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): September 6, 2017
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) |
(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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 7.01 | Regulation FD Disclosure. |
Andrew Levy, 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 Cowen and Company Global Transportation Conference on September 6, 2017. 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 (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* | United Continental Holdings, Inc. slide presentation delivered on September 6, 2017 | |
| * | 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: | /s/ Chris Kenny | |
| Name: | Chris Kenny | |
| Title: | Vice President and Controller | |
Date: September 6, 2017
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1* | United Continental Holdings, Inc. slide presentation delivered on September 6, 2017 | |
| * | Furnished herewith electronically. |
 Cowen
and Company Global Transportation Conference
September 6, 2017 Andrew Levy Executive Vice President and Chief Financial Officer Exhibit 99.1 |
 2 Safe Harbor Statement Certain statements included in this presentation are forward-looking and thus reflect our current expectations and beliefs with respect to
certain current and future events and anticipated financial and operating
performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such
forward-looking statements. Words such as “expects,”
“will,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook,” “goals” and similar expressions are
intended to identify forward-looking statements. Additionally, forward-looking
statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties or which indicate
that the future effects of known trends or uncertainties cannot be
predicted, guaranteed or assured. All forward-looking statements in this presentation are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result
of new information, future events, changed circumstances or otherwise,
except as required by applicable law. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: our ability to comply with the terms of our various financing arrangements; the
costs and availability of financing; our ability to maintain adequate
liquidity; our ability to execute our operational plans and revenue-generating initiatives, including optimizing our revenue; our ability to control our costs, including realizing benefits from our resource optimization efforts, cost reduction initiatives and fleet
replacement programs; costs associated with any modification or termination
of our aircraft orders; our ability to utilize our net operating losses; our ability to attract and retain customers; potential reputational or other impact from adverse events in our operations; demand for transportation in the markets in which we operate; an outbreak of a
disease that affects travel demand or travel behavior; demand for travel
and the impact that global economic and political conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income; general economic conditions (including interest rates, foreign currency exchange rates,
investment or credit market conditions, crude oil prices, costs of aircraft
fuel and energy refining capacity in relevant markets); our ability to cost-effectively hedge against increases in the price of aircraft fuel, if we decide to do so; economic and political instability and other risks of doing business globally; the effects of any
hostilities, act of war or terrorist attack; the ability of other air
carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the effects of any technology failures or cybersecurity breaches; disruptions to our regional network; the costs and availability of
aviation and other insurance; industry consolidation or changes in airline
alliances; the success of our investments in airlines in other parts of the world; competitive pressures on pricing and on demand; our capacity decisions and the capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation
and other actions (including Open Skies agreements and environmental
regulations); the impact of regulatory, investigative and legal proceedings and legal compliance risks; the impact of any management changes; labor costs; our ability to maintain satisfactory labor relations and the results of any collective bargaining agreement
process with our union groups; any disruptions to operations due to any
potential actions by our labor groups; weather conditions; and other risks and uncertainties set forth under Part I, Item 1A., “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as well as other risks
and uncertainties set forth from time to time in the reports we file with
the U.S. Securities and Exchange Commission. |
 3 Agenda 1 2 3 Revenue and guidance update Looking forward Fleet update |
 4 Challenging third quarter Unprecedented storm in second largest hub Geopolitical tensions in Korean Peninsula Pricing issues Higher fuel costs |
 5 3Q17 guidance update Prior Update Pre-tax margin 12.5% - 14.5% 8.0% - 10.0% Capacity ~4.0% 3.0% - 3.5% PRASM (1.0%) – 1.0% (3.0%) - (5.0%) CASM ex 1,2 2.0% - 3.0% 2.5% - 3.5% Fuel price $1.56 - $1.61 $1.72 - $1.77 Fuel consumption (M gals) 1,085 – 1,095 1,070 – 1,080 1 Excludes special charges, the nature and amount of which are not determinable at this time
2 Excludes fuel, profit sharing, and third-party business expenses. See appendix A for a reconciliation of non-GAAP financial
measures 3
Fuel price including taxes and fees and this price per gallon corresponds to fuel
expense as reported in the income statement Harvey impact still a
preliminary estimate Harvey impact still a preliminary
estimate 1
3 |
 6 3Q17 revenue headwinds ~0.5 pts Revised 3Q guidance (3.0%) – (5.0%) Incremental Pacific weakness ULCC pricing ~1 pt Uncompetitive Basic Economy pricing ~1 pt Harvey impact ~1.5 pts July 3Q guidance (1.0%) – 1.0% Unit revenue now expected to be down (3.0%) to (5.0%) |
 7 Harvey impact Operations at IAH were suspended for over four days with over 7,400 flights cancelled
All facilities at IAH are open and we anticipate operating at full schedule by the end
of the week
Our employees are rallying to restore service faster than originally anticipated
Local demand will be impacted in the near-term but for connecting
customers it’s business as usual
Expect some impact in 4Q17 dependent on pace of recovery on local IAH
demand |
 8 Uncompetitive Basic Economy pricing Basic Economy improves ability to optimize revenue through customer choice and is a tool to
more effectively compete for price sensitive customers
New product was rolled out broadly in domestic system at the end of May
However, we underappreciated that incremental revenue from buy-up would be more
than offset by share loss to legacy carriers without similar Basic
Economy offering We have adjusted our approach by:
Scaling back breadth of offering to a portion of our domestic network
Offering Basic Economy only in the bottom five fare classes instead of entire fare
ladder Varying buy-up levels depending on competitive
landscape Firmly believe in the long-term value of
segmentation Firmly believe in the long-term value of
segmentation |
 9 ULCC pricing Basic Economy is a powerful tool to compete with unbundled offerings on price and product
Rollout of Basic Economy has put pressure on ULCCs seeking a price
advantage Since late July, ULCCs have reduced fares substantially in our
hub markets and United has continued to match lower fares
We will continue to play to our strengths
Our hubs are our principal assets and are in the largest local markets in the
US Low marginal seat costs in our hubs give us a marginal seat cost
advantage due to connecting traffic
Price sensitive customers in local hub markets are very important to United and we will
continue to compete aggressively with all
Our strategy to compete in our hubs remains unchanged
Our strategy to compete in our hubs remains unchanged
|
 10 Agenda 1 2 3 Revenue and guidance update Looking forward Fleet update |
 11 Update on Airbus A350 order Changed model variant to A350-900 Order increases by 10 aircraft to 45 aircraft A350-900 better fit and size for the United network Deferred deliveries until late 2022 through 2027 Aligning delivery of aircraft to potential retirements A350-900 is a good replacement aircraft for the Boeing 777-200ER fleet
In 2022, Boeing 777-200ER aircraft begin to reach 25 years of age
Capex spend deferred to correspond to modified delivery dates 2018 capex guidance update from July already reflects the deferral of the four A350s 1 July 18, 2017 Investor Update - The Company expects full-year 2017 gross capital expenditures to be between $4.6 billion and $4.8 billion and full-year 2018 gross
capital expenditures to be approximately $1 billion lower than 2017 gross
capital expenditures 1 |
 12 Agenda 1 2 3 Revenue and guidance update Looking forward Fleet update |
 13 Key investment highlights Strong liquidity levels and healthy balance sheet Managing costs and disciplined capital investment Managing business to maximize margin and ROIC Defined strategy to close margin gap to peers by 2020 Will continue to return excess cash to shareholders |
 14 Looking forward Executing on strategic initiatives outlined at last year’s Investor Day Making progress on all fronts with some initiatives ahead of plan and some slightly behind
versus initial expectations
Feel good about United’s progress despite near-term challenges
Will provide a quantitative update on our strategic initiatives in November
Remain confident in our ability to drive earnings improvement in
2018 Remain confident in our ability to drive earnings improvement in
2018 |
 15 Looking forward Building on operational momentum from first half of the year Revenue management (Gemini) enhancements showing positive results in early stage roll out
Network changes will drive better hub connectivity and improved product:
Houston (IAH) re-bank in 4Q 2017; Chicago (ORD) & Denver (DEN) in
2018 More catchment area flying improves hub feed
Optimizing mainline vs. regional aircraft deployment in large business
markets Maximizing 70/76-seat aircraft scope clause
Actively managing international network
Segmentation - maturation of Basic Economy and decision forthcoming on Premium Economy Intensely focused on cost opportunity |
 16 Top priorities for 2018 Network optimization Drive better hub connectivity through re-banking and expanding catchment area flying
Capture unique opportunities and reallocate aircraft where necessary
Focus on eliminating costs and improving efficiency
Bottoms-up budgeting
Continue focus on customer and operational improvement
Holistically review and modify customer policies and procedures and enhance customer
experience Build on 2017 momentum in key operating metrics including
on-time, completion factor and MBR Invest in technology and digital to
drive better business results Examples include: Gemini (revenue
management system), untethering our workforce with increased mobile
capabilities, completing Flight Attendant JCBA implementation and using analytics to drive high-margin revenue Financial priority in 2018 is to drive margin expansion and improve earnings Financial priority in 2018 is to drive margin expansion and improve earnings |
 |
 18 Appendix A: reconciliation of 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 as the exclusion allows investors to better understand and analyze our recurring cost performance and provide a more meaningful comparison of our core
operating costs to the airline industry. Estimated 3Q 2017
Non-Fuel CASM Low High CASM, excluding special charges (a) (Non-GAAP) 3.3 % – 4.2 % Less: Profit sharing, third-party business expenses and fuel (b) 0.8 – 0.7 CASM, excluding special charges, profit sharing, third-party business expenses and fuel (Non-GAAP) 2.5 % – 3.5 % (a) Excludes special charges, the nature of which are not determinable at this time. 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 (b) Both the cost and availability of fuel are subject to many economic and political factors and are therefore beyond the Company’s
control |