Document
 

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): July 17, 2018

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 2.02     Results of Operations and Financial Condition.
On July 17, 2018, United Continental Holdings, Inc. (“UAL”), the holding company whose primary subsidiary is United Airlines, Inc. (“United,” and together with UAL, the “Company”), issued a press release announcing the financial results of the Company for second quarter 2018. The press release is attached as Exhibit 99.1 and is incorporated herein by reference.

The information in this Item 2.02, 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, (the “Securities Act”) except as shall be expressly set forth by specific reference in such filing.
Item 7.01     Regulation FD Disclosure.
On July 17, 2018, UAL issued an investor update related to the financial and operational outlook for the Company for third quarter and full year 2018. A copy of the investor update is attached as Exhibit 99.2 and is incorporated herein by reference.

The information in this Item 7.01, including Exhibit 99.2, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of 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, 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
  
 
 
99.2
  





























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: July 17, 2018





































Exhibit
Exhibit 99.1
News Release
 
United Airlines
Worldwide Media Relations
872.825.8640
media.relations@united.com
 
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12358945&doc=4


United Airlines Reports
Second-Quarter 2018 Performance
     
CHICAGO, July 17, 2018 - United Airlines (UAL) today announced its second-quarter 2018 financial results.

UAL reported second-quarter net income of $684 million, diluted earnings per share of $2.48, pre-tax earnings of $857 million and pre-tax margin of 8.0 percent.
Excluding special charges and mark-to-market adjustments, UAL reported second-quarter net income of $889 million, diluted earnings per share of $3.23, pre-tax earnings of $1.1 billion and pre-tax margin of 10.4 percent.
Ranked first among largest competitors in on-time departures in the quarter.
UAL repurchased $407 million of its common shares in the second quarter.
Consolidated passenger revenue per available seat mile (PRASM) increased 3.0 percent year-over-year.
Consolidated total revenue per available seat mile (TRASM) increased 2.8 percent year-over-year.
Consolidated unit cost per available seat mile (CASM) increased 7.1 percent year-over-year.
Consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, decreased 0.4 percent year-over-year.
UAL now expects full-year 2018 diluted earnings per share, excluding special charges and mark-to-market adjustments, to be $7.25 to $8.751.

“We delivered great financial results and strong operational performance in the second quarter despite the significant headwind of higher fuel prices,” said Oscar Munoz, chief executive officer of United Airlines. “These results are the strongest evidence yet that our strategic growth plan is working, and we are well positioned to carry our momentum into the second half of the year.”

For more information on UAL's third-quarter 2018 guidance, please visit ir.united.com for the company's investor update.



United Airlines Reports Second-Quarter 2018 Performance



Second-Quarter Highlights
Operations and Employees
Completed the best second-quarter on-time departure performance in United’s history.
Received "Best-of-the-Best" Award from the National LGBT Chamber of Commerce and National Business Inclusion Consortium for commitment to diversity and inclusion across all communities.
Announced a total of $8 million in grants to benefit organizations in each of its domestic hub communities.
Became the first carrier to achieve certification through the new Audubon International Green Hospitality Program for the airline's United Club location in Terminal 7 of Los Angeles International Airport.
Customer Experience
Expanded personal device entertainment option to all aircraft with DIRECTV live streaming for purchase, providing at least one free entertainment option on all Wi-Fi equipped aircraft (which is any aircraft with more than 70 seats).
Opened three new United Polaris lounges located in San Francisco International Airport, Newark Liberty International Airport and Houston’s George Bush Intercontinental Airport.
Announced a new relationship with The Private Suite, offering the airline's customers access to a newly built, private terminal at Los Angeles International Airport.
Introduced the new United Explorer Card which offers additional benefits, travel credits and discounts.
Network and Fleet
Launched service from Newark/New York to two new international destinations: Reykjavik, Iceland, and Porto, Portugal.
Announced the return of seasonal service to 25 destinations, including, among others: Athens, Greece; Glasgow, Scotland; Madrid and Barcelona, Spain; Rome and Venice, Italy; and Hamburg, Germany.
Announced schedule expansion at East Coast hubs in Newark/New York and Washington-Dulles to offer more nonstop flights to destinations popular with New York-area customers while reallocating largely connecting passenger flights to Washington-Dulles.
Took delivery of one Boeing 777-300ER aircraft and six Boeing 737 MAX 9 aircraft.
Became North American launch customer of the Boeing 737 MAX 9 aircraft, which took its first flight on June 7 from Houston’s George Bush Intercontinental Airport to Orlando International Airport in Florida.

Earnings Call
UAL will hold a conference call to discuss second-quarter 2018 financial results and its financial and operational outlook for the third quarter and full year of 2018 on Wednesday, July 18, at 9:30 a.m. Central Time /10:30 a.m. Eastern Time. A live, listen-only webcast of the conference call will be available at ir.united.com. The webcast will be available for replay within 24 hours of the conference call and then archived on the website for three months.



2

United Airlines Reports Second-Quarter 2018 Performance


About United
United Airlines and United Express operate approximately 4,600 flights a day to 357 airports across five continents. In 2017, United and United Express operated more than 1.6 million flights carrying more than 148 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, Newark/New York, San Francisco and Washington, D.C. United operates 757 mainline aircraft and the airline's United Express carriers operate 551 regional aircraft. The airline is a founding member of Star Alliance, which provides service to 193 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".

1 Excludes special charges, the nature of which are not determinable at this time, and mark-to-market impact of equity investments. Accordingly, UAL is not providing earnings guidance on a GAAP basis.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
Certain statements included in this release are forward-looking and thus reflect our current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as “expects,” “will,” “plans,” “anticipates,” “indicates,” “believes,” “estimates,” “forecast,” “guidance,” “outlook,” “goals” and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this release are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: 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, including political developments that may impact our operations in certain countries; demand for travel and the impact that global economic and political conditions have on customer travel patterns; competitive pressures on pricing and on demand; demand for transportation in the markets in which we operate; our capacity decisions and the capacity decisions of our competitors; the effects of any hostilities, act of war or terrorist attack; the effects of any technology failures or cybersecurity breaches; the impact of regulatory, investigative and legal proceedings and legal compliance risks; disruptions to our regional network; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; costs associated with any modification or termination of our aircraft orders; potential reputational or other impact from adverse events in our operations, the operations of our regional carriers or the operations of our code share partners; our ability to attract and retain customers; 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; the impact of any management changes; our ability to cost-effectively hedge against increases in the price of aircraft fuel if we decide to do so; any potential realized or unrealized gains or losses related to any fuel or currency hedging programs; 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; an outbreak of a disease that affects travel demand or travel behavior; U.S. or foreign governmental legislation, regulation and other actions (including Open Skies agreements and environmental regulations); industry consolidation or changes in airline alliances; our ability to comply with the terms of our various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; the costs and availability of aviation and other insurance; weather conditions; our ability to utilize our net operating losses to offset future taxable income; the impact of changes in tax laws; the success of our investments in airlines in other parts of the world; 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, 2017, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission.

-tables attached-


3

United Airlines Reports Second-Quarter 2018 Performance



On January 1, 2018, United Continental Holdings, Inc. (“UAL”) adopted Accounting Standards Update No. 2014-09 (Topic 606), Revenue from Contracts with Customers, and Accounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. As such, certain previously reported 2017 figures are adjusted in this report on a basis consistent with the new standards. See the Current Report on Form 8-K filed by UAL with the Securities and Exchange Commission on March 1, 2018 for additional information.
UNITED CONTINENTAL HOLDINGS, INC
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED) (A)
 
 
Three Months Ended
June 30,
 
%
Increase/
(Decrease)
 
 
Six Months Ended
June 30,
 
%
Increase/
(Decrease)
 
(In millions, except per share data)
 
2018
 
2017
 
 
 
2018
 
2017
 
 
Operating revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Passenger (B)
 
$
9,880

 
$
9,151

 
8.0

 
 
$
18,030

 
$
16,804

 
7.3

 
Cargo
 
314

 
273

 
15.0

 
 
607

 
511

 
18.8

 
Other operating revenue
 
583

 
584

 
(0.2
)
 
 
1,172

 
1,119

 
4.7

 
Total operating revenue
 
10,777

 
10,008

 
7.7

 
 
19,809

 
18,434

 
7.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and related costs
 
2,878

 
2,842

 
1.3

 
 
5,604

 
5,478

 
2.3

 
Aircraft fuel
 
2,390

 
1,669

 
43.2

 
 
4,355

 
3,229

 
34.9

 
Regional capacity purchase
 
681

 
549

 
24.0

 
 
1,300

 
1,085

 
19.8

 
Landing fees and other rent
 
603

 
541

 
11.5

 
 
1,161

 
1,085

 
7.0

 
Depreciation and amortization
 
557

 
536

 
3.9

 
 
1,098

 
1,054

 
4.2

 
Aircraft maintenance materials and outside repairs
 
438

 
472

 
(7.2
)
 
 
878

 
926

 
(5.2
)
 
Distribution expenses
 
393

 
385

 
2.1

 
 
735

 
704

 
4.4

 
Aircraft rent
 
119

 
152

 
(21.7
)
 
 
246

 
331

 
(25.7
)
 
Special charges (C)
 
129

 
44

 
NM

 
 
169

 
95

 
NM

 
Other operating expenses
 
1,428

 
1,381

 
3.4

 
 
2,826

 
2,690

 
5.1

 
Total operating expense
 
9,616

 
8,571

 
12.2

 
 
18,372

 
16,677

 
10.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
1,161

 
1,437

 
(19.2
)
 
 
1,437

 
1,757

 
(18.2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
 
10.8
%
 
14.4
%
 
(3.6
)
pts.
 
7.3
%
 
9.5
%
 
(2.2
)
pts.
Operating margin, excluding special charges (Non-GAAP)
 
12.0
%
 
14.8
%
 
(2.8
)
pts.
 
8.1
%
 
10.0
%
 
(1.9
)
pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nonoperating income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
(177
)
 
(167
)
 
6.0

 
 
(353
)
 
(329
)
 
7.3

 
Interest capitalized
 
14

 
21

 
(33.3
)
 
 
33

 
44

 
(25.0
)
 
Interest income
 
25

 
13

 
92.3

 
 
42

 
24

 
75.0

 
Miscellaneous, net (C)
 
(166
)
 
(27
)
 
NM

 
 
(118
)
 
(69
)
 
71.0

 
Total nonoperating expense
 
(304
)
 
(160
)
 
90.0

 
 
(396
)
 
(330
)
 
20.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
 
857

 
1,277

 
(32.9
)
 
 
1,041

 
1,427

 
(27.0
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax margin
 
8.0
%
 
12.8
%
 
(4.8
)
pts.
 
5.3
%
 
7.7
%
 
(2.4
)
pts.
Pre-tax margin, excluding special charges and mark-to-market ("MTM") losses on equity investments (Non-GAAP)
 
10.4
%
 
13.2
%
 
(2.8
)
pts.
 
6.6
%
 
8.3
%
 
(1.7
)
pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense (D)
 
173

 
456

 
(62.1
)
 
 
210

 
507

 
(58.6
)
 
Net income
 
$
684

 
$
821

 
(16.7
)
 
 
$
831

 
$
920

 
(9.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share, diluted
 
$
2.48

 
$
2.67

 
(7.1
)
 
 
$
2.96

 
$
2.96

 

 
Weighted average shares, diluted
 
275.6

 
307.7

 
(10.4
)
 
 
280.2

 
311.1

 
(9.9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NM Not meaningful
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

4

United Airlines Reports Second-Quarter 2018 Performance



UNITED CONTINENTAL HOLDINGS, INC.
STATISTICS
 
  
Three Months Ended
June 30,
 
%
Increase/
(Decrease)
 
 
Six Months Ended
June 30,
 
%
Increase/
(Decrease)
 
 
  
2018
 
2017
 
 
2018
 
2017
 
Mainline:
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Passengers (thousands)
  
29,589

 
28,084

 
5.4

 
 
54,191

 
51,909

 
4.4

 
Revenue passenger miles (millions)
  
53,485

 
50,554

 
5.8

 
 
97,595

 
92,737

 
5.2

 
Available seat miles (millions)
  
63,061

 
60,473

 
4.3

 
 
117,859

 
113,527

 
3.8

 
Cargo ton miles (millions)
  
855

 
828

 
3.3

 
 
1,672

 
1,576

 
6.1

 
Passenger revenue per available seat mile (cents)
  
12.76

 
12.39

 
3.0

 
 
12.44

 
12.08

 
3.0

 
Average yield per revenue passenger mile (cents)
  
15.04

 
14.82

 
1.5

 
 
15.02

 
14.79

 
1.6

 
Aircraft in fleet at end of period
  
757

 
748

 
1.2

 
 
757

 
748

 
1.2

 
Average stage length (miles)
  
1,823

 
1,821

 
0.1

 
 
1,818

 
1,812

 
0.3

 
Average daily utilization of each aircraft (hours: minutes)
  
11:07

 
10:46

 
3.3

 
 
10:32

 
10:16

 
2.6

 
Average aircraft fuel price per gallon
 
$
2.24

 
$
1.62

 
38.3

 
 
$
2.17

 
$
1.66

 
30.7

 
Fuel gallons consumed (millions)
 
885

 
867

 
2.1

 
 
1,656

 
1,628

 
1.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regional:
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Passengers (thousands)
  
11,469

 
10,163

 
12.9

 
 
21,362

 
19,443

 
9.9

 
Revenue passenger miles (millions)
  
6,460

 
5,802

 
11.3

 
 
12,199

 
11,230

 
8.6

 
Available seat miles (millions)
  
7,641

 
6,994

 
9.3

 
 
14,820

 
13,748

 
7.8

 
Passenger revenue per available seat mile (cents)
  
24.02

 
23.72

 
1.3

 
 
22.73

 
22.44

 
1.3

 
Average yield per revenue passenger mile (cents)
  
28.41

 
28.59

 
(0.6
)
 
 
27.62

 
27.47

 
0.5

 
Aircraft in fleet at end of period
  
551

 
475

 
16.0

 
 
551

 
475

 
16.0

 
Average stage length (miles)
  
552

 
558

 
(1.1
)
 
 
558

 
565

 
(1.2
)
 
Average aircraft fuel price per gallon
 
$
2.38

 
$
1.71

 
39.2

 
 
$
2.29

 
$
1.75

 
30.9

 
Fuel gallons consumed (millions)
 
173

 
156

 
10.9

 
 
334

 
305

 
9.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated (Mainline and Regional):
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Passengers (thousands)
  
41,058

 
38,247

 
7.3

 
 
75,553

 
71,352

 
5.9

 
Revenue passenger miles (millions)
  
59,945

 
56,356

 
6.4

 
 
109,794

 
103,967

 
5.6

 
Available seat miles (millions)
  
70,702

 
67,467

 
4.8

 
 
132,679

 
127,275

 
4.2

 
Passenger load factor:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
  
84.8
%
 
83.5
%
 
1.3

pts.
 
82.8
%
 
81.7
%
 
1.1

pts.
Domestic
 
87.1
%
 
86.8
%
 
0.3

pts.
 
85.1
%
 
85.2
%
 
(0.1
)
pts.
International
 
81.7
%
 
79.5
%
 
2.2

pts.
 
79.7
%
 
77.5
%
 
2.2

pts.
Passenger revenue per available seat mile (cents)
  
13.97

 
13.56

 
3.0

 
 
13.59

 
13.20

 
3.0

 
Total revenue per available seat mile (cents)
  
15.24

 
14.83

 
2.8

 
 
14.93

 
14.48

 
3.1

 
Average yield per revenue passenger mile (cents)
  
16.48

 
16.24

 
1.5

 
 
16.42

 
16.16

 
1.6

 
Aircraft in fleet at end of period
 
1,308

 
1,223

 
7.0

 
 
1,308

 
1,223

 
7.0

 
Average stage length (miles)
 
1,460

 
1,475

 
(1.0
)
 
 
1,452

 
1,464

 
(0.8
)
 
Average full-time equivalent employees (thousands)
  
86.7

 
86.0

 
0.8

 
 
86.2

 
85.6

 
0.7

 
Average aircraft fuel price per gallon
 
$
2.26

 
$
1.63

 
38.7

 
 
$
2.19

 
$
1.67

 
31.1

 
Fuel gallons consumed (millions)
 
1,058

 
1,023

 
3.4

 
 
1,990

 
1,933

 
2.9

 

Note: See Part II, Item 6, Selected Financial Data, of UAL's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, for definitions of these statistics.    




5

United Airlines Reports Second-Quarter 2018 Performance



UNITED CONTINENTAL HOLDINGS, INC.
SUMMARY FINANCIAL METRICS (A)
 
 
Three Months Ended
June 30,
 
%
Increase/
(Decrease)
 
 
Six Months Ended
June 30,
 
%
Increase/
(Decrease)
 
 
 
2018
 
2017
 
 
 
2018
 
2017
 
 
(In millions, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
$
1,161

 
$
1,437

 
(19.2
)
 
 
$
1,437

 
$
1,757

 
(18.2
)
 
Operating margin
 
10.8
%
 
14.4
%
 
(3.6
)
pts.
 
7.3
%
 
9.5
%
 
(2.2
)
pts.
Operating income, excluding special charges (Non-GAAP)
 
1,290

 
1,481

 
(12.9
)
 
 
1,606

 
1,852

 
(13.3
)
 
Operating margin, excluding special charges (Non-GAAP)
 
12.0
%
 
14.8
%
 
(2.8
)
pts.
 
8.1
%
 
10.0
%
 
(1.9
)
pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA, excluding special charges and MTM losses on equity investments (Non-GAAP)
 
$
1,816

 
$
1,990

 
(8.7
)
 
 
$
2,676

 
$
2,837

 
(5.7
)
 
EBITDA margin, excluding special charges and MTM losses on equity investments (Non-GAAP)
 
16.9
%
 
19.9
%
 
(3.0
)
pts.
 
13.5
%
 
15.4
%
 
(1.9
)
pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax income
 
$
857

 
$
1,277

 
(32.9
)
 
 
$
1,041

 
$
1,427

 
(27.0
)
 
Pre-tax margin
 
8.0
%
 
12.8
%
 
(4.8
)
pts.
 
5.3
%
 
7.7
%
 
(2.4
)
pts.
Pre-tax income, excluding special charges and MTM losses on equity investments (Non-GAAP)
 
1,121

 
1,321

 
(15.1
)
 
 
1,300

 
1,522

 
(14.6
)
 
Pre-tax margin, excluding special charges and MTM losses on equity investments (Non-GAAP)
 
10.4
%
 
13.2
%
 
(2.8
)
pts.
 
6.6
%
 
8.3
%
 
(1.7
)
pts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
684

 
$
821

 
(16.7
)
 
 
$
831

 
$
920

 
(9.7
)
 
Net income, excluding special charges and MTM losses on equity investments (Non-GAAP)
 
889

 
849

 
4.7

 
 
1,032

 
981

 
5.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
2.48

 
$
2.67

 
(7.1
)
 
 
$
2.96

 
$
2.96

 

 
Diluted earnings per share, excluding special charges and MTM losses on equity investments (Non-GAAP)
 
3.23

 
2.76

 
17.0

 
 
3.68

 
3.15

 
16.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
2,442

 
$
1,561

 
56.4

 
 
$
4,175

 
$
2,108

 
98.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
$
755

 
$
1,089

 
(30.7
)
 
 
$
1,734

 
$
1,780

 
(2.6
)
 
Adjusted capital expenditures (Non-GAAP)
 
783

 
1,247

 
(37.2
)
 
 
1,796

 
2,601

 
(30.9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Free cash flow, net of financings (Non-GAAP)
 
$
1,687

 
$
472

 
257.4

 
 
$
2,441

 
$
328

 
NM

 
Free cash flow (Non-GAAP)
 
1,659

 
314

 
428.3

 
 
2,379

 
(493
)
 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NM Not meaningful
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 







6

United Airlines Reports Second-Quarter 2018 Performance


 
UNITED CONTINENTAL HOLDINGS, INC.
RETURN ON INVESTED CAPITAL (ROIC) - Non-GAAP
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.
 
 
(in millions)
Twelve Months Ended
June 30, 2018
Net Operating Profit After Tax ("NOPAT")
 
Pre-tax income
$
2,654

Special charges and MTM losses on equity investments (C):
 
  Impairment of assets
159

  MTM losses on equity investments
90

  Severance and benefit costs
63

  (Gains) losses on sale of assets and other special charges
28

Pre-tax income excluding special charges and MTM losses on equity investments (Non-GAAP)
2,994

add: Interest expense (net of income tax benefit) (a)
689

add: Interest component of capitalized aircraft rent (net of income tax benefit) (a)
260

add: Net interest on pension (net of income tax benefit) (a)
10

less: Income taxes paid
(24
)
NOPAT (Non-GAAP)
$
3,929

 
 
 
 
Average Invested Capital (five-quarter average)
 
Total assets
$
43,205

add: Capitalized aircraft operating leases (b)
4,227

less: Non-interest bearing liabilities (c)
(16,957
)
Average invested capital (Non-GAAP)
$
30,475

 
 
Return on invested capital (Non-GAAP)
12.9
%
 
 
(a)
Income tax benefit measured based on the effective cash tax rate. The effective cash tax rate is calculated by dividing cash taxes paid by pre-tax income excluding special charges. For the twelve months ended June 30, 2018, the effective cash tax rate was 0.8%.
(b)
The purpose of this adjustment is to capitalize the impact of aircraft operating leases. The company uses a multiple of seven times its annual aircraft rent expense to estimate the potential capitalized value and related liability of its aircraft. This is a simplified method used by many rating agencies and financial analysts to assist with the impact of operating leases on financial measures like return on invested capital.
(c)
Non-interest bearing liabilities include advance ticket sales, frequent flyer deferred revenue, deferred income taxes and other non-interest bearing liabilities.



7

United Airlines Reports Second-Quarter 2018 Performance



UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION
 
(A) UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (GAAP) and Non-GAAP financial measures, including operating income (loss), excluding special charges, operating margin excluding special charges, pre-tax income (loss), excluding special charges and MTM gains and losses on equity investments, pre-tax margin, excluding special charges and MTM gains and losses on equity investments, net income (loss), excluding special charges and MTM gains and losses on equity investments, diluted earnings (loss) per share, excluding special charges and MTM gains and losses on equity investments, and CASM, excluding special charges, third-party business expenses, fuel, and profit sharing, among others. UAL believes that adjusting for special charges is useful to investors because special charges are not indicative of UAL’s ongoing performance. UAL believes that adjusting for MTM gains and losses on equity investments is useful to investors because those unrealized gains or losses may not ultimately be realized on a cash basis.

CASM is a common metric used in the airline industry to measure an airline’s cost structure and efficiency. UAL reports CASM excluding special charges, third-party business expenses, fuel and profit sharing. UAL believes that adjusting for special charges is useful to investors because special charges are not indicative of UAL’s ongoing performance. UAL also believes that excluding third-party business expenses, such as maintenance, ground handling and catering services for third parties and fuel sales, provides more meaningful disclosure because these expenses are not directly related to UAL’s core business. UAL also believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management’s performance excluding the effects of a significant cost item over which management has limited influence. UAL excludes profit sharing because this exclusion allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.
Reconciliations of reported non-GAAP financial measures to the most directly comparable GAAP financial measures are included below.
 
 
Three Months Ended
June 30,
 
%
Increase/
(Decrease)
 
Six Months Ended
June 30,
 
%
Increase/
(Decrease)
 
 
2018
 
2017
 
 
2018
 
2017
 
CASM Mainline Operations (cents)
 
 
 
 
 
 
 
 
 
 
 
 
Cost per available seat mile (CASM)
 
13.08

 
12.27

 
6.6

 
13.31

 
12.68

 
5.0

Special charges (C)
 
0.20

 
0.07

 
NM

 
0.14

 
0.09

 
NM

Third-party business expenses
 
0.05

 
0.07

 
(28.6
)
 
0.05

 
0.06

 
(16.7
)
Fuel expense
 
3.14

 
2.32

 
35.3

 
3.05

 
2.38

 
28.2

CASM, excluding special charges, third-party business expenses and fuel
 
9.69

 
9.81

 
(1.2
)
 
10.07

 
10.15

 
(0.8
)
Profit sharing per available seat mile
 
0.17

 
0.25

 
(32.0
)
 
0.10

 
0.15

 
(33.3
)
CASM, excluding special charges, third-party business expenses, fuel, and profit sharing
 
9.52

 
9.56

 
(0.4
)
 
9.97

 
10.00

 
(0.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
CASM Consolidated Operations (cents)
 
 
 
 
 
 
 
 
 
 
 
 
Cost per available seat mile (CASM)
 
13.60

 
12.70

 
7.1

 
13.85

 
13.10

 
5.7

Special charges (C)
 
0.18

 
0.07

 
NM

 
0.13

 
0.07

 
NM

Third-party business expenses
 
0.04

 
0.05

 
(20.0
)
 
0.05

 
0.06

 
(16.7
)
Fuel expense
 
3.38

 
2.47

 
36.8

 
3.28

 
2.54

 
29.1

CASM, excluding special charges, third-party business expenses and fuel
 
10.00

 
10.11

 
(1.1
)
 
10.39

 
10.43

 
(0.4
)
Profit sharing per available seat mile
 
0.16

 
0.23

 
(30.4
)
 
0.09

 
0.14

 
(35.7
)
CASM, excluding special charges, third-party business expenses, fuel, and profit sharing
 
9.84

 
9.88

 
(0.4
)
 
10.30

 
10.29

 
0.1




8

United Airlines Reports Second-Quarter 2018 Performance



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

 
 
Three Months Ended
June 30,
 
$
Increase/
(Decrease)
 
%
Increase/
(Decrease)
 
Six Months Ended
June 30,
 
$
Increase/
(Decrease)
 
%
Increase/
(Decrease)
(in millions)
 
2018
 
2017
 
 
2018
 
2017
 
Operating expenses
 
$
9,616

 
$
8,571

 
$
1,045

 
12.2

 
$
18,372

 
$
16,677

 
$
1,695

 
10.2

Special charges (C)
 
129

 
44

 
85

 
NM

 
169

 
95

 
74

 
NM

Operating expenses, excluding special charges
 
9,487

 
8,527

 
960

 
11.3

 
18,203

 
16,582

 
1,621

 
9.8

Third-party business expenses
 
29

 
41

 
(12
)
 
(29.3
)
 
60

 
81

 
(21
)
 
(25.9
)
Fuel expense
 
2,390

 
1,669

 
721

 
43.2

 
4,355

 
3,229

 
1,126

 
34.9

Profit sharing, including taxes
 
108

 
154

 
(46
)
 
(29.9
)
 
125

 
174

 
(49
)
 
(28.2
)
Operating expenses, excluding fuel, profit sharing, special charges and third-party business expenses
 
$
6,960

 
$
6,663

 
$
297

 
4.5

 
$
13,663

 
$
13,098

 
$
565

 
4.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
$
1,161

 
$
1,437

 
$
(276
)
 
(19.2
)
 
$
1,437

 
$
1,757

 
$
(320
)
 
(18.2
)
Special charges (C)
 
129

 
44

 
85

 
NM

 
169

 
95

 
74

 
NM

Operating income, excluding special charges
 
$
1,290

 
$
1,481

 
$
(191
)
 
(12.9
)
 
$
1,606

 
$
1,852

 
$
(246
)
 
(13.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax income
 
$
857

 
$
1,277

 
$
(420
)
 
(32.9
)
 
$
1,041

 
$
1,427

 
$
(386
)
 
(27.0
)
Special charges and MTM losses on equity investments before income taxes (C)
 
264

 
44

 
220

 
NM

 
259

 
95

 
164

 
NM

Pre-tax income excluding special charges and MTM losses on equity investments
 
$
1,121

 
$
1,321

 
$
(200
)
 
(15.1
)
 
$
1,300

 
$
1,522

 
$
(222
)
 
(14.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Net income
 
$
684

 
$
821

 
$
(137
)
 
(16.7
)
 
$
831

 
$
920

 
$
(89
)
 
(9.7
)
Special charges and MTM losses on equity investments, net of tax (C)
 
205

 
28

 
177

 
NM

 
201

 
61

 
140

 
NM

Net income, excluding special charges and MTM losses on equity investments
 
$
889

 
$
849

 
$
40

 
4.7

 
$
1,032

 
$
981

 
$
51

 
5.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Diluted earnings per share
 
$
2.48

 
$
2.67

 
$
(0.19
)
 
(7.1
)
 
$
2.96

 
$
2.96

 
$

 

Special charges and MTM losses on equity investments
 
0.96

 
0.14

 
0.82

 
NM

 
0.92

 
0.31

 
0.61

 
NM

Tax effect related to special charges and MTM losses on equity investments
 
(0.21
)
 
(0.05
)
 
(0.16
)
 
NM

 
(0.20
)
 
(0.12
)
 
(0.08
)
 
NM

Diluted earnings per share, excluding special charges and MTM losses on equity investments
 
$
3.23

 
$
2.76

 
$
0.47

 
17.0

 
$
3.68

 
$
3.15

 
$
0.53

 
16.8








9

United Airlines Reports Second-Quarter 2018 Performance



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

UAL provides financial metrics, including earnings before interest, taxes, depreciation and amortization (EBITDA), excluding special charges and MTM gains and losses on equity investments, that we believe provide useful supplemental information for management and investors by measuring profit and profit as a percentage of total operating revenues. UAL believes that adjusting for special charges is useful to investors because special charges are not indicative of UAL’s ongoing performance. UAL believes that adjusting for MTM gains and losses on equity investments is useful to investors because those unrealized gains or losses may not ultimately be realized on a cash basis.

 
 
Three Months Ended
June 30,
 
 
 
Six Months Ended
June 30,
 
EBITDA, excluding special charges and MTM losses on equity investments (in millions)
 
2018
 
2017
 
 
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
684

 
$
821

 
 
 
$
831

 
$
920

 
Adjusted for:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
557

 
536

 
 
 
1,098

 
1,054

 
Interest expense
 
177

 
167

 
 
 
353

 
329

 
Interest capitalized
 
(14
)
 
(21
)
 
 
 
(33
)
 
(44
)
 
Interest income
 
(25
)
 
(13
)
 
 
 
(42
)
 
(24
)
 
Income tax expense (D)
 
173

 
456

 
 
 
210

 
507

 
Special charges before income taxes (C)
 
129

 
44

 
 
 
169

 
95

 
       MTM losses on equity investments (C)
 
135

 

 
 
 
90

 

 
EBITDA, excluding special charges and MTM losses on equity investments (Non-GAAP)
 
$
1,816

 
$
1,990

 
 
 
$
2,676

 
$
2,837

 


 
UAL believes that adjusting capital expenditures for assets acquired through the issuance of debt and capital leases, airport construction financing and excluding fully reimbursable projects is useful to investors in order to appropriately reflect the non-reimbursable funds spent on capital expenditures. UAL also believes that adjusting net cash provided by operating activities for capital expenditures and adjusted capital expenditures is useful to allow investors to evaluate the company’s ability to generate cash that is available for debt service or general corporate initiatives.
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
Capital Expenditures (in millions)
 
2018
 
2017
 
2018
 
2017
Capital expenditures
 
$
755

 
$
1,089

 
$
1,734

 
$
1,780

Property and equipment acquired through the issuance of debt and capital leases
 
65

 
196

 
139

 
907

Airport construction financing
 

 
11

 
12

 
32

Fully reimbursable projects
 
(37
)
 
(49
)
 
(89
)
 
(118
)
Adjusted capital expenditures (Non-GAAP)
 
$
783

 
$
1,247

 
$
1,796

 
$
2,601

 
 
 
 
 
 
 
 
 
Free Cash Flow (in millions)
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
2,442

 
$
1,561

 
$
4,175

 
$
2,108

Less capital expenditures
 
755

 
1,089

 
1,734

 
1,780

Free cash flow, net of financings (Non-GAAP)
 
$
1,687

 
$
472

 
$
2,441

 
$
328

 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
2,442

 
$
1,561

 
$
4,175

 
$
2,108

Less adjusted capital expenditures (Non-GAAP)
 
783

 
1,247

 
1,796

 
2,601

Free cash flow (Non-GAAP)
 
$
1,659

 
$
314

 
$
2,379

 
$
(493
)


10

United Airlines Reports Second-Quarter 2018 Performance



UNITED CONTINENTAL HOLDINGS, INC.
NOTES (UNAUDITED)
 
(B) Select passenger revenue information is as follows (in millions):
 
 
2Q 2018
Passenger
Revenue
(millions)
 
Passenger
Revenue
vs.
2Q 2017
 
PRASM
vs.
2Q 2017
 
Yield
vs.
2Q 2017
 
Available
Seat Miles
vs.
2Q 2017
 
 
 
 
 
 
 
 
 
 
 
Mainline
 
$
4,395

 
8.7%
 
1.7%
 
1.6%
 
6.9%
Regional
 
1,786

 
10.6%
 
0.9%
 
(1.0%)
 
9.6%
Domestic
 
6,181

 
9.2%
 
1.7%
 
1.3%
 
7.4%
 
 
 
 
 
 
 
 
 
 
 
Atlantic
 
1,824

 
12.9%
 
7.9%
 
0.9%
 
4.7%
Pacific
 
1,103

 
3.7%
 
3.4%
 
4.3%
 
0.2%
Latin America
 
772

 
(5.2%)
 
(2.9%)
 
(4.2%)
 
(2.3%)
International
 
3,699

 
5.9%
 
4.3%
 
1.4%
 
1.6%
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
9,880

 
8.0%
 
3.0%
 
1.5%
 
4.8%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mainline
 
$
8,045

 
7.4%
 
3.0%
 
1.5%
 
4.3%
Regional
 
1,835

 
10.6%
 
1.3%
 
(0.6%)
 
9.3%
Consolidated
 
$
9,880

 
 
 
 
 
 
 
 


11

United Airlines Reports Second-Quarter 2018 Performance



UNITED CONTINENTAL HOLDINGS, INC.
NOTES (UNAUDITED)
 
(C) Special charges and MTM losses on equity investments include the following:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(In millions)
 
2018
 
2017
 
2018
 
2017
Operating:
 
 
 
 
 
 
 
 
Impairment of assets
 
$
111

 
$

 
$
134

 
$

Severance and benefit costs
 
11

 
41

 
25

 
78

(Gains) losses on sale of assets and other special charges
 
7

 
3

 
10

 
17

     Total special charges
 
129

 
44

 
169

 
95

Nonoperating MTM losses on equity investments
 
135

 

 
90

 

     Total special charges and MTM losses on equity investments
 
264

 
44

 
259

 
95

Income tax benefit related to special charges
 
(29
)
 
(16
)
 
(38
)
 
(34
)
Income tax benefit related to MTM losses on equity investments
 
(30
)
 

 
(20
)
 

     Total special charges and MTM losses on equity investments, net of income taxes
 
$
205

 
$
28

 
$