Form 8-K

 

 

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): October 21, 2010

 

 

UNITED CONTINENTAL HOLDINGS, INC.

UNITED AIR LINES, INC.

CONTINENTAL AIRLINES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-06033   36-2675207
Delaware   001-11355   36-2675206
Delaware   001-10323   74-2099724
(State or other jurisdiction
of incorporation)
  (Commission File Number)   (IRS Employer
Identification Number)

 

77 W. Wacker Drive, Chicago, IL   60601
(Address of principal executive offices)   (Zip Code)

(312) 997-8000

Registrant’s telephone number, including area code 

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


 

Item 2.02 Results of Operations and Financial Condition.

On October 21, 2010, United Continental Holdings, Inc. (“UAL”), the holding company whose primary subsidiaries are United Air Lines, Inc. (“United”) and Continental Airlines, Inc. (“Continental”), issued a press release announcing the financial results of United and Continental for the third quarter of 2010. 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, or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 7.01 Regulation FD Disclosure.

On October 21, 2010, UAL will provide an investor update related to the financial and operational outlook for United and Continental for the fourth quarter and full year of 2010. 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 Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

 

Exhibit No.

  

Description

99.1*    Press Release issued by United Continental Holdings, Inc. dated October 21, 2010
99.2*    United Continental Holdings, Inc. Investor Update dated October 21, 2010

 

* Filed herewith electronically.


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

UNITED CONTINENTAL HOLDINGS, INC.
UNITED AIR LINES, INC.
CONTINENTAL AIRLINES, INC.
By:  

/s/ Chris Kenny

Name:   Chris Kenny
Title:   Vice President and Controller

Date: October 21, 2010


 

EXHIBIT INDEX

 

Exhibit No.

  

Description

99.1*    Press Release issued by United Continental Holdings, Inc. dated October 21, 2010
99.2*    United Continental Holdings, Inc. Investor Update dated October 21, 2010

 

* Filed herewith electronically.
Press Release issued by United Continental Holdings, Inc. dated October 21, 2010

 

Exhibit 99.1

LOGO

UNITED CONTINENTAL HOLDINGS, INC.

ANNOUNCES THIRD QUARTER RESULTS

UNITED REPORTS THIRD QUARTER $473 MILLION PROFIT EXCLUDING SPECIAL ITEMS,

$387 MILLION ON GAAP BASIS

CONTINENTAL REPORTS THIRD QUARTER $367 MILLION PROFIT EXCLUDING SPECIAL ITEMS,

$354 MILLION ON GAAP BASIS

CHICAGO, Oct. 21, 2010 – United Continental Holdings, Inc. (NYSE: UAL) today announced individual third quarter 2010 financial results for United Airlines and Continental Airlines. On Oct. 1, a wholly owned subsidiary of United Continental Holdings, Inc., formerly UAL Corporation, merged with Continental Airlines, Inc. Financial results for United and Continental will be combined when the company reports fourth quarter 2010 results.

 

   

United reported third quarter 2010 net income of $473 million or $2.12 diluted earnings per share excluding certain special items, an improvement of $533 million year-over-year. On a GAAP basis, United reported third quarter net income of $387 million.

 

   

Continental reported third quarter 2010 net income of $367 million or $2.24 diluted earnings per share excluding certain special items, an improvement of $365 million year-over-year. On a GAAP basis, Continental reported third quarter net income of $354 million.

“Thanks to the efforts of my more than 80,000 co-workers across both airlines, we achieved strong third quarter financial and operational results at both United and Continental,” said Jeff Smisek, United’s president and chief executive officer. “We have begun our merger integration, and we have a lot of work ahead of us. By working together, we will create the airline that customers want to fly, employees want to work for, and shareholders want to own.”

 

   

United consolidated passenger revenue increased 21.4 percent in the third quarter 2010 compared to the same period in 2009.

 

   

Continental consolidated passenger revenue increased 20.6 percent in the third quarter 2010 compared to the same period in 2009.

“The strong revenue performance of the two carriers reflects the commitment of our co-workers to provide industry leading-products and service to our customers,” said Jim Compton, executive vice president and chief revenue officer. “As we integrate the two networks and create the world’s leading airline, we will provide even more value to our customers.”

LOGO

 

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

 

The companies ended the third quarter with a combined $9.1 billion of unrestricted cash, cash equivalents and short-term investments.

“The teams did a great job containing costs at both companies while running solid operations during the third quarter,” said Zane Rowe, United’s executive vice president and chief financial officer. “Our strong liquidity position gives us flexibility as we integrate our companies and manage our debt maturities.”

Standalone United Airlines Third Quarter Revenue and Capacity

For the third quarter of 2010, United’s total revenue was $5.4 billion, an increase of 21.7 percent compared to the same period in 2009. Consolidated passenger revenue for the third quarter rose 21.4 percent, or $878 million, compared to the same period in 2009.

Consolidated revenue passenger miles (RPMs) for the third quarter of 2010 increased 3.9 percent while capacity increased 2.6 percent year-over-year, resulting in a third quarter consolidated load factor of 85.9 percent.

Consolidated yield for the third quarter 2010 increased 16.9 percent year-over-year. Combined with the 1.0 point year-over-year increase in consolidated load factor, third quarter 2010 consolidated passenger revenue per available seat miles (RASM) increased 18.3 percent compared to the same period in 2009.

United’s mainline RPMs in the third quarter of 2010 increased 1.9 percent on a mainline capacity increase of 0.7 percent year-over-year, resulting in a third quarter mainline load factor of 86.8 percent. Mainline yield for the third quarter 2010 increased 17.6 percent over the same period in 2009. Together with the 1.0 point year-over-year increase in mainline load factor, third quarter 2010 mainline RASM increased 18.9 percent year-over-year.

Passenger revenue for the third quarter of 2010 and period-to-period comparisons of related statistics by geographic region for United’s mainline and regional operations are as follows:

 

Geographic Area

   3Q 2010
Passenger
Revenue
(millions)
     Passenger
Revenue %
vs. 3Q 2009
    RASM %
vs. 3Q 2009
    Yield % vs.
3Q 2009
    ASM1 %
vs.  3Q
2009
 

Domestic

   $ 2,101         7.7     10.7     9.8     (2.8 %) 

Pacific

   $ 869         43.2     41.0     34.1     1.6

Atlantic

   $ 827         30.2     19.6     22.0     8.9

Latin America

   $ 116         54.8     39.6     39.8     10.8
                 

International

   $ 1,812         37.6     30.7     28.4     5.3

Mainline

   $ 3,913         19.8     18.9     17.6     0.7

Regional

   $ 1,076         27.5     11.1     8.2     14.8
                 

Consolidated

   $ 4,989         21.4     18.3     16.9     2.6

 

1

ASM: Available Seat Miles

Cargo revenue in the third quarter of 2010 increased 40 percent, or $50 million, year-over-year as continued improvements in demand drove strength in both freight volume and yield across all regions, particularly trans-Pacific markets.

 

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Standalone United Airlines Third Quarter Costs

United’s total consolidated expenses for the third quarter 2010, excluding certain special items, increased $463 million or 10.7 percent compared to the third quarter of 2009, of which $211 million was due to higher fuel costs. On a GAAP basis, United’s total consolidated expenses increased $514 million or 11.8 percent compared to the third quarter of 2009. Third quarter 2010 consolidated expenses, excluding fuel, profit-sharing programs and certain special items, increased $162 million or 5.4 percent year-over-year on 2.6 percent higher capacity.

Consolidated and mainline costs per available seat mile (CASM), excluding certain special items, increased 7.9 percent and 8.4 percent, respectively, in the third quarter 2010 compared to the same period last year. On a GAAP basis, CASM increased 9.0 and 9.6 percent, respectively. Consolidated fuel prices for the third quarter of 2010 increased 14.4 percent compared to the third quarter of 2009, while consolidated fuel consumption increased 4.2 percent year-over-year. In the third quarter, holding fuel and profit sharing constant and excluding certain special items, consolidated CASM increased 2.4 percent and mainline CASM increased 2.5 percent compared to the same period in 2009.

Standalone Continental Airlines Third Quarter Revenue and Capacity

Continental’s total revenue for the third quarter of 2010 was $4.0 billion, an increase of 19.2 percent compared to the same period in 2009. Consolidated passenger revenue for the third quarter of 2010 increased 20.6 percent, or $608 million, compared to the same period in 2009.

Consolidated RPMs for the third quarter of 2010 increased 1.6 percent while capacity increased 0.6 percent year-over-year, resulting in a third quarter consolidated load factor of 85.9 percent.

Consolidated yield for the third quarter 2010 increased 18.7 percent year-over-year. Combined with the 0.8 point year-over-year increase in consolidated load factor, third quarter 2010 consolidated RASM increased 19.8 percent compared to the same period in 2009.

Mainline RPMs in the third quarter of 2010 increased 1.6 percent on a mainline capacity increase of 0.6 percent year-over-year, resulting in a third quarter mainline load factor of 86.6 percent. Mainline yield for the third quarter 2010 increased 19.6 percent over the same period in 2009. Together with the 0.8 point year-over-year increase in mainline load factor, third quarter 2010 mainline RASM increased 20.8 percent year-over-year.

Passenger revenue for the third quarter of 2010 and period-to-period comparisons of related statistics by geographic region for the company’s mainline and regional operations are as follows:

 

Geographic Area

   3Q 2010
Passenger
Revenue
(millions)
     Passenger
Revenue %
vs. 3Q 2009
    RASM %
vs. 3Q 2009
    Yield % vs.
3Q 2009
    ASM1 %
vs. 3Q
2009
 

Domestic

   $ 1,351         14.8     16.2     17.5     (1.2 )% 

Trans-Atlantic

   $ 848         30.8     25.8     22.5     3.9

Latin America

   $ 424         17.4     16.8     17.5     0.5

Pacific

   $ 344         34.7     33.4     22.3     0.9
                 

International

   $ 1,616         27.7     24.8     21.1     2.4

Mainline

   $ 2,967         21.5     20.8     19.6     0.6

Regional

   $ 588         16.4     15.8     14.2     0.5
                 

Consolidated

   $ 3,555         20.6     19.8     18.7     0.6

 

1

ASM: Available Seat Miles

Cargo revenue in the third quarter of 2010 increased 25 percent, or $23 million, compared to the same period in 2009, principally due to increased freight volume.

 

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Standalone Continental Airlines Third Quarter Costs

Continental’s total consolidated expenses for the third quarter 2010, excluding certain special items, increased $263 million or 8.1 percent year-over-year, of which $103 million was related to higher fuel costs. On a GAAP basis, Continental’s total consolidated expenses increased $256 million or 7.9 percent compared to the third quarter of 2009. Consolidated expenses for the third quarter 2010, excluding fuel, profit-sharing programs and certain special items, increased $102 million or 4.3 percent year-over-year on 0.6 percent higher capacity.

In the third quarter 2010, consolidated and mainline CASM, excluding certain special items, increased 7.5 percent and 8.3 percent, respectively, compared to the third quarter of 2009. On a GAAP basis, CASM increased 7.2 and 8.3 percent, respectively. Consolidated fuel prices for the third quarter of 2010 increased 11.1 percent compared to the third quarter of 2009, while consolidated fuel consumption increased 0.5 percent year-over-year. Holding fuel and profit sharing constant and excluding certain special items, consolidated and mainline CASM increased 2.7 percent and 3.1 percent respectively in the third quarter 2010 compared to the same period last year.

United and Continental Combined Third Quarter Liquidity

United and Continental ended the third quarter with a combined $9.1 billion in unrestricted cash, cash equivalents and short-term investments. During the quarter, the companies generated approximately $750 million of operating cash flow, had scheduled debt and net capital lease payments of $295 million and had capital expenditures of $185 million. In addition, United pre-paid approximately $140 million of debt in the third quarter. In August, Continental issued $800 million of senior secured notes due 2015 at an annual interest rate of 6.75 percent and used $350 million of net proceeds to pre-pay indebtedness.

Notable Third Quarter Accomplishments for United and Continental

 

   

United and Continental reached a transition and process agreement with the pilots of both companies. The agreement provides a framework for pilot operations until the two groups reach a joint collective bargaining agreement and single seniority list, and the carriers obtain a single operating certificate.

 

   

Continental reached tentative agreements on new labor contracts with the International Association of Machinists and Aerospace Workers representing Continental flight attendants and with the International Brotherhood of Teamsters representing Continental aircraft maintenance technicians and related employees.

 

   

Through Sept. 30, 2010, the companies have accrued a total of $214 million under their respective profit-sharing plans. The actual amount of profit sharing that the companies will distribute to eligible employees in February 2011 depends on each company’s full-year financial results.

 

   

United employees earned cash incentive payments for on-time performance and customer satisfaction totaling $12 million during the third quarter. For the quarter, United recorded a DOT on-time arrival rate of 85.8 percent and a systemwide mainline segment completion factor of 99.1 percent.

 

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Continental employees earned cash incentive payments for on-time performance totaling $8 million during the third quarter. Continental recorded a DOT on-time arrival rate of 83.2 percent and a systemwide mainline segment completion factor of 99.8 percent. Continental operated 31 days during the quarter without a single mainline flight cancellation.

 

   

United reconfigured six Boeing 777 aircraft with new products in first- and business-class and improved inflight entertainment and seat options in economy. United has now reconfigured 51 (21 767s, 6 777s and 24 747s) of 91 aircraft in its international widebody fleet.

 

   

Continental continued to install new flat-bed BusinessFirst seats on its Boeing 777 and 757 aircraft during the quarter, with 40 (16 777s and 24 757s) of 63 international aircraft now completed. The company also continued its DIRECTV® installation, with the service now offered on 145 narrowbody aircraft.

 

   

Continental announced plans to launch nonstop flights between Newark Liberty and Cairo, Egypt, beginning May 18, 2011, subject to government approval.

 

   

Star Alliance members Continental Airlines and Brussels Airlines announced plans to start codesharing on Continental’s trans-Atlantic flights between New York and Brussels complementing existing codesharing between United and Brussels Airlines on flights linking Washington and Chicago with Brussels. In addition, Continental announced plans to start codesharing with Aegean Airlines between New York and Athens.

Merger Integration

Upon the Oct. 1 close of their merger, United and Continental began their integration process. The companies introduced new benefits for customers, including reciprocal upgrade and preferred seating benefits for Mileage Plus and OnePass elite members and expanded free wireless and complimentary alcoholic beverages to airport club lounges across the combined network. The companies have also started the first phase of optimizing their combined route network to offer customers more travel options.

United and Continental continue to operate as separate carriers, and will do so until they receive their single operating certificate, which they currently expect to achieve by the end of 2011. However, travelers will begin to see a more unified product in the spring of 2011, as the carriers integrate key customer service and marketing activities to deliver a more seamless product.

About United Continental Holdings, Inc.

United Continental Holdings, Inc. (NYSE: UAL) is the holding company for both United Airlines and Continental Airlines. Together with United Express, Continental Express and Continental Connection, these airlines operate a total of approximately 5,800 flights a day to 371 airports on six continents from their hubs in Chicago, Cleveland, Denver, Guam, Houston, Los Angeles, New York/Newark Liberty, San Francisco, Tokyo and Washington,

 

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D.C. United and Continental are members of Star Alliance, which offers more than 21,200 daily flights to 1,172 airports in 181 countries worldwide through its 28 member airlines. United’s and Continental’s more than 80,000 employees reside in every U.S. state and in many countries around the world. For more information about United Continental Holdings, Inc., go to . For more information about the airlines, see and , and follow each company on Twitter and Facebook.

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 financial performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as “expects,” “will,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook” and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements which 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: our ability to comply with the terms of our various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our operational plans; our ability to control our costs, including realizing benefits from our resource optimization efforts, cost reduction initiatives and fleet replacement programs; our ability to utilize our net operating losses; our ability to attract and retain customers; demand for transportation in the markets in which we operate; an outbreak of a disease that affects travel demand or travel behavior; demand for travel and the impact that global economic conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aviation fuel and energy refining capacity in relevant markets); our ability to cost-effectively hedge against increases in the price of aviation fuel; any potential realized or unrealized gains or losses related to fuel or currency hedging programs; the effects of any hostilities, act of war or terrorist attack; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the costs and availability of aviation and other insurance; the costs associated with security measures and practices; industry consolidation or changes in airline alliances; competitive pressures on pricing and on demand; our capacity decisions and the capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation and other actions (including open skies agreements); labor costs; our ability to maintain satisfactory labor relations and the results of the collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; weather conditions; the possibility that expected merger synergies will not be realized or will not be realized within the expected time period; and other risks and uncertainties set forth under Item 1A., Risk Factors of Annual Report on Form 10-K, as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC. Consequently, forward-looking statements should not be regarded as representations or warranties by us that such matters will be realized.

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UNITED CONTINENTAL HOLDINGS, INC. AND SUBSIDIARIES (Formerly UAL Corporation)

STATEMENT OF CONSOLIDATED OPERATIONS

 

     Three Months     %     Nine Months     %  
   Ended September 30,     Increase/     Ended September 30,     Increase/  
(In millions, except per share data) (Unaudited)    2010     2009     (Decrease)     2010     2009     (Decrease)  

Operating Revenue:

            

Passenger:

            

Mainline

   $ 3,913      $ 3,267        19.8   $ 10,651      $ 8,909        19.6

Regional Affiliates

     1,076        844        27.5     2,937        2,252        30.4
                                    

Total Passenger Revenue

     4,989        4,111        21.4     13,588        11,161        21.7

Cargo

     175        125        40.0     522        370        41.1

Other

     230        197        16.8     686        611        12.3
                                    

Total Operating Revenue

     5,394        4,433        21.7     14,796        12,142        21.9
                                    

Operating Expenses:

            

Aircraft fuel

     1,242        1,064        16.7     3,398        2,528        34.4

Wages, salaries and related costs

     1,085        954        13.7     3,053        2,838        7.6

Regional affiliates

     914        775        17.9     2,640        2,154        22.6

Purchased services

     278        279        (0.4 %)      821        852        (3.6 %) 

Aircraft maintenance materials and outside repairs

     262        253        3.6     729        718        1.5

Landing fees and other rentals

     240        226        6.2     709        676        4.9

Depreciation and amortization

     224        220        1.8     652        675        (3.4 %) 

Distribution costs

     161        145        11.0     452        402        12.4

Aircraft rentals

     82        88        (6.8 %)      244        265        (7.9 %) 

Cost of third party sales

     64        59        8.5     182        172        5.8

Impairments, merger-related costs and special items (B)

     63        43        46.5     187        250        (25.2 %) 

Other

     244        239        2.1     691        699        (1.1 %) 
                                    

Total Operating Expenses

     4,859        4,345        11.8     13,758        12,229        12.5
                                    

Operating Income (Loss)

     535        88        NM        1,038        (87     NM   

Nonoperating Income (Expense):

            

Interest expense

     (171     (146     17.1     (520     (415     25.3

Interest income

     5        3        66.7     8        15        (46.7 %) 

Interest capitalized

     2        3        (33.3 %)      7        8        (12.5 %) 

Other, net

     15        (10     NM        42        19        121.1
                                    

Total Nonoperating Income (Expense)

     (149     (150     (0.7 %)      (463     (373     24.1
                                    

Income (Loss) before Income Taxes and equity in earnings of affiliates

     386        (62     NM        575        (460     NM   

Income Tax Benefit (C)

     —          (4     (100.0 %)      (1     (46     (97.8 %) 
                                    

Income (Loss) before equity in earnings of affiliates

     386        (58     NM        576        (414     NM   

Equity in earnings of affiliates

     1        1        —          2        3        (33.3 %) 
                                    

Net Income (Loss)

   $ 387      $ (57     NM      $ 578      $ (411     NM   
                                    

Earnings (Loss) per share, basic

   $ 2.30      ($ 0.39     NM      $ 3.44      ($ 2.83     NM   
                                    

Earnings (Loss) per share, diluted

   $ 1.75      ($ 0.39     NM      $ 2.78      ($ 2.83     NM   
                                    

Weighted average shares, basic

     168        146        15.1     168        145        15.9

Weighted average shares, diluted

     235        146        61.0     231        145        59.3

 

NM Not meaningful.

 

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UNITED CONTINENTAL HOLDINGS, INC. AND SUBSIDIARIES (Formerly UAL Corporation)

CONSOLIDATED NOTES (UNAUDITED)

 

(A) United Continental Holdings, Inc. (NYSE: UAL) is a holding company and its principal, wholly-owned subsidiaries are United Air Lines, Inc. (“United”) and, effective October 1, 2010, Continental Airlines, Inc. (“Continental”). Continental became a subsidiary of UAL as a result of a merger transaction. As a consequence of the merger, UAL Corporation changed its name to United Continental Holdings, Inc. Because the merger occurred on October 1, 2010, the results of UAL presented herein do not include the impact of Continental’s operations.

 

(B) Impairments, merger-related costs and special items include the following:

 

     Three Months
Ended September 30,
   

Nine Months

Ended September 30,

 
(In millions)    2010     2009     2010     2009  

Intangible asset impairments

   $ —        $ —        $ —        $ 150   

Aircraft and spare parts impairments

     22        19        112        19   
                                

Total impairments

     22        19        112        169   

Merger-related costs

     44        —          72        —     

LAX municipal bond litigation

     —          —          —          27   

Lease termination and other special items

     (3     24        3        54   
                                

Total impairments, merger-related costs and special items

     63        43        187        250   

Severance

     2        22        1        23   

Employee benefit adjustments

     —          —          —          (33

(Gain) Loss on asset sales

     5        (11     15        (11

Accelerated depreciation related to early asset retirement

     4        6        13        38   
                                

Total other charges

     11        17        29        17   
                                

Total impairments, merger-related costs, special items and other charges

     74        60        216        267   

Operating non-cash net mark-to-market (“MTM”) (gains) losses on undesignated fuel hedges

     12        (25     18        (521
                                

Total operating impact

     86        35        234        (254

Non-operating non-cash net MTM (gains) on undesignated fuel hedges

     —          (34     —          (241
                                

Pre-tax impairments, merger-related costs, special items, other charges and non-cash net MTM impact

     86        1        234        (495

Income tax benefit on impairments, other charges and other non-cash tax expense

     —          (4     (1     (46
                                

Total impairments, merger-related costs, special items, other charges and non-cash net MTM impact, net of tax

   $ 86      $ (3   $ 233      $ (541
                                

 

(C) Effective tax rates differ from the federal statutory rate of 35% primarily due to the following: changes in the valuation allowance, expenses that are not deductible for federal income tax purposes and state income taxes. We are required to provide a valuation allowance for our deferred tax assets in excess of deferred tax liabilities because UAL concluded that it is more likely than not that such deferred tax assets will ultimately not be realized. As a result, pre-tax losses for the three and nine months of September 30, 2009 were not reduced by any tax benefits except for certain tax benefits resulting from the disposal and impairment of indefinite-lived intangible assets. No federal income tax expense was recorded related to pre-tax income for the three and nine months ended September 30, 2010 due to the utilization of book net operating losses for which no benefit had previously been recognized.

 

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

 

UNITED CONTINENTAL HOLDINGS, INC. AND SUBSIDIARIES (Formerly UAL Corporation)

CONSOLIDATED NOTES (UNAUDITED)

 

(D) 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 UAL’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 UAL. Fuel hedging gains or losses are not allocated to Regional Affiliates fuel expense.

 

     Year-Over-Year Impact of Fuel Expense  
     United Mainline and Regional Affiliates Operations  
     Three Months Ended     %     Nine Months Ended     %  
(In millions, except per gallon)    September 30,     Increase/     September 30,     Increase/  
   2010     2009     (Decrease)     2010     2009     (Decrease)  

Total mainline fuel expense

   $ 1,242      $ 1,064        16.7   $ 3,398      $ 2,528        34.4

Exclude impact of non-cash net MTM gains (losses)

     (12     25        NM        (18     521        NM   
                                    

Mainline fuel expense excluding MTM impact

     1,230        1,089        12.9     3,380        3,049        10.9

Add: Regional Affiliates fuel expense

     292        222        31.5     829        564        47.0
                                    

Consolidated fuel expense excluding MTM impact

     1,522        1,311        16.1     4,209        3,613        16.5

Exclude impact of fuel hedge settlements

     (60     (92     (34.8 %)      (89     (491     (81.9 %) 

Exclude impact of fuel hedge ineffectiveness

     —          —          —          (3     —          NM   
                                    

Consolidated fuel expense excluding hedge impacts (a) (b)

   $ 1,462      $ 1,219        19.9   $ 4,117      $ 3,122        31.9
                                    

Mainline fuel consumption (gallons)

     520        511        1.8     1,461        1,480        (1.3 %) 

Mainline average jet fuel price per gallon (cents)

     238.8        208.2        14.7     232.6        170.8        36.2

Mainline average jet fuel price per gallon excluding non-cash net MTM impact (cents)

     236.5        213.1        11.0     231.3        206.0        12.3

Mainline average jet fuel price per gallon excluding fuel hedge impacts (cents)

     225.0        195.1        15.3     225.1        172.8        30.3

Regional Affiliates fuel consumption (gallons)

     122        105        16.2     339        294        15.3

Regional Affiliates average jet fuel price per gallon (cents)

     239.3        211.4        13.2     244.5        191.8        27.5

Consolidated consumption (gallons)

     642        616        4.2     1,800        1,774        1.5

Consolidated average jet fuel price per gallon (cents)

     238.9        208.8        14.4     234.8        174.3        34.7

Consolidated average jet fuel price per gallon excluding non-cash net MTM impact (cents)

     237.1        212.8        11.4     233.8        203.7        14.8

Consolidated average jet fuel price per gallon excluding fuel hedge impacts (cents)

     227.7        197.9        15.1     228.7        176.0        29.9

 

(a) See Note (F) for further information related to fuel hedging and non-GAAP measures.

 

(b) Beginning April 1, 2010, UAL designated substantially all of its outstanding fuel derivative contracts as cash flow hedges under GAAP. As of September 30, 2010, UAL has recognized $6 million of accumulated other comprehensive gains on its balance sheet for these designated hedges. Effective with the third quarter of 2010, UAL classified the ineffective portion of these designated hedges within non-operating income (expense).

 

(E) 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 $111 million for both of the three months ended September 30, 2010 and 2009 and $333 million and $327 million for the nine months ended September 30, 2010 and 2009, respectively. This rent is included in Regional Affiliates expense in our Statements of Consolidated Operations.

 

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

 

UNITED CONTINENTAL HOLDINGS, INC. AND SUBSIDIARIES (Formerly UAL Corporation)

CONSOLIDATED NOTES (UNAUDITED)

 

(F) Pursuant to SEC Regulation G, UAL has included the following reconciliation of reported non-GAAP financial measures to comparable financial measures reported on a GAAP basis. UAL 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 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 UAL’s on-going performance. UAL began to apply cash flow hedge accounting effective April 1, 2010. Prior to the designation of fuel hedge instruments as cash flow hedges, MTM gains and losses were immediately recognized in fuel expense. UAL believes that the net fuel hedge adjustments provide management and investors with a better perspective of its performance and comparison to its peers because the adjustments reflect the economic fuel cost during the periods presented and many of our peers apply cash flow hedge accounting.

 

     Three Months Ended
September 30,
 
     2010     2009  

Consolidated Operating Expenses (In millions)

   $ 4,859      $ 4,345   

Special Items (a):

    

Impairments

     (22     (19

Special items and other charges

     (8     (41

Merger-related costs

     (44     —     

Non-cash net fuel MTM impact

     (12     25   
                

Adjusted consolidated operating expenses, excluding special items

     4,773        4,310   

Consolidated fuel expense (excluding non-cash net MTM impact)

     (1,522     (1,311

Profit sharing programs including taxes

     (90     —     
                

Adjusted consolidated operating expenses, excluding fuel, profit- sharing programs and special items

   $ 3,161      $ 2,999   
                
     Three Months Ended
September 30,
 
     2010     2009  

Net Income (Loss) (In millions)

   $ 387      $ (57

Special items (a):

    

Impairments

     22        19   

Special items and other charges

     8        37   

Merger-related costs

     44        —     

Non-cash net fuel MTM impact

     12        (59
                

Adjusted Net Income (Loss)

   $ 473      $ (60
                
     Three Months Ended
September 30,
 
     2010     2009  

Earnings (Loss) per Share

    

Diluted earnings (loss) per share

   $ 1.75      ($ 0.39

Special items (a):

    

Impairments

     0.09        0.13   

Special items and other charges

     0.04        0.26   

Merger-related costs

     0.19        —     

Non-cash net fuel MTM impact

     0.05        (0.41
                

Adjusted diluted earnings (loss) per share

   $ 2.12      $ (0.41
                

 

(a) Special items are net of tax of $0, except for a $4 million tax benefit that is included within “special items and other changes” in the net income and EPS reconciliations.

 

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

 

UNITED CONTINENTAL HOLDINGS, INC. AND SUBSIDIARIES (Formerly UAL Corporation)

NON-GAAP FINANCIAL MEASURES

 

     Three Months
Ended September 30,
    %
Increase/
    Nine Months
Ended September 30,
    %
Increase/
 
     2010     2009     (Decrease)     2010     2009     (Decrease)  

CASM Mainline Operations (cents)

            

Cost per available seat mile (CASM)

     12.16        11.09        9.6     12.13        10.75        12.8

Less: Special items and non-cash net MTM impact

     (0.26     (0.11     136.4     (0.25     0.27        NM   
                                    

CASM, excluding special items and non-cash net MTM impact

     11.90        10.98        8.4     11.88        11.02        7.8

Less: Fuel cost per available seat mile

     (3.79     (3.38     12.1     (3.69     (3.25     13.5
                                    

CASM, excluding special items, non-cash net MTM impact and fuel

     8.11        7.60        6.7     8.19        7.77        5.4

Less: Profit sharing cost per available seat mile

     (0.28     —          NM        (0.17     —          NM   
                                    

CASM, excluding special items, non-cash net MTM impact, fuel and profit sharing

     7.83        7.60        3.0     8.02        7.77        3.2

Add: Profit sharing held constant at prior year expense per available seat mile

     —          —          —          —          —          —     

Add: Current year fuel cost at prior year fuel price per available seat mile

     3.42        —          NM        3.28        —          NM   

Add: Prior year fuel cost per available seat mile

     —          3.38        NM        —          3.25        NM   
                                    

CASM, holding fuel and profit sharing constant and excluding special items and non-cash net MTM impact

     11.25        10.98        2.5     11.30        11.02        2.5
                                    

CASM Consolidated Operations (cents)

            

Cost per available seat mile (CASM)

     12.79        11.73        9.0     12.82        11.42        12.3

Less: Special items and non-cash net MTM impact

     (0.23     (0.09     155.6     (0.22     0.24        NM   
                                    

CASM, excluding special items and non-cash net MTM impact

     12.56        11.64        7.9     12.60        11.66        8.1

Less: Fuel cost per available seat mile

     (4.00     (3.54     13.0     (3.92     (3.38     16.0
                                    

CASM, excluding special items, non-cash net MTM impact and fuel

     8.56        8.10        5.7     8.68        8.28        4.8

Less: Profit sharing cost per available seat mile

     (0.24     —          NM        (0.14     —          NM   
                                    

CASM, excluding special items, non-cash net MTM impact, fuel and profit sharing

     8.32        8.10        2.7     8.54        8.28        3.1

Add: Profit sharing held constant at prior year expense per available seat mile

     —          —          —          —          —          —     

Add: Current year fuel cost at prior year fuel price per available seat mile

     3.60        —          NM        3.42        —          NM   

Add: Prior year fuel cost per available seat mile

     —          3.54        NM        —          3.38        NM   
                                    

CASM, holding fuel and profit sharing constant and excluding special items and non-cash net MTM

     11.92        11.64        2.4     11.96        11.66        2.6
                                    

 

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

 

UNITED CONTINENTAL HOLDINGS, INC. AND SUBSIDIARIES (Formerly UAL Corporation)

STATISTICS

 

     Three Months     %     Nine Months     %  
     Ended September 30,     Increase/     Ended September 30,     Increase/  
     2010     2009     (Decrease)     2010     2009     (Decrease)  

Mainline Operations:

            

Passengers (thousands)

     14,542        15,179        (4.2 %)      40,948        42,933        (4.6 %) 

Revenue passenger miles (millions)

     28,149        27,611        1.9     77,433        76,510        1.2

Available seat miles (millions)

     32,431        32,193        0.7     91,634        93,746        (2.3 %) 

Cargo ton miles (millions)

     452        409        10.5     1,422        1,128        26.1

Passenger load factor

            

Mainline

     86.8     85.8     1.0  pts.      84.5     81.6     2.9  pts. 

Domestic

     87.3     86.6     0.7  pts.      85.3     84.1     1.2  pts. 

International

     86.2     84.7     1.5  pts.      83.5     78.5     5.0  pts. 

Passenger revenue per available seat mile (cents)

     12.07        10.15        18.9     11.62        9.50        22.3

Total revenue per available seat mile (cents)

     13.31        11.15        19.4     12.94        10.55        22.7

Average yield per revenue passenger mile (cents) (a)

     13.86        11.79        17.6     13.71        11.61        18.1

Average fare per passenger

   $ 269.05      $ 215.26        25.0   $ 260.11      $ 207.51        25.3

Cost per available seat mile (CASM) (cents):

            

CASM (b)

     12.16        11.09        9.6     12.13        10.75        12.8

CASM, excluding special items and non-cash net MTM impact

     11.90        10.98        8.4     11.88        11.02        7.8

CASM, excluding special items, non-cash net MTM impact and fuel

     8.11        7.60        6.7     8.19        7.77        5.4

CASM, excluding special items, non-cash net MTM impact, fuel and profit sharing

     7.83        7.60        3.0     8.02        7.77        3.2

CASM, holding fuel rate and profit sharing constant, excluding special items and non-cash net MTM impact

     11.25        10.98        2.5     11.30        11.02        2.5

Average price per gallon of jet fuel (cents) (c)

     238.8        208.2        14.7     232.6        170.8        36.2

Average price per gallon of jet fuel excluding non-cash net MTM impact (cents) (c)

     236.5        213.1        11.0     231.3        206.0        12.3

Average price per gallon of jet fuel excluding fuel hedge impact (cents) (c)

     225.0        195.1        15.3     225.1        172.8        30.3

Fuel gallons consumed (millions)

     520        511        1.8     1,461        1,480        (1.3 %) 

Aircraft in fleet at end of period

     360        371        (3.0 %)      360        371        (3.0 %) 

Average stage length (miles) (d)

     1,850        1,730        6.9     1,810        1,711        5.8

Average daily utilization of each aircraft (hours)

     11:24        11:14        1.5     11:02        10:50        1.8

 

(a) Yields exclude industry reduced fares, which have the impact of increasing yield by approximately 0.05 cents per RPM for all periods.
(b) Includes impact of special charges and merger-related costs.
(c) Fuel price per gallon includes aircraft fuel and related taxes.
(d) Average stage length equals the average distance a seat travels adjusted for size of aircraft (available seat miles/seats).

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

UNITED CONTINENTAL HOLDINGS, INC. AND SUBSIDIARIES (Formerly UAL Corporation)

STATISTICS (Continued)

 

 

     Three Months     %     Nine Months     %  
     Ended September 30,     Increase/     Ended September 30,     Increase/  
     2010     2009     (Decrease)     2010     2009     (Decrease)  

Regional Affiliates:

            

Passengers (thousands)

     7,711        6,897        11.8     21,447        18,875        13.6

Revenue passenger miles (millions)

     4,495        3,814        17.9     12,337        10,224        20.7

Available seat miles (millions)

     5,557        4,841        14.8     15,667        13,340        17.4

Passenger load factor

     80.9     78.8     2.1  pts.      78.7     76.6     2.1  pts. 

Passenger revenue per available seat mile (cents)

     19.36        17.43        11.1     18.75        16.88        11.1

Average yield per revenue passenger mile (cents)

     23.94        22.13        8.2     23.81        22.03        8.1

Aircraft in fleet at end of period

     295        292        1.0     295        292        1.0

Average stage length (miles) (a)

     552        507        8.9     536        498        7.6

Consolidated Operations (Mainline and Regional Affiliates):

            

Passengers (thousands)

     22,253        22,076        0.8     62,395        61,808        0.9

Revenue passenger miles (millions)

     32,644        31,425        3.9     89,770        86,734        3.5

Available seat miles (millions)

     37,988        37,034        2.6     107,301        107,086        0.2

Passenger load factor

     85.9     84.9     1.0  pts.      83.7     81.0     2.7  pts. 

Passenger revenue per available seat mile (cents)

     13.13        11.10        18.3     12.66        10.42        21.5

Total revenue per available seat miles (cents)

     14.20        11.97        18.6     13.79        11.34        21.6

Average yield per revenue passenger mile (cents) (b)

     15.25        13.05        16.9     15.10        12.83        17.7

CASM (c)

     12.79        11.73        9.0     12.82        11.42        12.3

CASM, excluding special items and non-cash net MTM impact

     12.56        11.64        7.9     12.60        11.66        8.1

CASM, excluding special items, non-cash net MTM impact and fuel

     8.56        8.10        5.7     8.68        8.28        4.8

CASM, excluding special items, non-cash net MTM impact, fuel and profit sharing

     8.32        8.10        2.7     8.54        8.28        3.1

CASM, holding fuel rate and profit sharing constant, excluding special items and non-cash net MTM impact

     11.92        11.64        2.4     11.96        11.66        2.6

Average price per gallon of jet fuel (cents) (d)

     238.9        208.8        14.4     234.8        174.3        34.7

Average price per gallon of jet fuel excluding non-cash net MTM impact (cents) (d)

     237.1        212.8        11.4     233.8        203.7        14.8

Average price per gallon of jet fuel excluding fuel hedge impacts (cents) (d)

     227.7        197.9        15.1     228.7        176.0        29.9

Fuel gallons consumed (millions)

     642        616        4.2     1,800        1,774        1.5

Average full-time equivalent employees (thousands)

     42.7        43.6        (2.1 %)      42.7        44.0        (3.0 %) 

Cash Flow (In millions):

            

Operating cash flow

   $ 445      $ 56        NM      $ 1,801      $ 878        105.1

Capital expenditures

     (88     (60     46.7     (212     (230     (7.8 %) 

Advanced deposits on aircraft

     —          —          —          (42     —          NM   

 

(a) Average stage length equals the average distance a seat travels adjusted for size of aircraft (available seat miles/seats).
(b) Yields exclude industry reduced fares, which have the impact of increasing yield by approximately 0.05 cents per RPM for all periods.
(c) Includes impact of special charges and merger-related costs.
(d) Fuel price per gallon includes aircraft fuel and related taxes.

 

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

 

CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED OPERATIONS (UNAUDITED)

 

     Three Months     %     Nine Months     %  
     Ended September 30,     Increase/     Ended September 30,     Increase/  
(In millions, except per share data)    2010     2009     (Decrease)     2010     2009     (Decrease)  

Operating Revenue:

            

Passenger:

            

Mainline

   $ 2,967      $ 2,442        21.5   $ 8,002      $ 6,940        15.3

Regional

     588        505        16.4     1,667        1,391        19.8
                                    

Total Passenger Revenue

     3,555        2,947        20.6     9,669        8,331        16.1

Cargo

     115        92        25.0     328        259        26.6

Other

     283        278        1.8     833        814        2.3
                                    

Total Operating Revenue

     3,953        3,317        19.2     10,830        9,404        15.2
                                    

Operating Expenses:

            

Aircraft fuel and related taxes

     984        881        11.7     2,806        2,507        11.9

Wages, salaries and related costs

     909        794        14.5     2,527        2,358        7.2

Aircraft rentals

     230        233        (1.3 %)      689        705        (2.3 %) 

Landing fees and other rentals

     228        222        2.7     656        647        1.4

Regional capacity purchase

     212        211        0.5     625        641        (2.5 %) 

Distribution costs

     193        160        20.6     555        467        18.8

Maintenance, materials and repairs

     131        159        (17.6 %)      413        473        (12.7 %) 

Depreciation and amortization

     124        124        0.0     380        353        7.6

Passenger services

     106        99        7.1     299        282        6.0

Special charges (a)

     2        20        NM        18        68        NM   

Merger-related costs (b)

     11        0        NM        29        0        NM   

Other

     382        353        8.2     1,114        1,050        6.1
                                    

Total Operating Expenses

     3,512        3,256        7.9     10,111        9,551        5.9
                                    

Operating Income (Loss)

     441        61        NM        719        (147     NM   
                                    

Nonoperating Income (Expense):

            

Interest expense

     (102     (91     12.1     (288     (274     5.1

Interest capitalized

     5        8        (37.5 %)      17        25        (32.0 %) 

Interest income

     2        2        0.0     6        10        (40.0 %) 

Other, net

     8        2        NM        (12     19        NM   
                                    

Total Nonoperating Income (Expense)

     (87     (79     10.1     (277     (220     25.9
                                    

Income (Loss) before Income Taxes

     354        (18     NM        442        (367     NM   

Income Taxes (c)

     0        0        NM        (1     0        NM   
                                    

Net Income (Loss)

   $ 354      ($ 18     NM      $ 441      ($ 367     NM   
                                    

Earnings per share, basic

   $ 2.52      ($ 0.14     NM      $ 3.16      ($ 2.91     NM   

Earnings per share, diluted

   $ 2.16      ($ 0.14     NM      $ 2.81      ($ 2.91     NM   

Weighted average shares, basic

     140        132        6.1     140        126        11.1

Weighted average shares, diluted

     167        132        26.5     167        126        32.5

 

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

 

CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES (UNAUDITED)

 

(a) Operating Expenses: Special Charges. Includes the following (in millions):

 

     Three Months
Ended September 30,
     %
Increase/
    

Nine Months

Ended September 30,

     %
Increase/
 
     2010      2009      (Decrease)      2010      2009      (Decrease)  

Aircraft-related charges, net

   $ 0       $ 6         NM       $ 6       $ 53         NM   

Severance and other

     2         14         NM         12         15         NM   
                                         

Total special charges

   $ 2       $ 20         NM       $ 18       $ 68         NM   

2010. In the nine months ended September 30, 2010, the company recorded $6 million of aircraft-related charges related to grounded Boeing 737-300 aircraft, net of gains on two 737-500 aircraft sold to a foreign buyer. Severance and other special charges in the nine months ended September 30, 2010 include severance charges of $3 million related to the elimination of approximately 600 reservation positions and other special charges of $9 million primarily related to an adjustment to a reserve for unused facilities due to reductions in expected sublease income for a maintenance hangar in Denver.

2009. During the third quarter of 2009, the company subleased five grounded EMB-135 aircraft resulting in aircraft-related charges of $6 million representing the difference between the sublease rental income and the contracted rental payments on those aircraft. Severance and other during the third quarter of 2009 represents a charge of $5 million for severance and other costs in connection with reductions in force, furloughs and leaves of absence and a $9 million adjustment to increase a reserve for unused facilities due to reductions in expected sublease income primarily for a maintenance hangar in Denver. Aircraft-related charges in 2009 prior to the third quarter include $31 million of non-cash impairments on owned Boeing 737-300 and 737-500 aircraft and related assets and $16 million of other charges ($12 million of which was non-cash) related to the grounding and disposition of Boeing 737-300 aircraft and the write-off of certain obsolete spare parts.

 

(b) Merger-related costs of $11 million and $29 million in the three and nine months ended September 30, 2010, respectively, relating to financial advisor, legal, accounting and consultant fees and communication and integration costs.

 

(c) Effective tax rates differ from the federal statutory rate of 35% primarily due to the following: changes in the valuation allowance, expenses that are not deductible for federal income tax purposes and state income taxes. We are required to provide a valuation allowance for our deferred tax assets in excess of deferred tax liabilities because the company concluded that it is more likely than not that such deferred tax assets will ultimately not be realized. As a result, pre-tax losses for the three and nine months ended September 30, 2009 were not reduced by any tax benefit. No federal income tax expense was recorded related to pretax income for the three and nine months ended September 30, 2010 due to the utilization of book net operating losses for which no benefit had previously been recognized.

 

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

 

CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES (UNAUDITED)

 

     Three Months
Ended September 30,
    %
Increase/
    Nine Months
Ended September 30,
    %
Increase/
 
     2010     2009     (Decrease)     2010     2009     (Decrease)  

Mainline Average Price per Gallon of Jet Fuel (cents)

            

Average price per gallon of jet fuel (in cents)

     221.2        199.1        11.1     220.7        196.9        12.1

Less: Fuel hedge impacts (a)

     (3.7     (9.3     (60.2 %)      (1.8     (31.1     (94.2 %) 
                                    

Average price per gallon of jet fuel excluding fuel hedge impacts (b)

     217.5        189.8        14.6     218.9        165.8        32.0
                                    

 

(a) Both the cost and availability of fuel are subject to many economic and political factors and are therefore beyond the company’s control.
(b) These financial measures provide management and investors the ability to measure and monitor Continental’s performance on a consistent basis.

 

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

 

CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES (UNAUDITED)

 

     Three Months Ended
September 30,
 
     2010     2009  

Consolidated Operating Expenses (in millions)

   $ 3,512      $ 3,256   

Special Items (a):

    

Impairments

     0        0   

Special items and other charges

     (2     (20

Merger-related costs

     (11     0   

Non-cash net fuel MTM impact

     0        0   
                

Adjusted consolidated operating expenses, excluding special items

   $ 3,499      $ 3,236   

Fuel Expense

     (984     (881

Profit sharing programs including taxes

     (58     0   
                

Adjusted consolidated operating expenses, excluding fuel, profit- sharing programs and special items

   $ 2,457      $ 2,355   
                
     Three Months Ended
September 30,
 
     2010     2009  

Net Income /(Loss) (in millions)

   $ 354      $ (18

Special items:

    

Impairments

     0        0   

Special charges (net of tax of $0)

     2        20   

Merger-related costs (net of tax of $0)

     11        0   

Less: income tax benefit

     0        0   
                

Adjusted Net Income / (Loss) (a)

   $ 367      $ 2   
                
     Three Months Ended
September 30,
 
     2010     2009  

Earnings per Share

    

Diluted earnings per share

   $ 2.16      $ (0.14

Special items:

    

Impairments

     0.00        0.00   

Special charges

     0.01        0.16   

Merger-related costs

     0.07        0.00   

Less: income tax benefit

     0.00        0.00   
                

Adjusted earnings per share (a)

   $ 2.24      $ 0.02   
                

 

(a) These financial measures provide management and investors the ability to measure and monitor Continental’s performance on a consistent basis.

 

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

 

CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

 

     Three Months
Ended September 30,
    %
Increase/
    Nine Months
Ended September 30,
    %
Increase/
 
     2010     2009     (Decrease)     2010     2009     (Decrease)  

CASM Mainline Operations (cents)

            

Cost per available seat mile (CASM)

     11.27        10.41        8.3     11.29        10.60        6.5

Less: Special items

     (0.05     (0.05     NM        (0.06     (0.08     NM   
                                    

CASM, excluding special items (a)

     11.22        10.36        8.3     11.23        10.52        6.7

Less: Fuel cost per available seat mile (b)

     (3.16     (2.85     10.9     (3.14     (2.82     11.3
                                    

CASM, excluding special items and fuel (a)

     8.06        7.51        7.3     8.09        7.70        5.1

Less: profit sharing cost per available seat mile

     (0.22     0.00        NM        (0.10     0.00        NM   
                                    

CASM, excluding special items, fuel and profit sharing (a)

     7.84        7.51        4.4     7.99        7.70        3.8

Add: Profit sharing held constant to prior year expense per available seat mile

     0.00        0.00        NM        0.00        0.00        NM   

Add: Current year fuel cost at prior year fuel price per available seat mile (b)

     2.84        0.00        NM        2.80        0.00        NM   

Add: Prior year fuel cost per available seat mile (b)

     0.00        2.85        NM        0.00        2.82        NM   
                                    

CASM, holding fuel rate and profit sharing constant and excluding special items (a)

     10.68        10.36        3.1     10.79        10.52        2.6
                                    
     Three Months
Ended September 30,
    %
Increase/
    Nine Months
Ended September 30,
    %
Increase/
 
     2010     2009     (Decrease)     2010     2009     (Decrease)  

CASM Consolidated Operations (cents)

            

Cost per available seat mile (CASM)

     12.06        11.25        7.2     12.13        11.47        5.8

Less: Special items

     (0.04     (0.07     NM        (0.06     (0.08     NM   
                                    

CASM, excluding special items (a)

     12.02        11.18        7.5     12.07        11.39        6.0

Less: Fuel cost per available seat mile (b)

     (3.38     (3.05     10.8     (3.37     (3.01     12.0
                                    

CASM, excluding special items and fuel (a)

     8.64        8.13        6.3     8.70        8.38        3.8

Less: Profit sharing cost per available seat mile

     (0.20     0.00        NM        (0.09     0.00        NM   
                                    

CASM, excluding special items, fuel and profit sharing (a)

     8.44        8.13        3.8     8.61        8.38        2.7

Add: Profit sharing held constant to prior year expense per available seat mile

     0.00        0.00        NM        0.00        0.00        NM   

Add: Current year fuel cost at prior year fuel price per available seat mile (b)

     3.04        0.00        NM        3.00        0.00        NM   

Add: Prior year fuel cost per available seat mile (b)

     0.00        3.05        NM        0.00        3.01        NM   
                                    

CASM, holding fuel rate and profit sharing constant and excluding special items (a)

     11.48        11.18        2.7     11.61        11.39        1.9
                                    

 

(a) These financial measures provide management and investors the ability to measure and monitor Continental’s performance on a consistent basis.
(b) Both the cost and availability of fuel are subject to many economic and political factors and are therefore beyond the company’s control.

 

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

 

CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES

STATISTICS

 

    

Three Months

Ended September 30,

    %
Increase/
   

Nine Months

Ended September 30,

    %
Increase/
 
     2010     2009     (Decrease)     2010     2009     (Decrease)  

Mainline Operations:

            

Passengers (thousands)

     11,914        12,181        (2.2 %)      34,087        34,619        (1.5 %) 

Revenue passenger miles (millions)

     22,476        22,127        1.6     62,278        60,589        2.8

Available seat miles (millions)

     25,961        25,803        0.6     74,147        74,119        0.0

Cargo ton miles (millions)

     277        245        13.1     825        664        24.2

Passenger load factor:

            

Mainline

     86.6     85.8     0.8  pts.      84.0     81.7     2.3  pts. 

Domestic

     87.0     87.9     (0.9)  pts.      85.2     84.9     0.3  pts. 

International

     86.2     83.7     2.5  pts.      82.9     78.8     4.1  pts. 

Passenger revenue per available seat mile (cents)

     11.43        9.46        20.8     10.79        9.36        15.3

Total revenue per available seat mile (cents)

     12.92        10.84        19.2     12.32        10.75        14.6

Average yield per revenue passenger mile (cents)

     13.20        11.04        19.6     12.85        11.45        12.2

Average fare per passenger

   $ 252.23      $ 202.87        24.3   $ 237.34      $ 202.62        17.1

Cost per available seat mile (CASM) (cents):

            

CASM (a)

     11.27        10.41        8.3     11.29        10.60        6.5

CASM, excluding special items and fuel (b)

     8.06        7.51        7.3     8.09        7.70        5.1

CASM, excluding special items, fuel and profit sharing (b)

     7.84        7.51        4.4     7.99        7.70        3.8

CASM, holding fuel rate and profit sharing constant and excluding special items (b)

     10.68        10.36        3.1     10.79        10.52        2.6

Average price per gallon of jet fuel (cents) (c)

     221.2        199.1        11.1     220.7        196.9        12.1

Average price per gallon of jet fuel excluding fuel hedge impacts (b)(c)

     217.5        189.8        14.6     218.9        165.8        32.0

Fuel gallons consumed (millions)

     370        369        0.3     1,054        1,061        (0.7 %) 

Aircraft in fleet at end of period (d)

     348        338        3.0     348        338        3.0

Average stage length (miles) (e)

     1,836        1,783        3.0     1,793        1,730        3.6

Average daily utilization of each aircraft (hours)

     10:47        11:06        (2.9 %)      10:43        10:45        (0.2 %) 

 

(a) Includes impact of special charges and merger-related costs.
(b) See “NON-GAAP FINANCIAL MEASURES.”
(c) Fuel price per gallon includes aircraft fuel and related taxes.
(d) Excludes three grounded 737-300 aircraft and five grounded 737-500 aircraft at September 30, 2010.
(e) Average stage length equals the average distance a seat travels adjusted for size of aircraft (available seat miles/seats).

 

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UNITED CONTINENTAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER RESULTS/Page

 

CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES

STATISTICS (cont’d)

 

 

     Three Months
Ended September 30,
    %
Increase/
    Nine Months
Ended September 30,
    %
Increase/
 
     2010     2009     (Decrease)     2010     2009     (Decrease)  

Regional Operations:

            

Passengers (thousands)

     4,673        4,614        1.3     13,335        12,932        3.1

Revenue passenger miles (millions)

     2,539        2,490        2.0     7,287        6,984        4.3

Available seat miles (millions)

     3,147        3,130        0.5     9,218        9,145        0.8

Passenger load factor

     80.7     79.6     1.1  pts.      79.0     76.4     2.6  pts. 

Passenger revenue per available seat mile (cents)

     18.69        16.14        15.8     18.09        15.22        18.9

Average yield per revenue passenger mile (cents)

     23.17        20.29        14.2     22.88        19.93        14.8

Aircraft in fleet at end of period (a)

     252        266        (5.3 %)      252        266        (5.3 %) 

Average stage length (miles) (b)

     527        518        1.7     529        519        1.9

Consolidated Operations (Mainline and Regional):

            

Passengers (thousands)

     16,587        16,795        (1.2 %)      47,422        47,551        (0.3 %) 

Revenue passenger miles (millions)

     25,015        24,617        1.6     69,565        67,573        2.9

Available seat miles (millions)

     29,108        28,933        0.6     83,365        83,264        0.1

Passenger load factor

     85.9     85.1     0.8  pts.      83.4     81.2     2.2  pts. 

Passenger revenue per available seat mile (cents)

     12.21        10.19        19.8     11.60        10.01        15.9

Total revenue per available seat miles (cents)

     13.58        11.46        18.5     12.99        11.29        15.1

Average yield per revenue passenger mile (cents)

     14.21        11.97        18.7     13.90        12.33        12.7

CASM (c)

     12.06        11.25        7.2     12.13        11.47        5.8

CASM, excluding special items and fuel (d)

     8.64        8.13        6.3     8.70        8.38        3.8

CASM, excluding special items, fuel and profit sharing (d)

     8.44        8.13        3.8     8.61        8.38        2.7

CASM, holding fuel rate and profit sharing constant and excluding special items (d)

     11.48        11.18        2.7     11.61        11.39        1.9

Average price per gallon of jet fuel (cents) (e)

     221.1        199.0        11.1     220.7        196.5        12.3

Fuel gallons consumed (millions)

     445        443        0.5     1,271        1,276        (0.4 %) 

Average full-time equivalent employees

     38,900        39,930        (2.6 %)      39,020        40,165        (2.9 %) 

Cash Flow ($ millions)

            

Operating cash flow

     306        (172     NM        1,307        187        NM   

Capital expenditures

     (98     (154     (36.4 %)      (246     (301     (18.3 %) 

Aircraft purchase deposits refunded, net

     94        25        NM        10        42        (76.2 %) 

 

(a) Consists of flights operated under capacity purchase agreements with Continental’s regional carriers ExpressJet, Colgan, Chautauqua and CommutAir. Excludes 25 EMB-135 aircraft that are temporarily grounded and 38 ERJ-145 aircraft and five EMB-135 aircraft subleased to other operators but are not operated on the company’s behalf at September 30, 2010.
(b) Average stage length equals the average distance a seat travels adjusted for size of aircraft (available seat miles/seats).
(c) Includes impact of special charges and merger-related costs.
(d) See “NON-GAAP FINANCIAL MEASURES.”
(e) Fuel price per gallon includes aircraft fuel and related taxes.

 

###

United Continental Holdings, Inc. Investor Update dated October 21, 2010

Exhibit 99.2

LOGO

Issue Date: October 21, 2010

Investor Update

This investor update provides forward-looking information about United Continental Holdings, Inc. (“the Company” or “UAL”) for the fourth quarter and full year 2010. Also included are certain historical quarterly pro forma operating statements and statistics for the combined company based on preliminary estimates filed with the SEC in the proxy statement filed on August 18, 2010, which assume that the merger closed January 1, 2009. In mid-November, the Company expects to complete its review of purchase accounting adjustments related to the merger and to complete its review of the classification of certain items on its income statement. After the Company completes these reviews, it will release pro forma combined quarterly income statements for year-to-date 2010 and 2009 based upon the updated purchase accounting adjustments and the determination of classification of certain items on its income statement.

Combined Company (United and Continental) Outlook Highlights

based on preliminary pro forma purchase accounting adjustments

Capacity

Fourth quarter 2010 consolidated available seat miles (ASMs) are expected to be up 3.0% to 4.0% year-over year. Full year 2010 consolidated ASMs are estimated to be up 0.8% to 1.1%.

Non-Fuel Expenses

Fourth quarter consolidated cost per ASM (CASM), excluding fuel, profit sharing, certain accounting charges and merger-related expenses for the combined Company are expected to be up 2.5% to 3.5%. For the full year, the Company estimates consolidated CASM excluding fuel, profit sharing, certain accounting charges and merger-related expenses will be up 2.6% to 2.9%.

The Company expects to implement a revenue share structure for its trans-Atlantic joint venture during the fourth quarter 2010, which will be retroactive to January 1, 2010. The Company will account for the revenue sharing obligations for the first nine months of 2010 related to this revenue sharing agreement as other operating expense in the fourth quarter. The Company estimates the impact of this obligation to be approximately $100 million, which accounts for 2 points of year over year growth in Consolidated CASM excluding fuel in the fourth quarter and is included in its guidance. This estimated revenue sharing payment is substantially less than the additional passenger revenue United and Continental receive from the joint marketing, scheduling and pricing efforts of the joint venture. Going forward, related revenue share payments will be booked as an adjustment to passenger revenue.

Fuel Expense

The Company estimates its consolidated fuel price, including the impact of settled hedges, to be $2.40 per gallon for the fourth quarter and $2.31 per gallon for the full year.

Profit Sharing

United and Continental have separate employee profit sharing plans for the employees of each respective subsidiary. The Company’s profit sharing plan for United pays 15% of total GAAP pre-tax profits, excluding special items and stock compensation expense, to the employees of United when pre-tax profit excluding special items and stock compensation expense exceeds $10 million. The Company currently expects the stock expense for United to be $28 million in the fourth quarter, and $58 million for the full year.

The Company’s profit sharing plan for Continental creates an award pool of 15% of annual pre-tax income excluding special, unusual or non-recurring items.

For both United and Continental, profit sharing expense is accrued on a year-to-date basis.

Non-Operating Income/Expense

Non-operating expense for the Company is estimated to be between $250 million and $260 million for the fourth quarter, and between $975 million and $985 million for the full year. Non-operating income/(expense) includes interest expense, capitalized interest, interest income and other non-operating income/(expense).

Net Capital Expenditures and Scheduled Debt and Capital Lease Payments

The Company expects a total of $260 million of net capital expenditures in the fourth quarter and $760 million for the full year. The Company expects scheduled debt and capital lease payments of $540 million in the fourth quarter for a total of $2,030 million debt payments for the year, including the prepayment of $350 million Continental secured term loan and $140 million in prepayments of United debt in the third quarter.

Liquidity

The Company expects to end the year with an unrestricted cash, cash equivalents and short-term investments balance of approximately $8.4 billion.


LOGO

 

 

Combined Company Outlook

based on preliminary pro forma purchase accounting adjustments

Advanced Booked Seat Factor (Percentage of Available Seats that are Sold)

Compared to the same period last year, for the next six weeks, mainline domestic advanced booked seat factor is up 1.2 points, mainline international advanced booked seat factor is down 1.2 points, mainline Latin advanced booked seat factor is down 4.3 points, Atlantic advanced booked seat factor is down 3.1 points, Pacific advanced booked seat factor is up 4.8 points, and Regional advanced booked seat factor is up 0.9 points.

 

                                            PRO-FORMA  
     Estimated
Fourth Quarter
2010
     Year-Over-Year
% Change
Higher/(Lower)
    Estimated
Full Year
2010
     Year-Over-Year
% Change
Higher/(Lower)
 

Capacity (Million ASMs)

                              

Mainline Capacity

                              

Domestic Capacity

     28,086        -        28,369         (1.1 )%      -        (0.1 )%      114,369        -         114,652         (2.4 )%      -         (2.2 )% 

Latin America Capacity

     4,505        -         4,547         7.5     -         8.5     19,233        -         19,275         4.8     -         5.0

Atlantic Capacity

     11,670        -         11,778         9.0     -         10.0     48,117        -         48,225         2.0     -         2.2

Pacific Capacity

     9,429        -         9,519         5.0     -         6.0     37,752        -         37,842         0.9     -         1.2

Total Mainline Capacity

     53,690        -         54,213         2.7     -         3.7     219,471        -         219,994         (0.3 )%      -         (0.1 )% 

Regional Affiliates Capacity*

     8,028        -         8,104         5.1     -         6.1     32,913        -         32,989         9.3     -         9.5

Consolidated Capacity

                              

Domestic Capacity

     35,728        -         36,087         (0.2 )%      -         0.8     145,749        -         146,108         (0.3 )%      -         (0.1 )% 

International Capacity

     25,990        -         26,230         7.7     -         8.7     106,635        -         106,875         2.5     -         2.7

Total Consolidated Capacity

     61,718        -         62,317         3.0     -         4.0     252,384        -         252,983         0.8     -         1.1

Traffic (Million RPMs)

                              

Mainline System Traffic

                              

Domestic System Traffic

                              

Latin America System Traffic

                              

Atlantic Load System Traffic

     Fourth Quarter Traffic Outlook To Be      

Pacific Load System Traffic

     Provided Later In The Quarter      

Total Mainline System Traffic

                              

Regional Affiliates System Traffic*

                              

Consolidated System Traffic

                              

Domestic System Traffic

                              

International System Traffic

                              

Total Consolidated System Traffic

                              

Load Factor

                              

Mainline Load Factor

                              

Domestic Load Factor

                              

Latin America Load Factor

                              

Atlantic Load Factor

     Fourth Quarter Load Factor Outlook To Be      

Pacific Load Factor

     Provided Later In The Quarter      

Total Mainline Load Factor

                              

Regional Affiliates Load Factor*

                              

Consolidated Load Factor

                              

Domestic Load Factor

                              

International Load Factor

                              

Total Consolidated Load Factor

                              

 

* Regional Affiliates results only reflect flights operated under capacity purchase agreements and flights operated as part of our joint venture with Aer Lingus

 

2


LOGO

 

 

Combined Company Outlook

based on preliminary pro forma purchase accounting adjustments

 

                                           PRO-FORMA  
     Estimated
Fourth Quarter
2010
    Year-Over-Year
% Change
Higher/(Lower)
    Estimated
Full Year
2010
    Year-Over-Year
% Change
Higher/(Lower)
 

Revenue

                            

Mainline Passenger Unit Revenue (¢/ASM)

                            

Regional Affilliate Passenger Unit Revenue (¢/ASM)

            Fourth Quarter Revenue Outlook To Be          

Consolidated Passenger Unit Revenue (¢/ASM)

            Provided Later In The Quarter          

Mainline Passenger Unit Revenue (¢/ASM)

                            

Cargo, Mail and Other Revenue

                            

Operating Expenses*

                            

Mainline Unit Cost Excluding Profit Sharing and Non-Cash Net Mark-to-Market Impacts (¢/ASM)

     12.10        -         12.18        7.2%        -         8.0%        11.48        -         11.50        7.4%        -         7.6%   

Regional Affiliates Unit Cost (¢/ASM)

     18.01        -         18.13        3.0%        -         3.7%        17.55        -         17.57        4.3%        -         4.4%   

Consolidated Unit Cost Excluding Profit Sharing and Non-Cash Net Mark-to-Market Impacts (¢/ASM)

     12.86        -         12.95        6.7%        -         7.4%        12.30        -         12.32        7.6%        -         7.8%   

Non-Fuel Expense*

                            

Mainline Unit Cost Excluding Fuel and Profit Sharing (¢/ASM)

     8.45        -         8.53        3.0%        -         4.0%        8.02        -         8.04        3.1%        -         3.3%   

Regional Affiliates Unit Cost Excluding Fuel (¢/ASM)

     12.43        -         12.55        0.2%        -         1.2%        12.23        -         12.25        (2.2)%        -         (2.1)%   

Consolidated Unit Cost Excluding Fuel and Profit Sharing (¢/ASM)

     8.96        -         9.05        2.5%        -         3.5%        8.57        -         8.59        2.6%