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CONTINUING AGGRESSIVE ACTIONS TO POSITION COMPANY FOR SUCCESS IN 2009
CHICAGO, Jan. 21 /PRNewswire-FirstCall/ -- UAL Corporation (Nasdaq: UAUA),
the holding company whose primary subsidiary is United Airlines, reported
results for the fourth quarter ended Dec. 31, 2008. The company:
* Reported a fourth quarter pre-tax loss of $547 million excluding
non-cash, net mark-to-market hedge losses and certain accounting
charges outlined in note 5 of the attached statement of consolidated
operations. Including these items the company reported a pre-tax
loss of $1.3 billion.
* Reported basic and diluted loss per share for the fourth quarter of
$4.22 excluding non-cash, net mark-to-market hedge losses and
certain accounting charges. Including these items the company's loss
per share was $9.91.
* Reported solid revenue performance with a 4.7 percent increase
year-over-year in fourth quarter consolidated passenger unit revenue
per available seat mile (PRASM), excluding Mileage Plus accounting
impacts. Including these impacts, consolidated PRASM increased 2.1
percent year-over-year.
* Held its mainline non-fuel unit costs per available seat mile (CASM)
for the quarter, excluding certain accounting charges, to an increase
of only 1.6 percent year-over-year, despite reducing mainline
capacity by 11.7 percent year-over-year. Mainline CASM including fuel
and certain accounting charges for the quarter was up 20.8 percent
versus the fourth quarter of 2007, primarily due to the impact of
hedge losses.
* Raised nearly $390 million in cash in the fourth quarter through
various activities including aircraft financings, asset sales and
equity issuances.
* Recorded its best fourth quarter on-time performance since 2004.
The company reported a pre-tax loss, excluding non-cash, net mark-to-
market hedge losses and certain accounting charges, of $547 million for the
quarter. This compared to an adjusted pre-tax loss of $105 million in the
fourth quarter of 2007, as the recent fall in fuel prices drove losses on fuel
hedges put in place earlier in the year when prices were rising to
unprecedented levels. Including these items the company's fourth quarter pre-
tax loss was $1.3 billion in 2008 compared to a pre-tax loss of $98 million in
2007.
Fuel prices drove the company's losses in 2008. The historic peak in
prices and the impact on hedges driven by the rapid decline resulted in a $2.9
billion increase in cost compared to 2007 fuel prices.
"Last year was by any measure a challenging year - defined by
unprecedented volatility and unpredictability, but for United it was also
characterized by steady and durable improvements," said Glenn Tilton, United's
chairman, president and CEO. "Our management team made timely decisions that
resulted in fundamental improvements across our business, which will hold us
in good stead in 2009."
Capacity Actions Drove Improved Passenger Unit Revenue Results
Total passenger revenue for the quarter decreased 8.7 percent year-over-
year as consolidated capacity declined 10.6 percent, consolidated yield
increased 2.4 percent and load factor decreased 0.3 points.
Domestic mainline PRASM for the fourth quarter, excluding Mileage Plus
accounting impacts, was up 6.7 percent year-over-year, reflecting the
company's capacity reduction actions. Including Mileage Plus accounting
impacts, the company's domestic mainline PRASM was up 4.6 percent for the
quarter.
International mainline PRASM, excluding Mileage Plus accounting impacts,
was up 1.2 percent for the quarter as a result of weaker demand for
international travel. Including Mileage Plus accounting impacts, the
company's international PRASM declined 1.7 percent.
Regional Affiliate PRASM for the quarter, excluding Mileage Plus
accounting impacts, was up 1.8 percent year-over-year. Including the Mileage
Plus accounting impacts, regional affiliate PRASM declined 0.7 percent for the
quarter.
Cargo revenue for the quarter decreased 19.3 percent year-over-year as a
result of lower international capacity and weakening demand.
Passenger Adjusted
4Q 2008 Revenue PRASM(1) PRASM ASM(2)
Passenger % % % %
Geographic Revenue Increase/ Increase/ Increase/ Increase/
Area (millions) (Decrease) (Decrease) (Decrease) (Decrease)
Domestic $1,989 (10.5%) 6.7% 4.6% (14.4%)
Pacific 700 (16.4%) 0.8% (2.1%) (14.7%)
Atlantic 597 (0.6%) (0.2%) (3.0%) 2.4%
Latin America 127 (7.1%) 3.7% 0.8% (7.9%)
Total
Mainline $3,413 (10.1%) 4.4% 1.8% (11.7%)
Regional
Affiliates 752 (1.7%) 1.8% (0.7%) (1.0%)
Total
Consolidated $4,165 (8.7%) 4.7% 2.1% (10.6%)
(1) PRASM adjusted for Mileage Plus effects (See Note 5 to the attached
statements of consolidated operations).
(2) ASM (available seat miles)
Continued Focus on Cost Performance
Mainline CASM, excluding fuel and certain accounting charges, was up only
1.6 percent in the fourth quarter, despite an 11.7 percent decline in mainline
capacity as the company took aggressive action to remove fixed as well as
variable costs from the system while reducing capacity. For the full-year
2008, mainline CASM excluding fuel and certain accounting charges was up only
1.5 percent, despite a 4.2 percent decline in capacity.
Fourth Quarter Increase/(Decrease)
Mainline Consolidated
% %
2008 2007 Chg. 2008 2007 Chg.
CASM (cents) 14.97 12.39 20.8% 15.39 13.08 17.7%
CASM excluding
certain accounting
charges and non-cash,
net mark-to-market
losses (cents) 12.91 12.41 4.0% 13.57 13.10 3.6%
CASM excluding fuel
and certain
accounting charges
(cents) 8.41 8.28 1.6% 8.87 8.72 1.7%
"Our industry continues to be challenged by a volatile fuel and revenue
environment, and against that backdrop, we are delivering strong cost results
even as we reduce capacity and improve quality," said John Tague, executive
vice president and chief operating officer. "Our operational performance
continues to improve, benefiting from reduced capacity, new runways and, most
importantly, the work of our people, who are focused on running a good airline
for our customers and our investors."
Lower Fuel Prices Resulted in Hedging Losses
The company recorded $370 million in cash losses on fuel hedges that
settled in the quarter, as the recent fall in fuel prices drove losses on
hedges put in place earlier in the year to mitigate the steep increase in
prices that had occurred in the second and third quarters of 2008. In
addition, the company also recorded non-cash, net mark-to-market losses on its
fuel hedges of $566 million.
Three Months Ending Dec. 31, 2008
(in millions)
Included Included in
In Fuel Non-Operating
Expense Expense Total
Non-cash, net mark-to-market
loss $(449) $(117) $(566)
Cash net loss on settled
contracts (142) (228) (370)
Total recorded net losses $(591) $(345) $(936)
Action Taken to Enhance Cash Position
The company completed several transactions during the fourth quarter that
helped strengthen its liquidity. It raised $215 million from aircraft
financing transactions that closed during the quarter along with $66 million
in proceeds from asset sales. The company also received net proceeds of $107
million through equity issuances during the quarter.
During the quarter, the company entered into an amendment with its largest
credit card processor that suspends until Jan. 20, 2010, the requirement for
United to post or maintain additional cash reserves with the processor if
United's balance of unrestricted cash, cash equivalents and short-term
investments falls below $2.5 billion. In exchange for this benefit, United has
granted the processor a security interest in certain United owned aircraft.
During the fourth quarter, the company generated negative $989 million of
operating cash flow and negative $1.1 billion of free cash flow, defined as
operating cash flow less capital expenditures. Both the operating cash flow
and free cash flow include $587 million in additional net fuel hedge deposits
that were paid during the quarter.
The company ended the quarter with an unrestricted cash balance of $2.0
billion, a restricted cash balance of $272 million and $965 million in cash
deposits held by its fuel hedge counterparties.
Early in the first quarter of 2009 the company closed an additional
aircraft financing transaction, which raised $95 million, and expects to raise
approximately $160 million from a cargo facility relocation agreement with
Chicago's O'Hare International Airport. In January, the company received net
proceeds of $62 million from equity issuances, and anticipates receiving an
additional $27 million of net proceeds in the first quarter by completing the
equity issuances that were announced in December. Altogether, the company
expects to raise about $350 million from these transactions by the end of the
first quarter.
"United, like many airlines across the industry, experienced significant
cash pressures associated with fuel hedge positions in 2008 as oil prices
declined more than $100 a barrel," said Kathryn Mikells, senior vice president
and CFO. "The cash impact, while significant, is now behind us, and we are
well positioned to manage through a challenging 2009 with good expected cost
performance building on our momentum from this past year."
Income Taxes
Because of its net operating loss carry-forwards, the company expects to
pay minimal cash taxes for the foreseeable future and is not recording
incremental tax benefits at this time.
Significant Improvements in Operating Results
United has seen significant improvement in its operational performance
during the fourth quarter as a result of its increased focus on operational
execution, improvements in the schedule structure and the industry-wide
reduction in capacity. The company has also benefited from the November
opening of the new runway at Chicago O'Hare International Airport.
United's on-time arrival :14 performance for the fourth quarter was 79.2
percent, the company's best fourth quarter performance since 2004. Its
cancellation rate was 1.4 percent, which is the company's lowest fourth
quarter rate since 2005. As a result of these improvements, United ranked
second in on-time performance for the fourth quarter among the five major U.S.
network carriers, including Continental Airlines, American Airlines, US
Airways, and the combined Delta / Northwest Airlines.
Business Highlights
* United began new daily non-stop passenger and cargo service between
Washington, D.C., and Dubai on October 28.
* United announced new daily non-stop passenger and cargo service
between Washington, D.C., and both Geneva and Moscow on its newly
reconfigured B767 with fully lie-flat seats in first and business
class.
* United and EGYPTAIR signed an agreement to offer codeshare flights,
which would expand the international destinations and enhance the
frequent flyer benefits offered to customers of both carriers.
* United announced it will offer in-flight internet service on it p.s.
transcontinental service between New York and California starting in
the second half of 2009.
* United became the first U.S. carrier to participate in the Asia and
South Pacific Initiative to Reduce Emissions (ASPIRE). United
Flight 870 on Nov. 14 from Sydney, Australia, to San Francisco saved
more than 1,500 gallons of fuel and 32,000 pounds of carbon
emissions using 11 fuel-savings initiatives from gate to gate.
* United announced its new Premier Line service, which allows
customers to purchase access to three types of specially reserved
lines that offer convenience at check-in, security and
boarding, including boarding for connecting flights.
* United was named the best North American airline by two Asian travel
publications. Travel Trade Gazette Asia honored United with the
award and Business Traveler Asia-Pacific recognized United with the
same accolade for the eighth consecutive year.
* United became the first U.S. airline to offer overnight baggage
shipping service via an overnight courier that will provide
customers with a more convenient and easy way to travel - without
their luggage. United's new service, Door-to-Door Baggage, enables
customers in the continental United States to conveniently ship
their luggage, or other travel items like skis or golf clubs,
overnight from a home or office directly to their destinations
within the 48 contiguous United States.
2009 Outlook
United is on track to complete the previously announced removal of 100
aircraft from its fleet by the end of 2009. The company's capacity outlook
for the first quarter 2009 and full-year 2009 is shown below:
Capacity First Quarter Full-year
(Available Seat Miles) 2009* 2009*
Domestic -14.0% to -13.0% -12.5% to -11.5%
International -15.0% to -14.0% -6.0% to -5.0%
Mainline -14.5% to -13.5% -9.5% to -8.5%
Express +4.0% to +5.0% +8.0% to +9.0%
Consolidated Domestic -11.0% to -10.0% -9.0% to -8.0%
Consolidated -12.5% to -11.5% -8.0% to -7.0%
* Increase/(Decrease) versus 2008
For the first quarter 2009, the company anticipates mainline CASM,
excluding fuel, profit sharing and certain accounting charges, to increase
between 4.0 and 5.0 percent despite a mainline capacity reduction of 14
percent. Consolidated CASM, excluding fuel, profit sharing and certain
accounting charges, is also expected to increase between 4.0 and 5.0 percent.
Continuing to build on its mainline non-fuel CASM results from 2008, the
company anticipates full-year 2009 mainline CASM, excluding fuel, profit
sharing and certain accounting charges, to increase between 2.5 and 3.5
percent despite a 9 percent reduction in mainline capacity. Consolidated
CASM, excluding fuel, profit sharing and certain accounting charges, is also
expected to increase between 2.5 and 3.5 percent.
United is taking additional steps in 2009 to reduce overhead costs. The
company will further reduce the number of salaried and management employees by
approximately 1,000 positions by the end of 2009. This is in addition to the
1,500 positions the company announced in the second quarter, and when
completed, will bring the total reduction in its salaried and management staff
to approximately 2,500, or nearly 30 percent, since the beginning of 2008.
The company is also limiting its non-aircraft capital budget to $450
million for 2009 and has no capital requirements for new aircraft in 2009.
The company has scheduled debt and capital lease payment obligations of $900
million in 2009.
Since the company's Dec. 17, 2008, disclosure, it has hedged an additional
7 percent of its 2009 consolidated fuel consumption at an average price of $53
per barrel using call options. A table outlining the company's hedge
positions can be found in note 9 of the attached statement of consolidated
operations.
The company estimates the following fuel prices for the first quarter
based on the closing forward curve on January 16.
Three Months Ending
Mainline Fuel Price (Price per Gallon)(1) March 31, 2009
Mainline Fuel price including taxes and excluding
impact of hedges $1.73
Mainline Fuel price including taxes and cash
net gains or losses on settled hedges(2) $2.22
Mainline Fuel price including taxes, cash net
gains or losses on settled hedges, and impact of
non-cash, net mark-to-market gains or losses on settled
and unsettled hedges(2) $1.83
(1) Based on the January 16 closing forward price
(2) Includes only the hedge gains/losses that are accounted for in the
fuel expense line
In addition to the impact of fuel hedges on fuel expense, a portion of the
company's total fuel hedge impact is recorded as a non-operating expense. The
company estimates that $81 million in cash fuel hedging losses and $69 million
in non-cash, net mark-to-market fuel hedging gains will be recorded in non-
operating income / expense for the first quarter based on January 16 closing
forward curve prices.
The company estimates it will have the following amounts posted as fuel
hedge collateral at each quarter end:
Projected Fuel Hedge Collateral Balance at Each Quarter End
Jan. 19,
2009 Q1 2009 Q2 2009 Q3 2009 Q4 2009
Based on Jan. 16
closing forward
crude oil
prices $780M $615M $315M $110M $25M
Additional details can be found in note 10 of the attached statement of
consolidated operations.
About United
United Airlines (NASDAQ: UAUA) operates more than 3,000* flights a day on
United and United Express to more than 200 U.S. domestic and international
destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and
Washington, D.C. With key global air rights in the Asia-Pacific region,
Europe and Latin America, United is one of the largest international carriers
based in the United States. United also is a founding member of Star
Alliance, which provides connections for our customers to 912 destinations in
159 countries worldwide. United's 49,500 employees reside in every U.S. state
and in many countries around the world. News releases and other information
about United can be found at the company's Web site at united.com.
*Based on United's flight schedule between Jan. 1, 2009, and Jan. 1, 2010.
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 the company's current expectations and beliefs with
respect to certain current and future events and financial performance. Such
forward-looking statements are and will be subject to many risks and
uncertainties relating to the operations and business environment of the
company that may cause actual results to differ materially from any future
results expressed or implied in such forward-looking statements. Factors that
could significantly affect net earnings, revenues, expenses, costs, load
factor and capacity include, without limitation, the following: the company's
ability to comply with the terms of its credit facility; the costs and
availability of financing; the company's ability to execute its business plan;
the company's ability to realize benefits from its resource optimization
efforts and cost reduction initiatives; the company's ability to attract,
motivate and/or retain key employees; the company's ability to attract and
retain customers; demand for transportation in the markets in which the
company operates; general economic conditions (including interest rates,
foreign currency exchange rates, investment or credit market conditions, crude
oil prices and energy refining capacity in relevant markets); the effects of
any hostilities or act of war or any terrorist attack; the ability of other
air carriers with whom the company has alliances or partnerships to provide
the services contemplated by the respective arrangements with such carriers;
the costs and availability of aircraft insurance; the costs of jet fuel; our
ability to cost-effectively hedge against increases in the price of jet fuel;
any potential realized or unrealized gains or losses related to fuel or
currency hedging programs; the costs associated with security measures and
practices; labor costs; industry consolidation; competitive pressures on
pricing and on demand; capacity decisions of United and/or its competitors;
U.S. or foreign governmental legislation, regulation and other actions,
including the effect of open skies agreements; the company's ability to
utilize its net operating losses; the ability of the company to maintain
satisfactory labor relations and our ability to avoid any disruptions to
operations due to any potential actions by our labor groups; weather
conditions; and other risks and uncertainties set forth from time to time in
UAL's reports to the United States Securities and Exchange Commission.
Consequently, the forward-looking statements should not be regarded as
representations or warranties by the company that such matters will be
realized. The company disclaims any intent or obligation to update or revise
any of the forward-looking statements, whether in response to new information,
unforeseen events, changed circumstances or otherwise.
UAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions, except per share amounts)
Three Months Ended %
December 31, Increase/
(In accordance with GAAP) 2008 2007 (Decrease)
Operating revenues:
Passenger - United Airlines $3,413 $3,797 (10.1)
Passenger - Regional Affiliates 752 765 (1.7)
Cargo 180 223 (19.3)
Other operating revenues 202 245 (17.6)
4,547 5,030 (9.6)
Operating expenses:
Aircraft fuel (Notes 3 and 5) 1,838 1,432 28.4
Salaries and related costs (Note 5) 1,049 1,112 (5.7)
Regional affiliates (a) 740 765 (3.3)
Purchased services 328 366 (10.4)
Depreciation and amortization (Note 5) 262 231 13.4
Aircraft maintenance materials and
outside repairs 228 306 (25.5)
Landing fees and other rent 211 222 (5.0)
Distribution expenses 152 183 (16.9)
Other impairments and special items (Note 5) 125 - -
Aircraft rent 95 99 (4.0)
Cost of third party sales 68 78 (12.8)
Other operating expenses (Note 5) 263 300 (12.3)
5,359 5,094 5.2
Loss from operations (812) (64) NM
Other income (expense):
Interest expense (131) (155) (15.5)
Interest income 12 66 (81.8)
Interest capitalized 4 5 (20.0)
Gain on sale of investment - 41 (100.0)
Miscellaneous, net (Note 5) (373) 9 -
(488) (34) NM
Loss before income taxes and equity in
earnings of affiliates (1,300) (98) NM
Income tax expense (benefit) (Note 5) 5 (43) -
Loss before equity in earnings of
affiliates (1,305) (55) NM
Equity in earnings of affiliates, net
of tax 2 2 -
Net loss $(1,303) $(53) NM
Loss per share, basic and diluted $(9.91) $(0.47)
Weighted average shares, basic and
diluted 131.6 117.7
See accompanying notes.
(a) Regional affiliates expense includes regional aircraft rent expense.
See Note 2 for more information.
NM Not meaningful.
UAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions, except per share amounts)
Twelve Months Ended %
December 31, Increase/
(In accordance with GAAP) 2008 2007 (Decrease)
Operating revenues:
Passenger - United Airlines $15,337 $15,254 0.5
Passenger - Regional Affiliates 3,098 3,063 1.1
Cargo 854 770 10.9
Special operating items (Note 5) - 45 (100.0)
Other operating revenues 905 1,011 (10.5)
20,194 20,143 0.3
Operating expenses:
Aircraft fuel (Notes 3 and 5) 7,722 5,003 54.3
Salaries and related costs (Note 5) 4,311 4,261 1.2
Regional affiliates (a) 3,248 2,941 10.4
Purchased services (Note 5) 1,375 1,346 2.2
Aircraft maintenance materials
and outside repairs 1,096 1,166 (6.0)
Depreciation and amortization
(Note 5) 932 925 0.8
Landing fees and other rent 862 876 (1.6)
Distribution expenses 710 779 (8.9)
Aircraft rent 409 406 0.7
Cost of third party sales 272 316 (13.9)
Goodwill impairment (Note 5) 2,277 - -
Other impairments and special
items (Note 5) 339 (44) -
Other operating expenses (Note 5) 1,079 1,131 (4.6)
24,632 19,106 28.9
Earnings (loss) from operations (4,438) 1,037 -
Other income (expense):
Interest expense (523) (661) (20.9)
Interest income 112 257 (56.4)
Interest capitalized 20 19 5.3
Gain on sale of investment - 41 (100.0)
Miscellaneous, net (Note 5) (550) 2 -
(941) (342) 175.1
Earnings (loss) before income taxes
and equity in earnings of affiliates (5,379) 695 -
Income tax expense (benefit) (Note 5) (25) 297 -
Earnings (loss) before equity in
earnings of affiliates (5,354) 398 -
Equity in earnings of affiliates, net
of tax 6 5 20.0
Net income (loss) $(5,348) $403 -
Earnings (loss) per share, basic $(42.21) $3.34
Earnings (loss) per share, diluted $(42.21) $2.79
Weighted average shares, basic 126.8 117.4
Weighted average shares, diluted 126.8 153.7
See accompanying notes.
(a) Regional affiliates expense includes regional aircraft rent expense.
See Note 2 for more information.
NM Not meaningful.
UAL CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In millions)
Three Months Twelve Months
Ended % Ended %
December 31, Increase/ December 31, Increase/
(In accordance with GAAP) 2008 2007 (Decrease) 2008 2007 (Decrease)
Cash flows provided
(used) by operating
activities (a) $(989) $132 - $(1,239) $2,134 -
Cash flows provided
(used) by investing
activities:
Net (purchases) sales
of short-term
investments - 604 (100.0) 2,295 (1,983) -
Additions to property
and equipment (80) (230) (65.2) (415) (658) (36.9)
Proceeds from the sale
of investment - 128 (100.0) - 128 (100.0)
Purchases of EETC
securities - (20) (100.0) - (96) (100.0)
(Increase) decrease in
restricted cash (b) (24) 32 - 484 91 431.9
Proceeds from asset
sale leaseback 215 - - 274 - -
Proceeds from
litigation on advance
deposits - - - 41 - -
Proceeds from the sale
of property and
equipment 51 5 NM 94 19 394.7
Other, net (17) (22) (22.7) (52) (61) (14.8)
145 497 (70.8) 2,721 (2,560) -
Cash flows provided
(used) by financing
activities:
Repayment of Credit
Facility - (500) (100.0) (18) (1,495) (98.8)
Repayment of other debt (128) (108) 18.5 (666) (1,257) (47.0)
Special distribution - - - (253) - -
Principal payments
under capital leases (26) (117) (77.8) (235) (177) 32.8
Decrease in capital
lease deposits 1 80 (98.8) 155 80 93.8
Increase (decrease) in
deferred financing
costs (2) 4 - (120) (18) NM
Proceeds from issuance
of secured notes - - - 337 694 (51.4)
Proceeds from the sale
of stock 107 - - 107 - -
Other, net - 8 (100.0) (9) 26 -
(48) (633) (92.4) (702) (2,147) (67.3)
Increase (decrease) in
cash and cash
equivalents during the
period (892) (4) NM 780 (2,573) -
Cash and cash equivalents
at beginning of the
period 2,931 1,263 132.1 1,259 3,832 (67.1)
Cash and cash equivalents
at end of the period $2,039 $1,259 62.0 $2,039 $1,259 62.0
Reconciliation of cash and cash equivalents to total cash and cash
equivalents, short-term investments and restricted cash:
As of %
December 31, Increase/
2008 2007 (Decrease)
Cash and cash equivalents $2,039 $1,259 62.0
Short-term investments - 2,295 (100.0)
Restricted cash (b) 272 756 (64.0)
Total cash and cash equivalents,
short-term investments and
restricted cash (b) $2,311 $4,310 (46.4)
(a) See Note 5[h] for the Company's computation of free cash flow.
(b) Restricted cash decreased significantly during the year ended
December 31, 2008 due to the posting of letters of credit for
workers' compensation obligations and an amendment of the Company's
largest credit card processing agreement with respect to credit card
ticket sales reserves.
NM Not meaningful.
CONSOLIDATED NOTES (UNAUDITED)
(1) UAL Corporation ("UAL" or the "Company") is a holding company whose
principal subsidiary is United Air Lines, Inc. ("United"). On
December 9, 2002, UAL, United and twenty-six direct and indirect
wholly-owned subsidiaries filed Chapter 11 petitions for relief in the
U.S. Bankruptcy Court for the Northern District of Illinois. On
February 1, 2006 (the "Effective Date"), the Company emerged from
Chapter 11. In connection with its emergence from Chapter 11
bankruptcy protection, the Company implemented fresh-start reporting
in accordance with American Institute of Certified Public Accountants'
Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" on the Effective Date. The
application of fresh-start reporting resulted in significant changes
to the historical financial statements.
(2) United has contractual relationships with various regional carriers to
provide regional jet and turboprop service branded as United Express.
Under these agreements, United pays the regional carriers
contractually agreed fees for crew expenses, maintenance expenses and
other costs of operating these flights. These costs include aircraft
rents of $104 million and $105 million for the three months ended
December 31, 2008 and 2007, respectively, and $413 million and $425
million for the twelve months ended December 31, 2008 and 2007,
respectively, which are included in regional affiliate expense in our
Statements of Consolidated Operations.
(3) UAL's results of operations include aircraft fuel expense for both
United mainline jet operations and regional affiliates. Aircraft fuel
expense incurred as a result of the Company's regional affiliates'
operations is reflected in Regional affiliates operating expense. In
accordance with UAL's agreement with its regional affiliates, these
costs are incurred by the Company. Fuel hedging gains or losses are
not allocated to Regional affiliates fuel expense.
Year-Over-Year Impact of Fuel Expense
United Mainline and Regional Affiliate Operations
(In millions, Three Months Ended Twelve Months Ended
except per gallon) December 31, % December 31, %
2008 2007 Change 2008 2007 Change
Total Mainline fuel
expense $1,838 $1,432 28.4 $7,722 $5,003 54.3
Non-cash, net mark-
to-market gains
(losses) in mainline
fuel (449) 7 - (568) 20 -
Mainline fuel expense
excluding non-cash,
net mark-to-market
gains (losses) 1,389 1,439 (3.5) 7,154 5,023 42.4
Regional affiliates
fuel expense 247 262 (5.7) 1,257 915 37.4
United system fuel
expense excluding
non-cash, net mark-
to-market gains
(losses) $1,636 $1,701 (3.8) $8,411 $5,938 41.6
Mainline fuel
consumption
(gallons) 491 566 (13.3) 2,182 2,292 (4.8)
Mainline average jet
fuel price per
gallon (in cents) 374.3 253.0 47.9 353.9 218.3 62.1
Mainline average jet
fuel price per
gallon excluding
non-cash, net mark-
to-market gains
(losses) (in cents) 282.9 254.2 11.3 327.9 219.2 49.6
Regional affiliates
fuel consumption
(gallons) 92 93 (1.1) 371 377 (1.6)
Regional affiliates
average jet fuel
price per gallon (in
cents) 268.5 281.7 (4.7) 338.8 242.7 39.6
(4) The tables below set forth certain operating statistics by geographic
region and the Company's mainline, regional affiliates and
consolidated operations, excluding special revenue items and the
impact of Mileage Plus:
(% change from prior year)
Three Months Ended Regional
December 31, 2008 Affili- Consoli-
Domestic Pacific Atlantic Latin Mainline ates dated
Passenger
revenues (8.6) (13.9) 2.3 (4.5) (7.9) 0.8 (6.4)
ASM (14.4) (14.7) 2.4 (7.9) (11.7) (1.0) (10.6)
RPM (12.6) (17.6) (1.3) (14.6) (12.1) (0.3) (10.9)
PRASM 6.7 0.8 (0.2) 3.7 4.4 1.8 4.7
Yield [a] 4.4 5.2 2.8 9.8 4.8 1.1 5.1
Load factor
(points) 1.7 (2.7) (3.0) (5.6) (0.3) 0.6 (0.3)
Twelve Months Ended Regional
December 31, 2008 Affili- Consoli-
Domestic Pacific Atlantic Latin Mainline ates dated
Passenger
revenues (0.8) (1.7) 12.3 7.2 1.3 1.9 1.4
ASM (7.8) (4.8) 11.0 (2.8) (4.2) (0.8) (3.9)
RPM (8.5) (9.4) 7.9 (5.5) (6.3) (3.9) (6.0)
PRASM 7.6 3.2 1.2 10.3 5.8 2.8 5.5
Yield [a] 8.3 8.5 3.4 14.1 8.0 6.1 7.9
Load factor
(points) (0.6) (3.9) (2.3) (2.2) (1.7) (2.4) (1.8)
[a] Yields for geographic regions exclude charter revenue, industry
reduced fares, passenger charges and related revenue passenger
miles.
CONSOLIDATED NOTES (UNAUDITED)
(5) The Company incurred significant charges related to tangible and
intangible asset impairments, severance and other charges that
significantly impacted its results in the three and twelve months
ended December 31, 2008. Collectively, these charges are identified as
"impairments and other charges" in the Regulation G reconciliations
below. These items consist of the following:
Three Twelve
Months Months
Ended Ended
December 31, December 31,
2008 2008
Income
Statement
Classification
Goodwill impairment $- $2,277 Goodwill
impairment
Intangible asset impairments - 64
Aircraft and deposit impairments 107 250
Other impairments 107 314
Lease termination and special items 18 25
Total other impairments and special 125 339 Other
items impairments
and special
items
Severance 18 106 Salaries and
related costs
Employee benefit charges 29 57 (a) Salaries and
related costs
Litigation-related settlement gain - (29) Other
operating
expenses
Purchased services charges - 26 (b) Purchased
services
Net gain on asset sales (11) (3) Depreciation
and
amortization
Accelerated depreciation related to 26 34 Depreciation
aircraft groundings and
amortization
Total other charges 62 191
Total impairments, special items and 187 2,807
other charges
Operating non-cash, net mark-to- 449 568 Aircraft fuel
market losses
Total operating expense impact 636 3,375
Non-operating non-cash, mark-to- 117 279 Miscellaneous,
market losses net
Pre-tax impairments and other 753 3,654
charges
Income tax expense (benefit) on (5) (31) Income tax
intangible asset impairments and expense
asset sales (benefit)
Impairments and other charges, net $748 $3,623
of tax
(a) Amount relates to additional charges to adjust certain employee
benefit obligations.
(b) Amount relates to expense for certain projects and transactions that
have been terminated or indefinitely postponed by the Company.
The Company did not classify any items as special items during the
fourth quarter of 2007, but it did have special items for the year
ended December 31, 2007, which include the following:
In 2007, the Company recorded a change in estimate of $59 million for
certain liabilities relating to bankruptcy administrative claims.
This adjustment resulted directly from the progression of the
Company's ongoing efforts to resolve certain bankruptcy pre-
confirmation contingencies. The Company classified these changes in
estimate as special items in the accompanying financial statements, as
they are related directly to the ongoing resolution of bankruptcy
administrative claims. This classification is consistent with
classification used to report the effects of similar claims resolved
in other quarterly periods since exit from bankruptcy. The Company
therefore recorded a special operating revenue credit of $45 million,
and a special operating expense credit of $14 million for these
changes in estimate.
The Company also recorded special operating expense credits of $30
million in the twelve months ended December 31, 2007 related to
bankruptcy facility lease secured interest litigation. The Company
separately recorded a $26 million benefit from a change in estimate to
certain other contingent liabilities, which was recorded as a credit
to mainline passenger revenues of $22 million, and to regional
affiliate revenues of $4 million. The Company classified this benefit
to passenger revenue, since it represents an adjustment to contingent
liabilities based largely on changes in underlying facts and
circumstances occurring during the year ended December 31, 2007.
See Notes 6 and 7, below, for additional information related to the
impacts of accounting for Mileage Plus on the Company's results of
operations.
Pursuant to SEC Regulation G, the Company has included the following
reconciliation of reported non-GAAP financial measures to comparable
financial measures reported on a GAAP basis. The Company believes
that excluding fuel costs from certain measures is useful to investors
because it provides an additional measure of management's performance
excluding the effects of a significant cost item over which management
has limited influence. The Company also believes that adjusting for
special items, and other items unusual or infrequent in nature, is
useful to investors because they are non-recurring items not
indicative of the Company's on-going performance. In addition, the
Company adjusts for Mileage Plus impacts for better comparison to
several of its peers as many still apply the incremental cost method
of accounting to their loyalty plans. The Company does not apply hedge
accounting. The Company believes that excluding unrealized
gains/losses related to the mark-to-market of its fuel hedge positions
provides management and investors with a better perspective of its
performance and comparison to its peers because the unrealized
gains/losses relate to future period fuel purchases and many of our
peers apply FAS 133 hedge accounting.
The tables below set forth the reconciliation of GAAP and non-GAAP
financial measures for certain operating statistics that are used in
determining key indicators such as adjusted passenger revenue per
revenue passenger mile ("Yield"), operating revenue per available seat
mile ("RASM"), operating margin, net income (loss) and operating
expense per available seat mile ("CASM").
Three Months Ended Twelve Months Ended
December 31, % December 31, %
2008 2007 Change 2008 2007 Change
[a] Yield (In
millions)
Mainline
Passenger -
United
Airlines $3,413 $3,797 (10.1) $15,337 $15,254 0.5
Add: Income
from special
item - - - - 37 (100.0)
Less:
industry
reduced
fares and
passenger
charges (11) (11) - (46) (45) 2.2
Mainline
adjusted
passenger
revenue $3,402 $3,786 (10.1) $15,291 $15,246 0.3
Mainline
revenue
passenger
miles 24,517 27,890 (12.1) 110,061 117,399 (6.3)
Adjusted
mainline
yield (in
cents) 13.88 13.57 2.3 13.89 12.99 6.9
Passenger -
United
Airlines $3,413 $3,797 (10.1) $15,337 $15,254 0.5
Less:
industry
reduced fares
and passenger
charges (11) (11) - (46) (45) 2.2
Mainline
adjusted
passenger
revenue $3,402 $3,786 (10.1) $15,291 $15,209 0.5
Adjusted
mainline
yield (in
cents) 13.88 13.57 2.3 13.89 12.95 7.3
Mainline
adjusted
passenger
revenue $3,402 $3,786 (10.1) $15,291 $15,209 0.5
Add: Mileage
Plus -
effect of
accounting
change 39 50 (22.0) 139 230 (39.6)
Less: Mileage
Plus - effect
of expiration
period change - (100) (100.0) - (204) (100.0)
Mainline
adjusted
passenger
revenue $3,441 $3,736 (7.9) $15,430 $15,235 1.3
Adjusted
mainline
yield (in
cents) 14.04 13.40 4.8 14.02 12.98 8.0
Regional
Affiliates
Passenger -
United
Express $752 $765 (1.7) $3,098 $3,063 1.1
Add: Income
from special
item - - - - 8 (100.0)
Regional
affiliates
passenger
revenue $752 $765 (1.7) $3,098 $3,071 0.9
Regional
affiliates
revenue
passenger
miles 3,003 3,013 (0.3) 12,155 12,649 (3.9)
Regional
affiliates
yield (in
cents) 25.04 25.39 (1.4) 25.49 24.28 5.0
Passenger -
United
Express $752 $765 (1.7) $3,098 $3,063 1.1
Add: Mileage
Plus - effect
of accounting
change 9 11 (18.2) 28 47 (40.4)
Less: Mileage
Plus - effect
of expiration
period change - (21) (100.0) - (42) (100.0)
Regional
affiliates
adjusted
passenger
revenue $761 $755 0.8 $3,126 $3,068 1.9
Adjusted
regional
affiliates
yield (in
cents) 25.34 25.06 1.1 25.72 24.25 6.1
CONSOLIDATED NOTES (UNAUDITED)
Three Months Ended Twelve Months Ended
December 31, % December 31, %
2008 2007 Change 2008 2007 Change
Consolidated
Consolidated
passenger
revenue $4,165 $4,562 (8.7) $18,435 $18,317 0.6
Add: Income
from special
item - - - - 45 (100.0)
Less: industry
reduced fares
and passenger
charges (11) (11) - (46) (45) 2.2
Consolidated
adjusted
passenger
revenue $4,154 $4,551 (8.7) $18,389 $18,317 0.4
Consolidated
revenue
passenger
miles 27,520 30,903 (10.9) 122,216 130,048 (6.0)
Adjusted
consolidated
yield (in
cents) 15.09 14.73 2.4 15.05 14.08 6.9
Consolidated
passenger
revenue $4,165 $4,562 (8.7) $18,435 $18,317 0.6
Less:
industry
reduced fares
and passenger
charges (11) (11) - (46) (45) 2.2
Consolidated
adjusted
passenger
revenue $4,154 $4,551 (8.7) $18,389 $18,272 0.6
Adjusted
consolidated
yield (in
cents) 15.09 14.73 2.4 15.05 14.05 7.1
Consolidated
adjusted
passenger
revenue $4,154 $4,551 (8.7) $18,389 $18,272 0.6
Add: Mileage
Plus - effect
of accounting
change 48 61 (21.3) 167 277 (39.7)
Less: Mileage
Plus - effect
of expiration
period change - (121) (100.0) - (246) (100.0)
Consolidated
adjusted
passenger
revenue $4,202 $4,491 (6.4) $18,556 $18,303 1.4
Adjusted
consolidated
yield (in
cents) 15.27 14.53 5.1 15.18 14.07 7.9
[b] PRASM (In
millions)
Mainline
Passenger -
United
Airlines $3,413 $3,797 (10.1) $15,337 $15,254 0.5
Add: Income
from special
item - - - - 37 (100.0)
Mainline
passenger
revenue $3,413 $3,797 (10.1) $15,337 $15,291 0.3
Mainline
available
seat miles 30,857 34,949 (11.7) 135,861 141,890 (4.2)
Mainline
PRASM (in
cents) 11.06 10.86 1.8 11.29 10.78 4.7
Passenger -
United
Airlines $3,413 $3,797 (10.1) $15,337 $15,254 0.5
Add: Mileage
Plus - effect
of accounting
change 39 50 (22.0) 139 230 (39.6)
Less:
Mileage
Plus - effect
of expiration
period change - (100) (100.0) - (204) (100.0)
Mainline
adjusted
passenger
revenue $3,452 $3,747 (7.9) $15,476 $15,280 1.3
Adjusted
mainline
PRASM
(in cents) 11.19 10.72 4.4 11.39 10.77 5.8
Regional
Affiliates
Passenger -
Regional
Affiliates $752 $765 (1.7) $3,098 $3,063 1.1
Add: Income
from special
item - - - - 8 (100.0)
Regional
affiliates
passenger
revenue $752 $765 (1.7) $3,098 $3,071 0.9
Regional
affiliates
available
seat miles 3,959 3,999 (1.0) 16,164 16,301 (0.8)
Regional
affiliates
PRASM (in
cents) 18.99 19.13 (0.7) 19.17 18.84 1.8
Passenger -
Regional
Affiliates $752 $765 (1.7) $3,098 $3,063 1.1
Add: Mileage
Plus - effect
of accounting
change 9 11 (18.2) 28 47 (40.4)
Less: Mileage
Plus - effect
of expiration
period change - (21) (100.0) - (42) (100.0)
Regional
affiliates
adjusted
passenger
revenue $761 $755 0.8 $3,126 $3,068 1.9
Adjusted
Regional
affiliates
PRASM (in
cents) 19.22 18.88 1.8 19.34 18.82 2.8
Consolidated
Consolidated
passenger
revenues $4,165 $4,562 (8.7) $18,435 $18,317 0.6
Add: Income
from special
item - - - - 45 (100.0)
Adjusted
consolidated
passenger
revenues $4,165 $4,562 (8.7) $18,435 $18,362 0.4
Consolidated
available
seat miles 34,816 38,948 (10.6) 152,025 158,191 (3.9)
Adjusted
consolidated
PRASM (in
cents) 11.96 11.71 2.1 12.13 11.61 4.5
Consolidated
passenger
revenues $4,165 $4,562 (8.7) $18,435 $18,317 0.6
Add: Mileage
Plus - effect
of accounting
change 48 61 (21.3) 167 277 (39.7)
Less: Mileage
Plus - effect
of expiration
period change - (121) (100.0) - (246) (100.0)
Adjusted
consolidated
passenger
revenues $4,213 $4,502 (6.4) $18,602 $18,348 1.4
Adjusted
consolidated
PRASM (in
cents) 12.10 11.56 4.7 12.24 11.60 5.5
[c] RASM (In
millions)
Mainline
Consolidated
operating
revenues $4,547 $5,030 (9.6) $20,194 $20,143 0.3
Less:
Passenger -
Regional
Affiliates (752) (765) (1.7) (3,098) (3,063) 1.1
Less: Regional
Affiliates
special items - - - - (8) (100.0)
Mainline
operating
revenues $3,795 $4,265 (11.0) $17,096 $17,072 0.1
Mainline
available
seat miles 30,857 34,949 (11.7) 135,861 141,890 (4.2)
Mainline
RASM (in
cents) 12.30 12.20 0.8 12.58 12.03 4.6
Mainline
operating
revenues $3,795 $4,265 (11.0) $17,096 $17,072 0.1
Less: income
from special
item - - - - (37) (100.0)
Adjusted
mainline
operating
revenues $3,795 $4,265 (11.0) $17,096 $17,035 0.4
Adjusted
mainline
RASM (in
cents) 12.30 12.20 0.8 12.58 12.01 4.7
Adjusted
mainline
operating
revenues $3,795 $4,265 (11.0) $17,096 $17,035 0.4
Add:
Mileage
Plus -
effect of
accounting
change 39 50 (22.0) 139 230 (39.6)
Less:
Mileage
Plus -
effect of
expiration
period change - (100) (100.0) - (204) (100.0)
Adjusted
mainline
operating
revenues $3,834 $4,215 (9.0) $17,235 $17,061 1.0
Adjusted
mainline
RASM (in
cents) 12.43 12.06 3.1 12.69 12.02 5.6
Consolidated
Consolidated
operating
revenues $4,547 $5,030 (9.6) $20,194 $20,143 0.3
Less:
income from
special item - - - - (45) (100.0)
Adjusted
consolidated
operating
revenues $4,547 $5,030 (9.6) $20,194 $20,098 0.5
Consolidated
available
seat miles 34,816 38,948 (10.6) 152,025 158,191 (3.9)
Adjusted
consolidated
RASM (in
cents) 13.06 12.91 1.2 13.28 12.70 4.6
Adjusted
consolidated
operating
revenues $4,547 $5,030 (9.6) $20,194 $20,098 0.5
Add: Mileage
Plus - effect
of accounting
change 48 61 (21.3) 167 277 (39.7)
Less: Mileage
Plus - effect
of expiration
period change - (121) (100.0) - (246) (100.0)
Adjusted
consolidated
operating
revenues $4,595 $4,970 (7.5) $20,361 $20,129 1.2
Adjusted
consolidated
RASM (in
cents) 13.20 12.76 3.4 13.39 12.72 5.3
CONSOLIDATED NOTES (UNAUDITED)
Three Months Ended Twelve Months Ended
December 31, % December 31, %
2008 2007 Change 2008 2007 Change
[d] Operating
Margin (In
millions)
Consolidated
operating
earnings
(loss) $(812) $(64) NM $(4,438) $1,037 -
Less:
income
from special
revenue item - - - - (45) (100.0)
Add (less):
non-cash, net
mark-to-market
(gains)
losses 449 (7) - 568 (20) -
Add (less):
impairments,
special items
and other
charges 187 - - 2,807 (44) -
Adjusted
operating
earnings
(loss) $(176) $(71) 147.9 $(1,063) $928 -
Consolidated
operating
revenues $4,547 $5,030 (9.6) $20,194 $20,143 0.3
Operating
margin (loss)
(percent) (17.9) (1.3) (16.6) pt. (22.0) 5.1 (27.1) pt.
Adjusted
operating
margin (loss)
(percent) (3.9) (1.4) (2.5) pt. (5.3) 4.6 (9.9) pt.
[e] Pre-tax
income
(loss)
(In millions)
Earnings (loss)
before income
taxes and
equity in
earnings of
affiliates $(1,300) $(98) NM $(5,379) $695 -
Less: income
from special
revenue item - - - - (45) (100.0)
Add (less):
non-cash, net
mark-to-market
(gains)
losses 566 (7) - 847 (20) -
Add (less):
impairments,
special items
and other
charges 187 - - 2,807 (44) -
Adjusted pre-
tax earnings
(loss) $(547) $(105) 421.0 $(1,725) $586 -
Pre-tax
earnings
(loss)
(percent) (28.6) (1.9) (26.7) pt. (26.6) 3.5 (30.1) pt.
Adjusted pre-
tax earnings
(loss)
(percent) (12.0) (2.1) (9.9) pt. (8.5) 2.9 (11.4) pt.
[f] Net income
(loss) (In
millions)
Net
income
(loss) $(1,303) $(53) NM $(5,348) $403 -
Less:
income
from
special
revenue
item - - - - (45) (100.0)
Add (less):
non-cash, net
mark-to-market
(gains)
losses 566 (7) - 847 (20) -
Add (less):
impairments,
special items
and other
charges 187 - - 2,807 (44) -
Add (less):
income tax
expense
(benefit) (i) (5) 3 - (31) 47 -
Adjusted net
income
(loss) $(555) $(57) - $(1,725) $341 -
[g] CASM (In
millions)
Mainline
Consolidated
operating
expenses $5,359 $5,094 5.2 $24,632 $19,106 28.9
Less:
Regional
affiliates (740) (765) (3.3) (3,248) (2,941) 10.4
Mainline
operating
expenses $4,619 $4,329 6.7 $21,384 $16,165 32.3
Mainline
available
seat miles 30,857 34,949 (11.7) 135,861 141,890 (4.2)
Mainline
CASM (in
cents) 14.97 12.39 20.8 15.74 11.39 38.2
Mainline
operating
expenses $4,619 $4,329 6.7 $21,384 $16,165 32.3
Add (less):
impairments,
special items,
other charges
and non-cash,
net mark-to-
market
(gains)
losses (636) 7 - (3,375) 64 -
Adjusted
mainline
operating
expense $3,983 $4,336 (8.1) $18,009 $16,229 11.0
Adjusted
mainline
CASM (in
cents) 12.91 12.41 4.0 13.26 11.44 15.9
Adjusted
mainline
operating
expense $3,983 $4,336 (8.1) $18,009 $16,229 11.0
Less:
mainline
fuel expense
(excluding
non-cash,
net mark-to-
market
(gains)
losses) (1,389) (1,439) (3.5) (7,154) (5,023) 42.4
Less: cost
of third
party
sales -
UAFC (ii) 1 (2) - (4) (36) (88.9)
Adjusted
mainline
operating
expense $2,595 $2,895 (10.4) $10,851 $11,170 (2.9)
Adjusted
mainline
CASM (in
cents) 8.41 8.28 1.6 7.99 7.87 1.5
Consolidated
Consolidated
operating
expenses $5,359 $5,094 5.2 $24,632 $19,106 28.9
Add (less):
impairments,
special
items,
other
charges and
non-cash,
net mark-to-
market
(gains)
losses (636) 7 - (3,375) 64 -
Adjusted
consolidated
operating
expenses $4,723 $5,101 (7.4) $21,257 $19,170 10.9
Consolidated
available
seat miles 34,816 38,948 (10.6) 152,025 158,191 (3.9)
Adjusted
consolidated
CASM (in
cents) 13.57 13.10 3.6 13.98 12.12 15.3
Adjusted
consolidated
operating
expenses $4,723 $5,101 (7.4) $21,257 $19,170 10.9
Less: fuel
expense
(excluding
non-cash, net
mark-to-market
(gains)
losses) and
UAFC (ii) (1,635) (1,703) (4.0) (8,415) (5,974) 40.9
Adjusted
consolidated
operating
expenses $3,088 $3,398 (9.1) $12,842 $13,196 (2.7)
Adjusted
consolidated
CASM (in
cents) 8.87 8.72 1.7 8.45 8.34 1.3
[h] Operating
cash flow (In
millions)
Operating
cash flow $(989) $132 - $(1,239) $2,134 -
Less: capital
expenditures (80) (230) (65.2) (415) (658) (36.9)
Add: proceeds
from
litigation on
advance
deposits - - - 41 - -
Free cash
flow $(1,069) $(98) NM $(1,613) $1,476 -
[i] Loss per
share (Basic
and diluted)
Loss per
share -
GAAP $(9.91) $(42.21)
Add: non-
cash, net
mark-to-
market
losses 4.30 6.68
Add:
impairments,
special
items and
other
charges 1.39 21.90
Loss per
share -
excluding non-
cash, net mark-
to-market
losses and
impairments,
special items
and other
charges $(4.22) $(13.63)
(i) For the three and twelve months ended December 31, 2007, the
income tax adjustment for special items is the difference in the
income tax provision on actual net income (loss) and the income
tax provision on adjusted net income (loss), computed using an
effective tax rate of 43%. The Company did not record a tax
benefit on the impairments and special items in the three and
twelve months ended December 31, 2008, except for $(5) million and
$(31) million, respectively, of tax expense (benefits) related to
the decreases in indefinite-lived intangible assets, which was
calculated using a 37% tax rate.
(ii) Included in UAL's operating expenses are the expenses of United's
wholly-owned subsidiary United Aviation Fuels Corporation
("UAFC"). UAFC's expenses are not derived from mainline jet
operations; therefore, UAL has excluded these expenses from the
above reported GAAP financial measures.
NM - Not meaningful.
CONSOLIDATED NOTES (UNAUDITED)
(6) The table below sets forth the estimated exit-related and fresh-start
reporting impacts on the Company's results of operations.
2008 Increase (Decrease)
(In millions)
Revenue impact: 1Q 2Q 3Q 4Q YTD
Estimate Estimate Estimate Estimate Estimate
Mileage Plus
revenue $(65) $(42) $(12) $(48) $(167)[a]
Operating expense
impact:
Share-based
compensation 11 7 5 8 31 [b]
Mileage Plus
marketing expense 5 2 6 3 16 [a]
Postretirement welfare
cost 14 14 14 14 56 [c]
Depreciation and
amortization 10 10 10 10 40 [d]
Deferred gain 18 18 18 18 72 [e]
Total operating
expense impact 58 51 53 53 215
Non-operating expense
impact:
Non-cash and fresh-
start interest
expense $4 $4 $4 $5 $17 [f]
[a] In connection with its emergence from Chapter 11 protection effective
February 1, 2006, the Company adopted fresh-start reporting.
Accordingly, the Company elected to change its accounting policy from
an incremental cost basis to a deferred revenue model to measure the
obligation for the Mileage Plus Frequent Flyer program. Adjustments to
the obligation are recorded to operating revenues. Historically,
adjustments were based upon incremental costs and were recorded in
both operating revenues and advertising expense.
The deferred revenue model is more volatile than the incremental cost
basis. Because all miles are now accounted for under the deferred
revenue model, the amount of revenue recognized is more sensitive to
the number of miles earned and redeemed during the period than the
incremental cost basis.
[b] In accordance with the plan of reorganization, the Company implemented
stock-based compensation plans for certain management employees and
non-employee directors. The Company adopted SFAS 123R effective
January 1, 2006 and recorded compensation expense for such plans.
[c] In accordance with fresh-start reporting, the Company revalued its
liabilities effective February 1, 2006 to fair value. As a result,
all prior period service credits related to postretirement costs were
eliminated.
[d] In accordance with fresh-start reporting, the Company revalued its
assets to fair value effective February 1, 2006. As a result,
definite lived intangible asset values increased substantially which
results in higher associated amortization expense. In addition, the
value of the Company's operating property and equipment was
significantly reduced which results in lower depreciation expense.
The Company has estimated the net impact of changes in asset values at
fresh-start on net depreciation and amortization.
[e] In accordance with fresh-start reporting, the Company revalued its
liabilities effective February 1, 2006 to fair value. As a result,
all deferred gains on aircraft sale/leasebacks were eliminated.
[f] As a result of fresh-start reporting, the Company recognizes certain
non-cash interest expenses, including the amortization of mark-to-
market discounts on all debt and capital leases.
(7) The following table presents additional detail on the Mileage Plus
impacts summarized in the table above. These items consist of the
additional amount of revenue that the Company estimates would have
been recognized had we continued to apply the incremental cost method
of accounting after exiting bankruptcy and, for 2007, the estimated
impact of the change in the expiration period for inactive accounts
from 36 months to 18 months. The Company utilizes this adjustment for
comparison of its performance to its peers, as certain of our peers
currently still apply the incremental cost method of accounting.
Increase (Decrease)
2008
(In millions) 1Q 2Q 3Q 4Q YTD
Mainline
Effect of accounting change $(54) $(35) $(11) $(39) $(139)
Effect of expiration period change - - - - -
Total Mainline (54) (35) (11) (39) (139)
Regional Affiliates
Effect of accounting change (11) (7) (1) (9) (28)
Effect of expiration period change - - - - -
Total Regional Affiliates (11) (7) (1) (9) (28)
Consolidated
Effect of accounting change (65) (42) (12) (48) (167)
Effect of expiration period change - - - - -
Total Consolidated $(65) $(42) $(12) $(48) $(167)
Increase (Decrease)
2007
(In millions) 1Q 2Q 3Q 4Q YTD
Mainline
Effect of accounting change $(113) $(37) $(30) $(50) $(230)
Effect of expiration period change 23 39 42 100 204
Total Mainline (90) 2 12 50 (26)
Regional Affiliates
Effect of accounting change (22) (9) (5) (11) (47)
Effect of expiration period change 5 8 8 21 42
Total Regional Affiliates (17) (1) 3 10 (5)
Consolidated
Effect of accounting change (135) (46) (35) (61) (277)
Effect of expiration period change 28 47 50 121 246
Total Consolidated $(107) $1 $15 $60 $(31)
CONSOLIDATED NOTES (UNAUDITED)
(8) Pursuant to SEC Regulation G, the Company has included the following
reconciliation of reported non-GAAP financial measures to comparable
financial measures reported on a GAAP basis. Further, the Company
believes that excluding fuel costs from certain measures is useful to
investors because it provides an additional measure of management's
performance excluding the effects of a significant cost item over
which management has limited influence. The Company also believes
that adjusting for impairments and other charges is useful to
investors because they are non-recurring income and/or charges that
are not indicative of the Company's on-going performance.
The forecasted fuel amounts shown below were estimated based on
forecasted jet fuel prices, including estimated hedge impacts, of
$1.83 per gallon and $1.87 per gallon for the first quarter and the
full year of 2009, respectively.
Three Months Ending
March 31,
2009 Estimate 2008 YOY
Operating expense per ASM - CASM Low High Actual % Change
(cents) (i)
Mainline operating expense - - 12.67 - -
Less: profit sharing programs - - - - -
Mainline excluding profit sharing
programs 11.38 11.46 12.67 (10.2) (9.6)
Less: fuel expense & cost of third
party sales - UAFC (2.97) (2.97) (4.57) (35.0) (35.0)
Mainline excluding profit sharing,
fuel & UAFC 8.41 8.49 8.10 3.8 4.8
Add (less): impairments and other
charges and special items - - (0.01) - -
Mainline excluding profit sharing,
fuel, UAFC, impairments and other
charges and special items 8.41 8.49 8.09 4.0 5.0
Consolidated operating expense - - 13.41 - -
Less: profit sharing programs - - - - -
Consolidated excluding profit
sharing programs 12.04 12.13 13.41 (10.2) (9.5)
Less: fuel expense & cost of third
party sales - UAFC (3.13) (3.13) (4.83) (35.2) (35.2)
Consolidated excluding profit
sharing, fuel & UAFC 8.91 9.00 8.58 3.8 4.9
Add (less): impairments and other
charges and special items - - (0.01) - -
Consolidated excluding fuel, UAFC,
impairments and other charges and
special items 8.91 9.00 8.57 4.0 5.0
Twelve Months Ending
December 31,
2009 Estimate 2008 YOY
Operating expense per ASM - CASM Low High Actual % Change
(cents) (i)
Mainline operating expense - - 15.74 - -
Less: profit sharing programs - - (0.04) - -
Mainline excluding profit sharing
programs 11.17 11.25 15.70 (28.9) (28.3)
Less: fuel expense & cost of
third party sales - UAFC (3.02) (3.02) (5.68) (46.8) (46.8)
Mainline excluding profit
sharing, fuel & UAFC 8.15 8.23 10.02 (18.7) (17.9)
Add (less): impairments and other
charges and special items - - (2.07) - -
Mainline excluding profit
sharing, fuel, UAFC, impairments
and other charges and special
items 8.15 8.23 7.95 2.5 3.5
Consolidated operating expense - - 16.20 - -
Less: profit sharing programs - - (0.03) - -
Consolidated excluding profit
sharing programs 11.84 11.92 16.17 (26.8) (26.3)
Less: fuel expense & cost of
third party sales - UAFC (3.22) (3.22) (5.91) (45.5) (45.5)
Consolidated excluding profit
sharing, fuel & UAFC 8.62 8.70 10.26 (16.0) (15.2)
Add (less): impairments and other
charges and special items - - (1.85) - -
Consolidated excluding fuel,
UAFC, impairments and other
charges and special items 8.62 8.70 8.41 2.5 3.5
(i) CASM also excludes the impact of future special items and other
charges, including profit sharing, as these items are unknown and
cannot be predicted with certainty.
(9) The table below details the Company's hedge positions as of January
16, 2009.
Average Price
% of Expected % of Expected Where Payment
Consolidated Mainline Obligations
Hedging Instrument Consumption(i) Consumption(i) Stop
1st Quarter 2009
Calls 18% 21% N/A
Collars 9% (10%) 11% (12%) N/A
3-Way Collars 25% (29%) 30% (35%) N/A
4-Way Collars 2% 2% $63 bbl
1st Quarter 2009 Total 54% 64% N/A
1st Quarter 2009 Purchased Puts to
Cap Downside
Purchased Puts 35% 42% $57
Full Year 2009
Calls 12% 14% N/A
Collars 5% (6%) 6% (7%) N/A
3-Way Collars 18% (22%) 22% (26%) N/A
4-Way Collars 1% 2% $63 bbl
Full Year 2009 Total 36% 44% N/A
Full Year 2009 Purchased Puts to
Cap Downside
Purchased Puts 17% 20% $54
Average Price Average Price Average Price
Where Payment Where Where
Obligations Protection Protection
Hedging Instrument Begin Begins Ends
1st Quarter 2009
Calls N/A $77 bbl(ii) N/A
Collars $109 bbl $118 bbl N/A
3-Way Collars $104 bbl $118 bbl $143 bbl
4-Way Collars $78 bbl $95 bbl $135 bbl
1st Quarter 2009 Total $104 bbl $104 bbl N/A
1st Quarter 2009 Purchased
Puts to Cap Downside
Purchased Puts
Full Year 2009
Calls N/A $76 bbl(iii) N/A
Collars $111 bbl $123 bbl N/A
3-Way Collars $102 bbl $117 bbl $147 bbl
4-Way Collars $78 bbl $95 bbl $135 bbl
Full Year 2009 Total $103 bbl $104 bbl N/A
Full Year 2009 Purchased Puts to
Cap Downside
Purchased Puts
(i) Percent of expected mainline and consolidated consumption represents
the notional amount of purchased calls in the hedge structures.
Certain 3-way collars and collars included in the table above have
sold puts with twice the notional amount of the purchased calls.
The percent in parentheses represent the notional amount of sold
puts in these hedge structures.
(ii) Call position average includes the following two groupings of
positions: 9% of consolidated consumption with protection beginning
at $106 per barrel; and 9% of consolidated consumption beginning at
$50 per barrel.
(iii) Call position average includes the following two groupings of
positions: 5% of consolidated consumption with protection beginning
at $106 per barrel; and 7% of consolidated consumption beginning at
$53 per barrel.
(10) The table below outlines the Company's estimated collateral
provisions at various crude oil prices, based on the hedge portfolio
as of January 16, 2009.
Approximate Change in
Cash Collateral For Each
Price of Crude Oil, $5 per Barrel Change in the
in Dollars per Barrel Price of Crude Oil
Above $105 No Collateral Required
At or Above $85, but Below $105 $45 million
At or Above $25, but Below $85 $60 million
Below $25 $40 million
For example, using the table above, at an illustrative $35 per barrel the
Company's January 16, 2009, required collateral provision to its
derivative counterparties would be approximately $780 million.
UAL CORPORATION AND SUBSIDIARY COMPANIES
(Mainline and Regional Affiliates (a))
Three Months Ended
December 31, %
2008 2007 Change
Mainline revenue passengers (In
thousands) 14,147 16,042 (11.8)
Revenue passenger miles - RPM (In
millions)
Mainline 24,517 27,890 (12.1)
Regional affiliates 3,003 3,013 (0.3)
Consolidated 27,520 30,903 (10.9)
Available seat miles - ASM (In
millions)
Mainline 30,857 34,949 (11.7)
Regional affiliates 3,959 3,999 (1.0)
Consolidated 34,816 38,948 (10.6)
Passenger load factor (percent)
Mainline 79.5 79.8 (0.3) pt.
Regional affiliates 75.9 75.3 0.6 pt.
Consolidated 79.0 79.3 (0.3) pt.
Consolidated operating breakeven
passenger load factor (percent) 94.5 80.5 14.0 pt.
Passenger revenue per passenger mile
- Yield (cents) [See Note 5a]
Mainline adjusted 13.88 13.57 2.3
Mainline adjusted for Mileage Plus 14.04 13.40 4.8
Regional affiliates 25.04 25.39 (1.4)
Regional affiliates adjusted for
Mileage Plus 25.34 25.06 1.1
Consolidated adjusted 15.09 14.73 2.4
Consolidated adjusted for Mileage
Plus 15.27 14.53 5.1
Passenger revenue per available seat
mile - PRASM (cents) [See Note 5b]
Mainline 11.06 10.86 1.8
Mainline adjusted for Mileage Plus 11.19 10.72 4.4
Regional affiliates 18.99 19.13 (0.7)
Regional affiliates adjusted for
Mileage Plus 19.22 18.88 1.8
Consolidated 11.96 11.71 2.1
Consolidated adjusted for Mileage
Plus 12.10 11.56 4.7
Operating revenue per available seat
mile - RASM (cents) [See Note 5c]
Mainline 12.30 12.20 0.8
Mainline adjusted for Mileage Plus 12.43 12.06 3.1
Regional affiliates 18.99 19.13 (0.7)
Regional affiliates adjusted for
Mileage Plus 19.22 18.88 1.8
Consolidated 13.06 12.91 1.2
Consolidated adjusted for Mileage
Plus 13.20 12.76 3.4
Operating expense per available seat
mile - CASM (cents) [See Note 5g]
Mainline 14.97 12.39 20.8
Mainline excluding impairments,
special items, other charges and
non-cash, net mark-to-market (gains)
losses 12.91 12.41 4.0
Mainline excluding impairments, other
special items, fuel & UAFC 8.41 8.28 1.6
Regional affiliates 18.69 19.13 (2.3)
Consolidated 15.39 13.08 17.7
Consolidated excluding
impairments, special items,
other charges and non-cash,
net mark-to-market (gains)
losses 13.57 13.10 3.6
Consolidated excluding
impairments, other special
items, fuel & UAFC 8.87 8.72 1.7
Mainline unit earnings (loss)
(cents) (b) (2.67) (0.19) NM
Mainline unit earnings excluding
impairments, special items and other
charges (including non-cash, net
mark-to-market (gains) losses), fuel
& UAFC (cents) (b) 3.89 3.92 (0.8)
Number of aircraft in operating fleet
at end of period
Mainline 409 460 (11.1)
Regional affiliates 280 279 0.4
Consolidated 689 739 (6.8)
Other Mainline Statistics
Mainline average price per gallon of
jet fuel (cents) 374.3 253.0 47.9
Mainline average price per gallon of
jet fuel excluding non-cash, net
mark-to-market (gains) losses
(cents) 282.9 254.2 11.3
Average full-time equivalent
employees (thousands) 45.9 51.7 (11.2)
Mainline ASMs per equivalent employee
- productivity (thousands) 672 676 (0.6)
Average stage length (in miles) 1,400 1,381 1.4
Fleet utilization (in hours and
minutes) 10:05 10:42 (5.8)
(a) Mainline includes United Air Lines, Inc. scheduled and chartered jet
operations. Regional affiliates include operations from regional
carriers with whom the Company has entered into capacity purchase
agreements to provide jet and turboprop operations branded as United
Express.
(b) Unit earnings are calculated as RASM minus CASM.
NM - Not meaningful
UAL CORPORATION AND SUBSIDIARY COMPANIES
(Mainline and Regional Affiliates (a))
Twelve Months Ended
December 31, %
2008 2007 Change
Mainline revenue passengers (In
thousands) 63,149 68,386 (7.7)
Revenue passenger miles - RPM (In
millions)
Mainline 110,061 117,399 (6.3)
Regional affiliates 12,155 12,649 (3.9)
Consolidated 122,216 130,048 (6.0)
Available seat miles - ASM (In
millions)
Mainline 135,861 141,890 (4.2)
Regional affiliates 16,164 16,301 (0.8)
Consolidated 152,025 158,191 (3.9)
Passenger load factor (percent)
Mainline 81.0 82.7 (1.7) pt.
Regional affiliates 75.2 77.6 (2.4) pt.
Consolidated 80.4 82.2 (1.8) pt.
Consolidated operating breakeven
passenger load factor (percent) 99.8 77.6 22.2 pt.
Passenger revenue per passenger mile
- Yield (cents) [See Note 5a]
Mainline adjusted 13.89 12.99 6.9
Mainline adjusted for special items 13.89 12.95 7.3
Mainline adjusted for special items
and Mileage Plus 14.02 12.98 8.0
Regional affiliates 25.49 24.28 5.0
Regional affiliates adjusted for
special items 25.49 24.22 5.2
Regional affiliates adjusted for
special items and Mileage Plus 25.72 24.25 6.1
Consolidated adjusted 15.05 14.08 6.9
Consolidated adjusted for special
items 15.05 14.05 7.1
Consolidated adjusted for special
items and Mileage Plus 15.18 14.07 7.9
Passenger revenue per available seat
mile - PRASM (cents) [See Note 5b]
Mainline 11.29 10.78 4.7
Mainline adjusted for special items 11.29 10.75 5.0
Mainline adjusted for special items
and Mileage Plus 11.39 10.77 5.8
Regional affiliates 19.17 18.84 1.8
Regional affiliates adjusted for
special items 19.17 18.79 2.0
Regional affiliates adjusted for
special items and Mileage Plus 19.34 18.82 2.8
Consolidated 12.13 11.61 4.5
Consolidated adjusted for special
items 12.13 11.58 4.7
Consolidated adjusted for special
items and Mileage Plus 12.24 11.60 5.5
Operating revenue per available seat
mile - RASM (cents) [See Note 5c]
Mainline 12.58 12.03 4.6
Mainline adjusted for special items 12.58 12.01 4.7
Mainline adjusted for special items
and Mileage Plus 12.69 12.02 5.6
Regional affiliates 19.17 18.84 1.8
Regional affiliates adjusted for
special items 19.17 18.79 2.0
Regional affiliates adjusted for
special items and Mileage Plus 19.34 18.82 2.8
Consolidated 13.28 12.73 4.3
Consolidated adjusted for special
items 13.28 12.70 4.6
Consolidated adjusted for special
items and Mileage Plus 13.39 12.72 5.3
Operating expense per available seat
mile - CASM (cents) [See Note 5g]
Mainline 15.74 11.39 38.2
Mainline excluding impairments,
special items, other charges and
non-cash, net mark-to-market (gains)
losses 13.26 11.44 15.9
Mainline excluding impairments, other
special items, fuel & UAFC 7.99 7.87 1.5
Regional affiliates 20.09 18.04 11.4
Consolidated 16.20 12.08 34.1
Consolidated excluding
impairments, special items,
other charges and non-cash,
net mark-to-market (gains)
losses and other special items 13.98 12.12 15.3
Consolidated excluding
impairments, other special
items, fuel & UAFC 8.45 8.34 1.3
Mainline unit earnings (loss)
(cents) (b) (3.16) 0.64 -
Mainline unit earnings excluding
special revenue items, impairments,
special items and other charges
(including non-cash, net mark-to-
market (gains) losses), fuel & UAFC
(cents) (b) 4.59 4.14 10.9
Number of aircraft in operating fleet
at end of period
Mainline 409 460 (11.1)
Regional affiliates 280 279 0.4
Consolidated 689 739 (6.8)
Other Mainline Statistics
Mainline average price per gallon of
jet fuel (cents) 353.9 218.3 62.1
Mainline average price per gallon of
jet fuel excluding non-cash, net
mark-to-market (gains) losses
(cents) 327.9 219.2 49.6
Average full-time equivalent
employees (thousands) 49.6 51.6 (3.9)
Mainline ASMs per equivalent employee
- productivity (thousands) 2,739 2,750 (0.4)
Average stage length (in miles) 1,402 1,371 2.3
Fleet utilization (in hours and
minutes) 10:42 11:00 (2.7)
(a) Mainline includes United Air Lines, Inc. scheduled and chartered jet
operations. Regional affiliates include operations from regional
carriers with whom the Company has entered into capacity purchase
agreements to provide jet and turboprop operations branded as United
Express.
(b) Unit earnings are calculated as RASM minus CASM.
NM - Not meaningful
SOURCE UAL Corporation
CONTACT: Worldwide Press Office of UAL Corporation, +1-312-997-8640
