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): November 15, 2016
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 of incorporation) |
(Commission File Number) |
(IRS Employer Identification Number) |
| 233 S. Wacker Drive, Chicago, IL | 60606 | |
| 233 S. Wacker Drive, Chicago, IL | 60606 | |
| (Address of principal executive offices) | (Zip Code) |
(872) 825-4000
(872) 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 |
United Continental Holdings, Inc. (“UAL”), the holding company whose primary subsidiary is United Airlines, Inc., will host an Investor Day conference on Tuesday, November 15, 2016. The conference will be webcast. Attached hereto as Exhibit 99.1 and 99.2, respectively, are the press release issued in connection with the conference and slides that will be presented at the conference.
The information in this Item 7.01, including Exhibit 99.1 and 99.2, 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 (“the Exchange Act”), 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* | Press Release issued by United Continental Holdings, Inc. dated November 15, 2016 | |
| 99.2* | United Continental Holdings, Inc. Investor Day slide presentation delivered on November 15, 2016 | |
| * | Furnished herewith electronically. |
SIGNATURES
Pursuant to the requirements of the Exchange Act, 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: | Andrew C. Levy | |||||
| Name: | Andrew C. Levy | |||||
| Title: | Executive Vice President and Chief Financial Officer | |||||
| Date: November 15, 2016 | ||||||
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1* | Press Release issued by United Continental Holdings, Inc. dated November 15, 2016 | |
| 99.2* | United Continental Holdings, Inc. Investor Day slide presentation delivered on November 15, 2016 | |
| * | Furnished herewith electronically. |
Exhibit 99.1
| News Release
United Airlines Worldwide Media Relations 872.825.8640 media.relations@united.com |
|
United Sets Course To Be Best Airline
For Employees, Customers, and Investors
Introduces further choice for customers with new Basic Economy fares;
Expects to unlock $4.8 billion in value by 2020 with earnings initiatives;
Updates narrowbody order book, reducing capital expenditures by approximately $1 billion by 2017 -2018
Chicago, Nov. 15, 2016 – United Airlines will present to its investors today plans for long-term earnings growth through a number of strategic initiatives across the airline. These initiatives include improving network connectivity and revenue management, broadening product segmentation and introducing additional customer enhancements. Along with maintaining disciplined cost control, this strategy is expected to generate $4.8 billion in earnings improvement by 2020.
“As we approach the new year, our operations are running well, our employees are more energized than ever, and we are ready to unlock United’s full potential,” said Oscar Munoz, chief executive officer. “Today, we are talking about what’s next for United. We now have the strategy and organization in place to be the best airline in the world – for employees, customers and investors.”
More Choice for Customers
To further meet customers’ needs and provide more options to price-sensitive travelers, the company announced the introduction of Basic Economy fares. This new offering provides customers the option of paying the lowest fares to their destinations, while still receiving the same standard economy experience, including food, beverage, Wi-Fi and personal device entertainment, with a few key differences. Customers who choose Basic Economy will be assigned seats on the day of departure, be assigned to boarding group five and be permitted only one personal carry-on item that must fit under the seat. The new offering provides the added benefit for customers and employees of simplifying the boarding process, as fewer customers will bring overhead bags on board. Complete details on Basic Economy can be found at united.com/basiceconomy.
“Customers have told us that they want more choice and Basic Economy delivers just that,” said Julia Haywood, executive vice president and chief commercial officer. “By offering low fares while also offering the experience of traveling on our outstanding network, with a variety of onboard amenities and great customer service, we are giving our customers an additional travel option from what United offers today.”
United Sets Course To Be Best Airline For Employees, Customers, and Investors / Page 2
In addition to Basic Economy, United will continue to offer economy, Economy Plus and domestic first class, and it remains on track to introduce its reimagined international premium travel experience, United Polaris, on December 1. The company is evaluating a new premium economy experience for domestic and international markets.
Optimize Network and Revenue Management
The company also announced its plans to fully optimize its network potential by continuing to leverage its leading international position while strengthening its domestic network, including improving the bank structures at key hubs in Chicago, Houston, and Newark/New York, and further improving both schedules and product in top business markets.
In addition, United is improving its revenue management system to more accurately forecast demand to better maximize profitability on each flight. The company expects these system improvements to drive $900 million of incremental revenue by 2019.
“We have the best people and network, with ever-improving products, and importantly have the most opportunity to improve our margins among our industry peers,” said Scott Kirby, president. “As we strengthen both our domestic and international networks, we will ensure we are offering our customers the right flights to the right destinations at the right time.”
Adjusting Aircraft Order Book
The company announced a modification to its narrowbody order book. The company is converting its original order for 65 737-700 aircraft into 4 737-800 aircraft to be delivered in 2017 while the remaining 61 will be converted into orders for 737 MAX aircraft, with delivery dates to be determined. These changes will allow United to take advantage of the superior fuel efficiency of the MAX aircraft while also reducing capital expenditures by approximately $1.6 billion through 2018.
In addition, the company has agreed to purchase 24 Embraer 175 aircraft from Embraer, instead of leasing these aircraft through a capacity purchase agreement as was originally planned. These aircraft will be leased to third party carriers operating as United Express.
“The realignment of our order book shifts our focus to ensuring our capital investments support earnings growth. We will continue to look at profitable opportunities in the new and used aircraft market to generate the highest ROIC,” said Andrew Levy, executive vice president and chief financial officer. “We have made important investments in our people and product this year, and will continue to make investments in the business to ensure increased profitability while maintaining a strong balance sheet.”
United Sets Course To Be Best Airline For Employees, Customers, and Investors / Page 3
Continued Strong Cost Control
The company will continue its rigorous cost management program and expects 2017 unit costs to grow 3.5% to 4.5% excluding fuel. The company expects 2018-2020 unit costs excluding fuel to grow less than 1% per year due in part to its plan to remove $700 million of costs by 2020, as compared to 2015 levels.
Building on Current Success
United has made significant progress in operational reliability, with an improvement of nearly 10 percentage points year-to-date in on-time departures. The company plans to further improve performance with a specific focus on decreasing the time it takes to turn narrowbody aircraft, continuing to reduce long delays and cancellations, and executing on previously announced fleet reliability measures.
The company also is accelerating its mobile strategy, including next steps for its award-winning mobile app, which has more than 14 million downloads, expanding the types of transactions customers can make throughout their journey, including managing documentation for international travel and expanded rebooking options. In addition, the company made further progress this year in providing mobile tools to the majority of its operational employees.
United currently has ratified agreements for all of its employee groups, with the exception of its technicians, who are represented by the International Brotherhood of Teamsters. The technicians are expected to vote on their contract before the end of the year.
Webcast Details
United’s 2016 Investor Day will begin today at 9:00 a.m. ET. A live, listen-only webcast of the presentations and question-and-answer session 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 a limited time.
About United
United Airlines and United Express operate more than 4,500 flights a day to 339 airports across five continents. In 2015, United and United Express operated more than 1.5 million flights carrying more than 140 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 more than 720 mainline aircraft, and this year, the airline anticipates taking delivery of 21 new Boeing aircraft, including 737NGs, 787s and 777s, as well as six used Airbus A319 aircraft. The airline is a founding member of Star Alliance, which provides service to 192 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 press release are forward-looking and thus reflect our current expectations and beliefs with respect to certain 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,”
United Sets Course To Be Best Airline For Employees, Customers, and Investors / Page 4
“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 press release are based upon information available to us on the date of this press 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; 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); 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 the 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 UAL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, 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.
# # #
United Sets Course To Be Best Airline For Employees, Customers, and Investors / Page 5
UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION
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 items, operating margin excluding special items, and consolidated unit cost (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 profit sharing, third-party business expenses, fuel, and special charges. 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 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.
United Sets Course To Be Best Airline For Employees, Customers, and Investors / Page 6
UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION (continued)
| Twelve Months Ended December 31, 2017E |
||||||||
| Low | High | |||||||
| Non-Fuel CASM Consolidated Operations (year-over-year percentage change) |
||||||||
| CASM, excluding special charges and profit sharing (a) |
4.9 | % | 6.7 | % | ||||
| Less: Third-party business expenses |
(0.2 | ) | 0.0 | |||||
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|||||
| CASM, excluding special charges, profit sharing and third-party business expenses |
5.1 | 6.7 | ||||||
| Less: Fuel expense |
1.6 | 2.2 | ||||||
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| CASM, excluding special charges, profit sharing, third-party business expenses and fuel |
3.5 | % | 4.5 | % | ||||
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| (a) | Excludes special charges, such as the impact of certain primarily non-cash impairment, severance and other similar accounting charges. While the Company anticipates that it will record such special charges throughout the year, at this time the Company is unable to provide an estimate of these charges, as well as an estimate of full-year profit sharing, with reasonable certainty. |
| Exhibit 99.2
|
Investor Day
November 15, 2016
|
|
Safe Harbor Statement
Certain statements included in this presentation are forward-looking and thus reflect our current expectations and beliefs with respect to certain 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 presentation are based upon information available to us on the date of this presentation. 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); 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 the 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 UAL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, 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
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Today’s Agenda
Commercial
Operations
Technology
Finance
Optimize network to achieve full potential
Continue re-fleeting and upgauge initiatives
Improve products and segmentation Enhance revenue management systems
Ensure safety in all things we do
Increase efficiency while maintaining reliability Provide excellent customer service
Use mobile technology to increase productivity and efficiency Drive incremental revenue through better app functionality
Grow earnings and control costs Ensure efficient capital investment Allocate capital to create long-term value
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Oscar Munoz
Chief Executive Officer
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We have great assets in place to realize our full potential
Engaged workforce
Flexible fleet
Global network
Healthy balance sheet
4
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And we have made a lot of progress already…
Extended contracts with pilots, dispatchers, IAM-represented employees Ratified JCBA with flight attendants Paid down ~$6B of debt since 2010 Introduced United Polaris business class Best-ever on-time performance YTD 2016
Established new leadership team
Launched new service to over 20 int’l destinations since merger
Repurchased over $4B of shares since 2014
Top-tier arrival and baggage handling performance throughout 2016 Tentative JCBA with technicians
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Goal:
Make United the best airline for employees, customers and investors.
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Scott Kirby
President
Julia Haywood
Executive Vice President & Chief Commercial Officer
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Great opportunities to improve our product
Great network potential
Re-fleeting and upgauge
Product segmentation
Airport and onboard experience
Yield management upside
Top-tier reliability
Exceptional customer service
Further leverage best international network; incremental opportunity in domestic hubs Plan to grow 2017 consolidated capacity by 1%—2%
Continue upgauge and slimline initiatives Increase front cabin and Economy Plus seat mix
Offer customers more choice Launch Basic Economy
Launch United Polaris business class product
Create market-leading airport experience and Clubs in high-profile business hubs
Transitioning to conditional demand forecasting (Gemini)
Addressing “small numbers” problem
Fulfill our promise to consistently deliver a reliable product
Changing the culture to improve employee engagement
Consolidating all customer touch points under our new Chief Customer Officer
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We have great network potential in the biggest markets
United has hubs in the five largest markets
Pacific
SFO (#3)
LAX (#2)
DEN (#9)
Latin
IAH (#12)
ORD (#4)
EWR
(#1)
IAD (#5)
Atlantic
Note: Ranked by origin and destination passengers (2015)
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However, we had de-emphasized domestic flying
Historical network profitability
Domestic International
Low High
High Low
High Medium
This led to United de-emphasizing domestic through:
Smaller gauge Low frequency Less connectivity
Over the last 5 years, domestic has become more profitable for the industry
International remains highly profitable and we will continue to support it, but our incremental improvement will come from domestic
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Newark should be leading airport in New York and across the Atlantic
Newark is the only true potential connecting hub in NY So it should be the best Atlantic gateway New York share has fallen from 30% to 26% Why has that happened?
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Newark lacks connectivity
Philadelphia: Grouping departures and arrivals in banks allows more connections
Departures
Arrivals
Early morning
45% connecting traffic
Late night
Departures
Arrivals
Newark: Rolling departures and arrivals create less connectivity
35% connecting traffic
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Newark has less competitive schedules for the local market
Newark to Atlanta
2004 201320162016
Dept Aircraft GaugeDeptAircraftGaugeDeptAircraftGaugeDeptAircraftGauge
7:00 737-300 1246:00ERJ506:203201506:00M88149
9:45 737-500 1129:42E-170707:523201507:00319132
12:00 737-300 12412:39ERJ5010:35737-7001188:00M88149
13:30 737-300 12414:46ERJ5014:35737-7001189:00717110
15:30 737-500 11216:59ERJ5017:1032015010:30M88149
17:00 737-500 11219:35E-1707021:00737-70011811:46319132
18:15 737-300 12413:00717110
20:00 737-300 12414:15717110
15:39M88149
16:40M88149
18:29319132
8 freq, ~120 seats 6 freq, ~57 seats 6 freq, ~137 seats11 freq, ~134 seats
Source: OAG, DOT DB1B
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Chicago O’Hare
Well positioned geographically for connecting passengers Additional cities in Chicago catchment that remain unserved by United Less banked schedule than American Airlines Opportunity to improve bank structure Introduce omni-directional banks
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Denver
Most profitable hub
Declining cost per passenger
Highest connecting percentage of any United hub
Continue Denver growth plan
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Houston
Strong Latin gateway
Current energy weakness
Gate capacity to also re-bank Houston
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San Francisco
Best gateway from the United States to Asia
Positioned for continued China and Asia growth
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Los Angeles
Second largest local market
Profitable international gateway, though difficult to connect to Star carriers
Working to get more gates and improve connectivity with Star carriers
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Washington Dulles
Profitable international gateway
High cost airport
Remain committed to Washington Dulles airport
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Expect earnings1 improvement to come from all areas of the business
Earnings initiatives by year (vs.2015)
($M)
Commercial enhancements 2016E 2017E2018E2019E2020E
Network initiatives - 100300450600
1Effect on pre-tax earnings expected from initiatives
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_
Re-fleeting and upgauge
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Re-fleeting through upgauge, slimline and incremental premium seats Change in gauge driven by upgauge and slimline programs Front cabin and Economy Plus seat growth Seats per departure % of total seats 120 119 119 +0.9 pts 117 117 115 111 +1.7 pts 13.3% 110 105 105 100 FY15 FY16E FY17E FY18E FY19E FY20E 2015 2020E 2015 2020E Front cabin Economy Plus 22
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Updating prior outlook based on fleet changes and assumptions
Prior valuation implied a marginal RASM of ~80% with a total value of:
2016E2017E2018E
Slimline and upgauge 300700800
Addition of front cabin and Economy Plus 200450750
Total 5001,1501,550
Revised our analysis using more conservative assumptions with a marginal RASM of ~50%
2016E2017E2018E2019E2020E
Slimline and upgauge 350550600650700
Addition of front cabin and Economy Plus 50150200250300
Total 4007008009001,000
23
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Expect earnings1 improvement to come from all areas of the business
Earnings initiatives by year (vs. 2015)
($M)
Commercial enhancements 2016E 2017E2018E2019E2020E
Network initiatives - 100300450600
Re-fleeting and upgauge 400 7008009001,000
1Effect on pre-tax earnings expected from initiatives 24
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Segmentation
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Customers have increasing choice in today’s world
Customers have increasing choice when
they make a purchase…
…and greater ability to customize to meet their needs and budget
Expectations and behaviors are changing because of increased choice
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Airlines have historically segmented on three dimensions
Brand
Experience of full service vs. low-cost carriers
Network reach and geography
Customer service and experience
Fare rules
Advance purchase requirements and Saturday stays
Refunds / change fees
Class of service
First class vs. economy
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But now, segmentation is changing
Brand
Consolidation has
created fewer brands
with broader offerings
Fare rules
Fare rules eroding: U/LCCs offering one-way, no advance purchase fares
Class of service
Airlines now expanding offering beyond two classes of service
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Industry is moving toward more product options for a trip, e.g. Domestic
Basic Economy
Basic product, without attributes not valued:
Lowest price No seat choice
No status or upgrades Not changeable
Economy
Core product, including:
Able to choose seat Competitive price Earn credit toward Premier status Eligible for upgrades Changeable, sometimes with a fee
Premium Economy
Enhanced seating and
amenities:
Extra width and
legroom
Improved drinks, food,
and amenities
(largely long-haul, but
some short-haul
outside US)
Domestic First Class
High-end experience:
Larger seat, more
room
Priority handling
throughout journey
Complimentary meals
and drinks
Enhanced service
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Today, we are announcing United Basic Economy
We will continue to offer the same great United onboard product for the price sensitive segment
We will offer customers greater choice: the option to purchase the core product at the lowest price…
…with the ability to pay for access to the features and benefits they value
Basic Economy will be on sale in early 1Q17 for travel in 2Q17
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Basic Economy is meaningfully differentiated from Economy
Price
Onboard product Seat selection Fare restrictions Carry-on bags
Boarding priority Upgrades Loyalty Benefits
Basic Economy
United’s lowest available price
Same as economy; better than U/LCCs
Seat assignment only at check-in
Flight changes not allowed
Overhead carry-on bags not permitted1
More room for economy passenger bags Improves operation and boarding process
Board in last group1
Cannot upgrade to Economy Plus or
First Class
Continue to earn redeemable miles, but not status miles
Economy
Higher price than Basic Economy
Unchanged
Seat selection at purchase
Flexibility to change flights
One carry-on and one personal item
Board in main groups
Opportunity to buy up or receive upgrades to Economy Plus and First Class
Earn credit toward Premier status and redeemable miles
1 MileagePlus Premier members and certain credit card members will retain boarding priority and be permitted an overhead carry-on bag
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We are now evaluating Premium Economy
Basic EconomyPremiumFirst Class
Domestic Economy Economy
International Basic EconomyPremiumUnited Polaris
Economy Economy
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Segmentation is part of a broader focus on personalization
We will continue to learn from
our customers’ behavior…
Travel patterns
Product choice
(travel occasion)
Operational
reliability
…to offer personalized experiences
Tailored promotions
Personalized booking and on-board experiences
Real-time response in cases of disruption
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MileagePlus will continue to enhance revenue
New credit card deal
Rate escalation due to new agreement
Next-gen redemption platform
Enhancements to improve customers’ ability to redeem miles
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Expect earnings1 improvement to come from all areas ofthe business
Earnings initiatives by year (vs. 2015)
($M)
Commercial enhancements 2016E 2017E2018E2019E2020E
Network initiatives - 100300450600
Re-fleeting and upgauge 400 7008009001,000
Segmentation - 2005507001,000
MileagePlus enhancements 250 100300300300
1Effect on pre-tax earnings expected from initiatives
35
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Other product improvements
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Improvements to ground and onboard experience coming
United Clubs
Renovating 12 clubs in 2017 including upgrades at all hubs Upgraded food and beverage service New modern interior designs Adding square footage in key markets
Domestic First United Polaris High-profile hubs Class
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Improvements to ground and onboard experience coming
United Clubs
United Polaris
Custom designed direct-aisle-access lie-flat seats Dedicated international business class lounge in 9 markets with pre-flight dining New sleep-focused amenities featuring bedding products from Saks Fifth Avenue
Domestic First High-profile hubs Class
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Improvements to ground and onboard experience coming
United Clubs
United Polaris
High-profile hubs
EWR to be the best airport experience in New York City
- Premium Lobby
- Upgraded food, beverage and retail
- Consolidated security
- New Polaris Lounge
Major investment in Los Angeles terminal Constructing new Houston terminal C North
Domestic First Class
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Improvements to ground and onboard experience coming
United Clubs UnitedPolarisHigh-profilehubsDomestic First
Class
New custom seats for
narrowbodies
Improved meal service
and expanded meal
windows
Upgraded first class
offering on two-cabin
regional jets
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Improvements to ground and onboardexperience coming
United Clubs United PolarisHigh-profile hubsDomestic First
Class
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Revenue Management
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Orion, our RM system, built in 1997 and has some known shortcomings
Independence of demand
Small numbers
No forecast evaluation
Limited history
Orion still assumes independence of demand
Mostly true 20 years ago… almost never true today
Which leads to spiral down
Average forecast standard deviation is 11 times the mean forecast
Users cannot compare the forecast to actual bookings, which makes it very difficult to improve the forecast, and therefore, the results
Only the two past years of data are stored, leading to large forecast error on certain dates, e.g. Christmas 2016
People do a great job overcoming these issues manually but upside is letting people focus on getting the forecast right
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Demand today is no longer independent
Historical
New York/Newark to Indianapolis
21 AP Non-ref Sat night stay$154S
14 AP Non-ref Sat night stay$199V
7 AP Non-ref Sat night stay$288H
0 AP Refundable One-way$764B
Today
New York/Newark to Indianapolis
21 AP Non-ref One-way$94 K
$114 L
14 AP Non-ref One-way$129 T
$144 S
7 AP Non-ref One-way$173 W
$204 V
0 AP Refundable One-way$343 Q
$426 U
$526 M
$819 B
Demand for each product was independent
Demand for multiple products with same restrictions is 100% dependent
Customers almost never buy the $526 fare if the $426 or $343 fare is available
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Demand dependence leads to spiral down
Historical observed demand
Advance Price when lowestwhen lowestwhen twowhen threeOrion expectsReal
purchase class is openclass islowestlowestwillingness
closedclasses areclasses areto pay is
closedclosed
(60%)(20%)(15%)(5%)
0 AP $81900070.47
0 AP $5260012-1.812
0 AP $426015--3.015
0 AP $34319---11.419
Real unconstrained demand for the $526 fare is 12… but Orion thinks it is 1.8
Leading Orion to keep lower buckets open
Meaning we only try to sell the $526 fare 15% of the time even though real demand always exists
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We have a problem with forecasting small numbers
Example of a distributionof passengersflyingbetween two cities
Most of the time, Orion is
100% wrong when 0
passengers show up
Total number
of instances ~5% of the time, 1-2
passengers show up – OrionOccasionally, a big group
is 200-500% wrongshows up and throws off
the average
0.3
0 Orion123456789 101112131415
DemandNumber of passengers traveling per day
Forecast
With small number forecasts, we are always wrong, and wrong by a lot
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Have no ability to evaluate our forecast quality, so difficult to improve
Orion makes nearly 8 million forecasts every day Nearly all have <1 passenger forecasted Impractical to compare actual bookings to forecast So forecast error never improves
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Limited history
Current Orion system only stores two years of full data
Therefore, when unusual calendar events occur, Orion has no reliable forecast to predict demand
For example, Christmas 2016 shifts from Friday to Sunday which hasn’t happened in five years
This requires revenue management analysts to manually adjust expectations for demand
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Orion functions as a black box
Analysts hand manage 2/3 of all managed flights1
They do a great job… but only so much people can do with thousands of data points
Hand management can lead to management bias
1 Managed flights are those that have fare buckets closed at any time
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What are we doing about it
Phase I
Conditional demand forecasting (solving for
independence of demand)
Demand aggregation (solving for small numbers)
Begin forecast vs actual assessment capability
Further adaptivity to schedule and pricing changes
Rolls out between summer 2017 and summer 2018
PRASM improvement: 1-2 points
Future Phases
Further improvements to our forecast accuracy Intelligent spilldown risk assessment Improvements to network optimizer Expanded history Expect roll out over next three years
PRASM improvement: 1-2 points
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Expect earnings1 improvement to come from all areas ofthe business
Earnings initiatives by year (vs. 2015)
($M)
Commercial enhancements 2016E 2017E2018E2019E2020E
Network initiatives - 100300450600
Re-fleeting and upgauge 400 7008009001,000
Segmentation - 2005507001,000
MileagePlus enhancements 250 100300300300
Revenue management improvements - 100400700900
1Effect on pre-tax earnings expected from initiatives
Total 650 1,200 2,350 3,050 3,800
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Q&A
Scott Kirby
President
Julia Haywood
Executive Vice President & Chief Commercial Officer
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UNITED
53
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Greg Hart
Executive Vice President &
Chief Operations Officer
54
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Focused on safety, reliability, efficiency and service
Ensure safety in all things we do
Continue to improve reliability
Increase efficiency of operation
Provide excellent customer service
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Significant and sustained reliability improvement
Consolidated D:001
67.5%
59.8%
55.8%
2014 2015 2016
Consolidated A:001
66.7%
58.2%
52.5%
2014 2015 2016
Consolidated completion factor1
97.9%
97.5%
95.7%
2014 2015 2016
Mishandled bag ratio2
3.59
3.18
2.53
2014 2015 2016
1 Jan-Oct for each year; Includes both mainline and regional
2 Jan-Oct for each year; As reported to Department of Transportation
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Opportunity to improve reliability and efficiency
Aircraft turn times
Aircraft maintenance
Cancellations and long-delays
57
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Redesigning our turn processes to turn aircraft quicker
Narrowbody turn time1
(6%)
United Peer Avg2
1 Normal turn defined as having available ground time between 55 min and 70 min
2 Includes AA, DL and WN
Improve turn times by:
Minimize handling/processing of gate bags near the end of the turn
Focus on time-constrained turns
Consistently provide resources to “attack” arriving aircraft
Goal to provide the opportunity to give aircraft time back to the schedule
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Improving our aircraft maintenance processes
Initiatives underway to drive fleet health
Redesigning maintenance programs
Improve supply chain
Reliability modifications
59
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Continue to reduce long-delays and cancellations
Disruptive events2016 vs 20141
(57%)
(27%)
2014 2016 20142016
Long-delays2 Cancellations
1 Jan-Oct for each year; Includes both mainline and regional
2 Long-delays defined as flights delayed two or more hours from scheduled departure time
Long-delays and cancellations are the most disruptive events for our customers and our employees
Primary areas of focus:
- Improved fleet health
- Improved durability of the flight schedule to better protect the customer’s travel journey
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New organization structure elevates focus on customers
Chief Customer
Officer
Airport Operations Contact Centers
Customer Food Services
Experience
Ops Strategy,
Inflight Services Planning and
Design
Primary emphasis areas
A consistent, integrated and—most importantly -positive experience across every customer interaction, on the ground and in the air
Ensuring all policies, procedures and practices are designed and implemented in a manner that enhances the customer journey
Prioritizing investment decisions to ensure operational reliability and customer experience are consistent and positive
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Expect earnings1 improvement to come from all areas of the business
Earnings initiatives by year (vs. 2015)
($M)
Commercial enhancements 2016E 2017E2018E2019E2020E
Network initiatives - 100300450600
Re-fleeting and upgauge 400 7008009001,000
Segmentation - 2005507001,000
MileagePlus enhancements 250 100300300300
Revenue management improvements - 100400700900
Improved operations
Operational integrity 50 200300300300
1Effect on pre-tax earnings expected from initiatives
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Linda Jojo
Executive Vice President & Chief Information Officer
63
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Our technology supports a large and complex operation today
27,000 $12B 1.5M14M+
Flight plans Annual revenue Baggage scansMobile app
generated daily (E-commerce) dailydownloads
500K 700K 56K1M
United.com visitors Tickets soldWorkforce
Flight messages daily staffing events
per day dailydaily
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We have strengthened and aligned our technology team
Leadership team realigned and revamped in last two years
Previous industry experience includes: Airlines, Telecom, Energy, Healthcare, Government, Technology, Logistics
Model supports alignment and faster delivery
Improve reliability
Reduce incidents, flight delays and impact of delivery
Enable mobility
Drive revenue, enhance experience and improve productivity
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Reliability and stability have improved meaningfully
Critical incidents remain
at record lows
(63%)
2012 2013 201420152016
IT-related flight delays at lowest level since 2012
(57%)
2015 2016
Continue to improve root cause analysis and delivery
Meaningful reductions in volume/length of technology “glitches” improves airline reliability
- Improving processes for updating systems
- Leveraging leading-edge monitoring and analytics to predict and prevent outages
- Investing in technical infrastructure Executed large-scale IT programs with no operational impacts
- Technical Operations Integration
- Departure Management Upgrade
- MileagePlus Security Upgrade
66
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Technical Operations integration is large and complex …
…and has been executed with no impact on the operation
SCEPTRE
(Aug 2015)
Created a single system
No flight delays during planned 14 hour cutover Converted $1 billion in parts (>7M records across ~300K part numbers) 7,000 Tech Ops employees trained
Electronic Log Book
(1Q 2017)
Eliminating the paper
102 of 450 aircraft migrated from paper log book Over 50,000 flights completed across stations 102 stations
Simplification and consolidation of our Tech Ops systems is one key to our improved performance
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Mobile application continues to win awards and lead the market
First to offer
Passport scanning for check-in
Location-based airport maps
Media streaming onboard
aircraft
On-demand Uber integration
Touch ID sign-in
Proactive travel disruption
messaging and ability to
modify travel plans
Award flight booking
Continue to invest and extend
Extended Travel Disruption
Assistance (rebooking,
electronic travel vouchers)
Full reservation management
(changes/cancelations)
International Document
Management (Visas)
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…and is an integral part of our customers’ experience every day
App downloads & average daily visits Daily averages
1000
650
800
513600
25
20400
23314
200
37 7
2
0
2012 2013201420152016
App downloads (M) Average daily visits (000s)
56,000 $37M
Bookings Digital Revenue
(Reservations) (Booking & Ancillary)
550,000 577,000
Flight Status Self-Service
Checks Check-ins
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Untethering our workforce…
…with role-based, context-driven mobile tools and apps
Pilots Flight Attendants Customer Service Ramp
Electronic Flight Bag—iPad that provides pilots with access to schedules and flight plans in real time
Link—iPhone with in-flight service, all flight manuals and customer information
MAP—iPhone that provides agents with ability to work “shoulder to shoulder” including closing a flight, checking bags and re-accommodating travelers
Bag/Cargo Scanning—Military grade device that provides scheduling and critical bag transfers
70
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The power of mobile technology is connectivity in real time
Improving collaboration for faster aircraft turns
Distribute contact list of individuals working a flight for easy communication across workgroups
Send event-driven alerts and notifications
Consolidate system messages and employee communications in one place
Create rules that govern what triggers events and what audiences need to be included in alerts
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Andrew Levy
Executive Vice President & Chief Financial Officer
|
|
Focused on creating long-term value
Revenue growth
and cost control
Disciplined capital investment
Capital allocation
73
|
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Commercial and operational improvements critical to financial success
Commercial enhancements drive $3.8B in earnings benefit by 2020
Operational improvements drive $300M in earnings benefit by 2020
74
|
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Cost savings initiatives
Expected run-rate savings1
($M)
$700
$600
$500
$400
$200
2016 2017 201820192020
Key cost levers
Increasing operational efficiency
Better utilizing assets & people
Strategic purchasing
New technology
Controlling costs with the goal of growing expense at a slower rate than capacity– leading to higher margin incremental flying
1As compared to 2015
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Expect to grow non-fuel unit costs less than 1% from 2018—2020
Non-fuel CASM outlook1
Year-over-year H/(L)
3.5%—4.5%
1.5%—2.0%
1.5%—2.0% Less than 1.0%
~0.5%
FY17E Avg annual
FY18E—FY20E
IBT and pilot market reset estimate
Recently ratified labor agreements
Core unit cost growth
Core unit cost growth including 2016 labor agreements
Pilot labor agreement becomes amendable in 2019; all other labor agreements become amendable after 2020
Long-term unit cost projection based on assumption of 1.5% annual capacity growth
1 Non-fuel CASM (operating expense per available seat mile) excludes fuel, profit sharing, third-party expenses, special charges, the impact of certain primarily non-cash impairment, severance and other similar accounting charges.
For a GAAP to Non-GAAP reconciliation see Appendix A 76
76
|
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Focused on creating long-term value
Earnings growth and cost control
Disciplined capital investment
Capital allocation
77
|
|
Reviewing fleet plan
Undertaking bottoms-up review of our fleet commitments in 2H17 and beyond
Focus on capital efficiency
Made two changes to the fleet plan….
78
|
|
Restructuring 737 order placed in early 2016
Converting four 737-700s to four 737-800s to be delivered in second half of 2017
Deferring remaining 61 aircraft and converting to 737-MAX with delivery dates to be determined
Will continue to leverage order book flexibility to adjust fleet plan as needed going forward
Reduces 2017 – 2018 cap ex by ~$1.6B
79
|
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Changing ownership structure for 24 E175s
In 2014 UAL entered into CPA commitment with RJET for 24 E175s
During RJET Chapter 11 reorganization, UAL modified the agreement and will now purchase all 24 aircraft
Utilize United’s strong balance sheet lower cost of capital to drive better economics Capture residual asset value
NPV benefit of more than $100M compared to lease arrangement
Increases planned capex by ~$550M not including pre-delivery deposits paid in 2016
Aircraft ownership
NPV for one E175
$4M—$5M
Original CPA Stucture United Owned
80
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Continuing to review and refine fleet strategy Fleet initiatives underway Densifying both narrowbodies and widebodies Maximizing regional scope provisions (ability to fly 255 70/76 seaters under current scope provision) Refurbishing existing aircraft to improve product and extend life of aircraft Retiring 747 Fleet (retire all 20 aircraft by 3Q18) Fleet initiatives under consideration Adding used aircraft opportunities beyond 11 used Airbus being delivered in 2016 and 2017 Identifying Further densification opportunities Refining widebody fleet plan and further evaluate opportunities for narrowbodies 81
|
|
Fleet plan has significant flexibility Mainline aircraft (at year end) Current fleet including 250 unencumbered Does not include aircraft option positions Includes: - 330 unencumbered 250 count 450 aircraft - 120 aircraft eligible Aircraft to return to lessor 2016 2017 2018 2019 2020 Current fleet plan Return aircraft at lease end and sell unencumbered assets 82
|
|
Non-aircraft capital expenditures Reliability Spare parts Competitive product United Polaris business class Infrastructure Consolidate flight training centres Regulatory, safety & security Nitrogen inerting system (FAA requirement) Financial return Slimline seats 83
|
|
84 Lowering capital expenditures Capital expenditures ($B) FY18E $3.3 - $3.5 $2.2 - $2.4 $1.1 FY17E $3.1 - $3.3 $1.1 $4.2 - $4.4 Aircraft Non-aircraft Reducing 2017 2018 planned capital expenditures by $1B
|
|
Focused on creating long-term value
Earnings growth and cost control
Disciplined capital investment
Capital allocation
85
|
|
Strong liquidity position Quarter-end unrestricted liquidity ($B) $5B-$6B is the optimal liquidity level Why 5B - $6B is optimal liquidity level $6.5 $6.2 Absorb seasonality of the business $6.0 $1.35 $5.3 $1.35 (~$1.5B peak to trough) $1.35 Minimum target balance $1.35 $5.0B Meets debt and capital expenditure commitments $5.2 $4.7 $4.9 $4.0 Provides sufficient liquidity under extreme stress-test (e.g. Sept. 11th) scenario Q4 2015 Q1 2016 Q2 2016 Q3 2016 Revolving credit facility Unrestriced cash 86
|
|
Unencumbered asset base is source of additional liquidity
Unencumbered assets1
($B)
~$13
+262%~$5
$8.7
$3.6
~$8
$2.4 $5.1
$ 1.4
$0.7
YE11 YE16E YE20E
AircraftNon-aircraft
1 Company estimates as of September 2016. Non-aircraft includes spare parts, spare engines, routes and other property YE20 assumes continued pay down as debt matures
UAL has made significant progress paying down debt and unencumbering assets
Secured debt market remains open during challenging economic environment
87
|
|
Strong balance sheet
Adjusted debt
Debt, pension & post-retirement obligations1 ($B)
~20%
$24.1
$4.3
$19.5
$3.1
$7.1
$4.9
$12.7
$11.5
YE11
3Q16
Pension & post-retirement
Aircraft rent, capitalized1
Debt and capital lease obligations
1 Aircraft rent capitalized at 7x
2 Trailing twelve months
3 For a GAAP to Non-GAPP reconciliation see Appendix A
Source: SEC filings
YE11 3Q162
EBITDA3 ($B) $3.7 $7.0
Debt/EBITDA 5.2x 2.3x
Adj. debt/EBITDA 6.4x 2.8x
YE11 3Q162
EBIT3 ($B) $2.2 $5.0
Interest expense ($B) $0.9 $0.6
Interest coverage 2.3x 8.0x
Blended interest rate 6.8% 5.2%
88
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|
Manageable debt payments going forward
Scheduled debt and capital lease payments
($B)
~$1.8
~$1.4
Avg Annual Avg annual
FY12—FY16E FY17EX—FY20E1
Expect to finance 50%—75% of
aircraft capital expenditures
EETCs are a highly efficient
source of aircraft funding
PrincipalInterest
EETC Tranche ($M)rate
AA $7293.100%
2016-1 A $3243.450%
AA $6372.875%
2016-2 A $2833.100%
1 Includes $850M term loan maturity
89
|
|
Pension funded ratio Pension funded ratio 75% 67% 50% YE11 YE15 YE20E Expect cash contributions of ~$400M annually 90
|
|
Credit ratings reflect strong balance sheet UAL credit ratings BB Fitch upgraded UAL in October Ba3 BB- 2016; Moody’s under review Several balance sheet metrics at investment grade levels Able to raise debt through EETCs at investment grade interest rates Fitch Moody’s S&P Stable Positive Positive outlook outlook outlook 91
|
|
Lowest adjusted debt among peers
Adjusted debt
3Q16 debt, pension and post-retirement obligations ($B)
$39.2
$7.4
$8.5
$22.1
$19.5
$3.1
$12.6
$4.9
$23.3
$1.9
$11.5
$7.6
Pension & post-retirement Aircraft rent, capitalized1 Debt and capital lease obligations
1Aircraft rent capitalized at 7x Source: SEC filings
92
|
|
Have reduced share count by ~20% since 2014
Will continue to return excess cash to shareholders
$2B of current authorization remaining as of the end of 3Q16
Evaluating dividend strategy
Will not compromise strength of balance sheet to fund shareholder return programs
|
|
Focused on creating long-term value
Revenue growth
and cost control
Disciplined capital investment
Capital allocation
Going forward we will manage our business to maximize operating margin and ROIC
94
|
|
Expect earnings1 improvement to come from all areas of the business
Earnings initiatives by year (vs. 2015) Unique United
($M)levers compared
Commercial enhancements 2016E 2017E2018E2019E2020Eto Delta
Network initiatives - 100300450600~100%
Re-fleeting and upgauge 400 7008009001,000~50%
Segmentation - 2005507001,000~25%
MileagePlus enhancements 250 100300300300~100%
Revenue management improvements - 100400700900~75%
Improved operations
Operational integrity 50 200300300300~100%
Cost structure
Cost efficiency program 200 400500600700~50%
Total $0.9B $1.8B$3.2B$4.0B$4.8B
1Effect on pre-tax earnings expected from initiatives 95
|
|
Path to close the margin gap to Delta Operating margin gap 2016 consensus excluding fuel hedges1 UAL H/(L) vs. DAL ~1 pt ~1 pt ~1 pt ~5 pts (5.9 pts) 2016 UAL operating Commercial Improved operations Cost structure UAL estimated margin gap to DAL enhancements improvements premium to DAL by 2020 1Wall Street estimates 96
|
|
Q&A
Andrew Levy
Executive Vice President & Chief Financial Officer
97
|
|
Oscar Munoz
Chief Executive Officer
98
|
|
Executing on our plan to realize our full potential
Realize full network, product and segmentation potential Capture value by improving revenue management systems Improve efficiency while maintaining reliability
Use technology to enable reliability, drive efficiency and improve revenue
Secure our future through strong financial performance
99
|
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Goal:
Make United the best airline for employees, customers and investors.
100
|
|
UNITED
101
|
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Appendix A: reconciliation of GAAP to Non-GAAP financial measures
UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (GAAP) and Non-GAAP financial measures. CASM is a common metric used in the airline industry to measure an airline’s cost structure and efficiency. UAL reports CASM excluding profit sharing, third-party business expenses, fuel, and special charges. 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 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.
Year-over-Year L/H (in percentage change) Non-Fuel CASM CASM, excluding special charges and profit sharing (a) less: Third-party business expenses CASM, excluding special charges, profit sharing and third-party business expenses less: Fuel CASM, excluding special charges, profit sharing, third-party business expenses, and fuel Twelve Months Ended December 31, 2017E Low High 4.9 – 6.7 % (0.2) – 0.0 5.1 1.6 3.5 – 6.7 – 2.2 – 4.5 %
(a) Excludes special charges, such as the impact of certain primarily non-cash impairment, severance and other similar accounting charges. While the Company anticipates that it will record such special charges throughout the year, at this time the Company is unable to provide an estimate of these charges, as well as an estimate of full-year profit sharing, with reasonable certainty. 102
|
|
Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued)
UAL provides financial metrics, including earnings before interest, taxes (EBIT), and earnings before interest, taxes depreciation and amortization (EBITDA), that we believe provides useful supplemental information for management and investors by measuring profit and profit as a percentage of total operating revenues. Aircraft rent is adjusted times seven per industry standards. These financial metrics are adjusted for special items that are non-recurring and that management believes are not indicative of UAL’s ongoing performance.
(In millions) EBIT and EBITDA Net income Adjusted for: Interest expense Interest capitalized Interest income Income tax expense (benefit) Special items before income taxes Adjusted EBIT, excluding special items Depreciation and amortization Adjusted EBITDA, excluding special items Twelve Months Ended September 30, 2016 December 31, 2011 $2,689 $840 631 (59) (40) 1,151 704 5,076 1,949 $7,025 949 (32) (20) 5 485 2,227 1,547 $3,774 Adjusted Debt Current maturities of long-term debt Current maturities of capital leases Long-term debt Long-term obligations under capital leases Postretirement benefit liability Pension liability Balance sheet debt Aircraft rent at 7x Adjusted debt Twelve Months Ended September 30, 2016 December 31, 2011 $969 $1,186 124 125 9,612 10,496 752 1,927 1,220 14,604 4,865 $19,469 928 2,407 1,862 17,004 7,063 $24,067 103