37,152
Adjusted pre-tax margin
5.1%
2.6%
1.6%
Appendix A: reconciliation of GAAP to Non-GAAP
financial measures
31
Note 1: United began reporting earnings excluding special charges and Economic Hedge
Adjustments in 2014 for the years ended 2014 and 2013. The Company evaluates its financial
performance utilizing various accounting principles generally accepted in the United States of America ("GAAP") and Non-GAAP financial measures including net
income/loss excluding special charges, net earnings/loss per share excluding special charges and CASM,
among others. CASM is a common metric used in the airline industry to measure an airline's cost
structure and efficiency. The Company 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. Fuel hedge operating
non-cash mark-to-market ("MTM") gains (losses) are excluded as the Company did not apply cash flow
hedge accounting for certain of the periods presented, and these adjustments may provide a better
comparison to the Company's peers, most of which either apply cash flow hedge accounting or exclude
cash MTM gains or losses in certain disclosures of fuel expense. The Company believes that adjusting
for special items is useful to investors because the special items are non-recurring items not
indicative of the Company's ongoing performance. The Company 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 the Company's core business. In addition, the Company believes that
reflecting Economic Hedge Adjustments, consisting of MTM gains and losses recorded in Nonoperating
expense from fuel hedges settling in future periods and of prior period gains recorded in
Nonoperating expense on fuel contracts settled in the current period, is useful because the adjustments
allow investors to better understand the cash impact of settled hedges in a given period. The
Company excludes profit sharing because this exclusion allows investors to better understand and
analyze its recurring cost performance and provides a more meaningful comparison of its core operating
costs to the airline industry. Pursuant to SEC Regulation G, the Company has included the following
reconciliation of reported Non-GAAP financial measures to comparable financial measures reported on
a GAAP basis (in millions, except CASM amounts). For additional information related to special items,
see Note 17 to the financial statements included in the 2014 Annual Report Form 10-K.
Forward Looking Projections. UAL is unable to reconcile certain forward-looking projections to GAAP
as the nature or amount of special items cannot be estimated at this time.
|
 Appendix A: reconciliation of GAAP to Non-GAAP
financial measures
32
ROIC is a non-GAAP 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. We use ROIC to track how much value we are creating for our
shareholders as it represents an important financial metric that we believe provides meaningful information as to how well we
generate cash flow relative to the capital invested in our business.
Twelve Months Ended
December 31, 2014
Twelve Months Ended
December 31, 2013
Twelve Months Ended
December 31, 2012
Pre-tax income (loss)
$1,128
$539
($724)
Add: Special items
844
520
1,323
Pre-tax income excluding special items
$1,972
$1,059
$599
(in millions)
Twelve Months Ended
December 31, 2014
Twelve
Months
Ended
December 31, 2013
Twelve Months Ended
December 31, 2012
Net Operating Profit After Tax (NOPAT)
Pre-tax income excluding special items (a)
$1,972
$1,059
$599
Add: Interest expense (b)
733
801
821
Add: Interest component of capitalized aircraft rent (b)
431
469
478
Add: Net interest on pension (b)
107
144
164
Less: Income tax (expense) benefit
(6)
25
(10)
NOPAT
$3,237
$2,498
$2,052
Effective tax rate
0.3%
(2.4%)
1.7%
Invested Capital (five-quarter average)
Total assets
$37,560
$37,198
$38,083
Add: Capitalized aircraft rent (@7.0x)
6,362
6,761
$7,015
Less: Non-interest bearing liabilities
(18,849)
(19,063)
(19,607)
Average Invested Capital
$25,073
$24,896
$25,491
Return on Invested Capital
12.9%
10.0%
8.0%
(b) Net of tax shield
(a)
Non-GAAP Financial Reconciliation |