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 17, 2016
UNITED CONTINENTAL HOLDINGS, INC.
UNITED AIRLINES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-06033 | 36-2675207 | ||
| Delaware | 001-10323 | 74-2099724 | ||
| (State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
| of incorporation) | Identification Number) |
| 233 S. Wacker Drive, Chicago, IL | 60606 | |
| 233 S. Wacker Drive, Chicago, IL | 60606 | |
| (Address of principal executive offices) | (Zip Code) |
(872) 825-4000
(872) 825-4000
Registrant’s telephone number, including area code
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On October 17, 2016, United Continental Holdings, Inc. (“UAL”), the holding company whose primary subsidiary is United Airlines, Inc. (“United,” and together with UAL, the “Company”), issued a press release announcing the financial results of the Company for third quarter 2016. The press release is attached as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, (the “Securities Act”) except as shall be expressly set forth by specific reference in such filing.
Item 7.01 Regulation FD Disclosure.
On October 17, 2016, UAL will provide an investor update related to the financial and operational outlook for the Company for fourth quarter and full year 2016. A copy of the investor update is attached as Exhibit 99.2 and is incorporated herein by reference.
The information in this Item 7.01, including Exhibit 99.2, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
| Exhibit |
Description | |
| 99.1* | Press Release issued by United Continental Holdings, Inc. dated October 17, 2016 | |
| 99.2* | Investor Update issued by United Continental Holdings, Inc. dated October 17, 2016 | |
| * | Furnished herewith electronically. |
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| UNITED CONTINENTAL HOLDINGS, INC. | ||||||
| UNITED AIRLINES, INC. | ||||||
| By: | /s/ Chris Kenny | |||||
| Name: | Chris Kenny | |||||
| Title: | Vice President and Controller | |||||
| Date: October 17, 2016 | ||||||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1* | Press Release issued by United Continental Holdings, Inc. dated October 17, 2016 | |
| 99.2* | Investor Update issued by United Continental Holdings, Inc. dated October 17, 2016 | |
| * | Furnished herewith electronically. |
Exhibit 99.1
|
|
United Airlines Reports
Third-Quarter 2016 Performance
Diluted EPS of $3.01; $3.11 excluding special items
Best third-quarter and year-to-date on-time performance in company history
CHICAGO, Oct. 17, 2016 – United Airlines (UAL) today announced its third-quarter 2016 financial results.
| • | UAL reported third-quarter net income of $965 million, diluted earnings per share of $3.01, pre-tax earnings of $1.5 billion and pre-tax margin of 15.2 percent. |
| • | Excluding special items, UAL reported third-quarter net income of $997 million, diluted earnings per share of $3.11, pre-tax earnings of $1.6 billion and pre-tax margin of 15.7 percent. |
| • | Flight attendants ratified a joint contract and the company reached a tentative agreement with technicians and related employees for a joint contract. |
“We delivered another very good quarter, demonstrating the progress United continues to make at improving our customer experience, which included our best third quarter on-time performance in company history,” said Oscar Munoz, chief executive officer of United Airlines. “As we execute our strategy to build the world’s best airline, we will remain intensely focused on engaging our employees, running a great operation and improving our financial performance.”
Third-Quarter Revenue
For the third quarter of 2016, total revenue was $9.9 billion, a decrease of 3.8 percent year-over-year. Third-quarter 2016 consolidated passenger revenue per available seat mile (PRASM) decreased 5.8 percent and consolidated yield decreased 5.7 percent compared to the third quarter of 2015. The decline in PRASM continues to be driven by factors including a strong U.S. dollar, lower surcharges, reductions from energy-related corporate travel, and declining yields.
Third-Quarter Costs
Total operating expense including special charges was $8.3 billion in the third quarter, down 1.4 percent year-over-year. Excluding special charges, total operating expense was $8.2 billion, a 1.0 percent improvement year-over-year. Consolidated unit cost (CASM) including special charges, third-party business
United Airlines Reports Third-Quarter 2016 Performance
expenses, fuel and profit sharing decreased 3.3 percent compared to the third quarter of 2015 due mainly to lower oil prices. Consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, increased 3.4 percent year-over-year driven largely by the impact of recently ratified labor agreements.
Liquidity and Capital Allocation
In the third quarter, UAL generated $1.1 billion in operating cash flow and ended the quarter with $6.2 billion in unrestricted liquidity, including $1.35 billion of undrawn commitments under its revolving credit facility. The company continued to invest in its business through capital expenditures of $689 million in the third quarter. Including assets acquired through the issuance of debt and airport construction financing and excluding fully reimbursable projects, the company invested $679 million in adjusted capital expenditures during the third quarter. Free cash flow, measured as operating cash flow less adjusted capital expenditures, was $459 million in the third quarter and $2.6 billion year-to-date.
For the 12 months ended Sept. 30, 2016, the company’s return on invested capital was 19.6 percent.
In the quarter, UAL purchased $255 million of its common shares, representing 1.5 percent of shares outstanding. Since the initial repurchase announcement in July 2014, the company has purchased $4.0 billion of its common shares, representing approximately 20 percent of shares outstanding. As of Sept. 30, 2016, the company had $2.0 billion remaining to purchase shares under its existing share repurchase authority.
For more information on UAL’s fourth-quarter 2016 guidance, please visit ir.united.com for the company’s investor update.
Third-Quarter Highlights
Operations and Employees
| • | Flight attendants ratified a joint contract covering 25,000 employees. |
| • | Reached a tentative agreement with technicians and related employees for a joint contract. |
| • | Achieved best September, third-quarter and year-to-date on-time performance in company history. |
| • | Employees earned cash-incentive payments of approximately $30 million for achieving operational performance goals in the quarter, marking ten straight months of bonus payouts. |
| • | Solidified the company’s executive leadership, bringing significant experience and expertise to the team. |
Network, Fleet and Customer Experience
| • | Raised $920 million in financing through an enhanced equipment trust certificate transaction at a blended interest rate of 2.94 percent. |
| • | Launched new international routes between San Francisco and Auckland, New Zealand; and between San Francisco and Hangzhou, China. |
| • | Announced the launch of service to Havana, Cuba from the company’s Newark and Houston hubs. |
2
United Airlines Reports Third-Quarter 2016 Performance
| • | Flew approximately 1,500 athletes, coaches and Team USA staff to the 2016 Rio Olympic and Paralympic Games as the company celebrated more than 35 years partnering with Team USA. |
| • | Took delivery of four new Boeing 737NG aircraft and one used Airbus A319 aircraft. |
| • | In the third quarter, United’s industry-leading mobile app surpassed more than 24 million downloads and 1 million visits per day. |
About United
United Airlines and United Express operate more than 4,500 flights a day to 339 airports across five continents. In 2015, United and United Express operated more than 1.5 million flights carrying more than 140 million customers. United is proud to have the world’s most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C. United operates more than 720 mainline aircraft, and this year, the airline anticipates taking delivery of 21 new Boeing aircraft, including 737NGs, 787s and 777s, as well as six used Airbus A319 aircraft. The airline is a founding member of Star Alliance, which provides service to 192 countries via 28 member airlines. For more information, visit united.com, follow @United on Twitter or connect on Facebook. The common stock of United’s parent, United Continental Holdings, Inc., is traded on the NYSE under the symbol UAL.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
Certain statements included in this 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 that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this release are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: our ability to comply with the terms of our various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our operational plans and revenue-generating initiatives, including optimizing our revenue; our ability to control our costs, including realizing benefits from our resource optimization efforts, cost reduction initiatives and fleet replacement programs; our ability to utilize our net operating losses; our ability to attract and retain customers; demand for transportation in the markets in which we operate; an outbreak of a disease that affects travel demand or travel behavior; demand for travel and the impact that global economic conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets); economic and political instability and other risks of doing business globally our ability to cost-effectively hedge against increases in the price of aircraft fuel; any potential realized or unrealized gains or losses related to fuel or currency hedging programs; the effects of any hostilities, act of war or terrorist attack; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; disruptions to our regional network the costs and availability of aviation and other insurance; industry consolidation or changes in airline alliances; competitive pressures on pricing and on demand; our capacity decisions and the capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation and other actions (including open skies agreements and environmental regulations); the impact of regulatory, investigative and legal proceedings and legal compliance risks; the impact of any management changes; labor costs; our ability to maintain satisfactory labor relations and the results of the collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; weather conditions; and other risks and uncertainties set forth under Part 1, Item 1A., Risk Factors, of UAL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission.
3
United Airlines Reports Third-Quarter 2016 Performance
-tables attached-
4
United Airlines Reports Third-Quarter 2016 Performance
UNITED CONTINENTAL HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
| Three Months Ended September 30, |
% Increase/ (Decrease) |
Nine Months Ended September 30, |
% Increase/ (Decrease) |
|||||||||||||||||||||
| (In millions, except per share data) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||
| Operating revenue: |
||||||||||||||||||||||||
| Passenger: (A) |
||||||||||||||||||||||||
| Mainline |
$ | 7,017 | $ | 7,254 | (3.3 | ) | $ | 19,119 | $ | 20,153 | (5.1 | ) | ||||||||||||
| Regional |
1,586 | 1,706 | (7.0 | ) | 4,577 | 4,903 | (6.6 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total passenger revenue |
8,603 | 8,960 | (4.0 | ) | 23,696 | 25,056 | (5.4 | ) | ||||||||||||||||
| Cargo |
224 | 235 | (4.7 | ) | 626 | 706 | (11.3 | ) | ||||||||||||||||
| Other operating revenue |
1,086 | 1,111 | (2.3 | ) | 3,182 | 3,066 | 3.8 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total operating revenue |
9,913 | 10,306 | (3.8 | ) | 27,504 | 28,828 | (4.6 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating expense: |
||||||||||||||||||||||||
| Salaries and related costs |
2,625 | 2,534 | 3.6 | 7,707 | 7,289 | 5.7 | ||||||||||||||||||
| Aircraft fuel (B) |
1,603 | 1,934 | (17.1 | ) | 4,258 | 5,904 | (27.9 | ) | ||||||||||||||||
| Regional capacity purchase |
572 | 572 | — | 1,645 | 1,725 | (4.6 | ) | |||||||||||||||||
| Landing fees and other rent |
546 | 551 | (0.9 | ) | 1,612 | 1,647 | (2.1 | ) | ||||||||||||||||
| Depreciation and amortization |
503 | 469 | 7.2 | 1,473 | 1,343 | 9.7 | ||||||||||||||||||
| Aircraft maintenance materials and outside repairs |
451 | 424 | 6.4 | 1,301 | 1,252 | 3.9 | ||||||||||||||||||
| Distribution expenses |
345 | 366 | (5.7 | ) | 987 | 1,026 | (3.8 | ) | ||||||||||||||||
| Aircraft rent |
168 | 185 | (9.2 | ) | 521 | 580 | (10.2 | ) | ||||||||||||||||
| Special charges (C) |
45 | 76 | NM | 669 | 195 | NM | ||||||||||||||||||
| Other operating expenses |
1,431 | 1,296 | 10.4 | 3,998 | 3,782 | 5.7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total operating expense |
8,289 | 8,407 | (1.4 | ) | 24,171 | 24,743 | (2.3 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating income |
1,624 | 1,899 | (14.5 | ) | 3,333 | 4,085 | (18.4 | ) | ||||||||||||||||
| Nonoperating income (expense): |
||||||||||||||||||||||||
| Interest expense |
(150 | ) | (164 | ) | (8.5 | ) | (466 | ) | (504 | ) | (7.5 | ) | ||||||||||||
| Interest capitalized |
20 | 13 | 53.8 | 48 | 38 | 26.3 | ||||||||||||||||||
| Interest income |
14 | 5 | 180.0 | 31 | 16 | 93.8 | ||||||||||||||||||
| Miscellaneous, net (C) |
2 | (147 | ) | NM | (11 | ) | (321 | ) | (96.6 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total nonoperating expense |
(114 | ) | (293 | ) | (61.1 | ) | (398 | ) | (771 | ) | (48.4 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Income before income taxes |
1,510 | 1,606 | (6.0 | ) | 2,935 | 3,314 | (11.4 | ) | ||||||||||||||||
| Income tax expense (benefit) (D) |
545 | (3,210 | ) | NM | 1,069 | (3,203 | ) | NM | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net income |
$ | 965 | $ | 4,816 | (80.0 | ) | $ | 1,866 | $ | 6,517 | (71.4 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Earnings per share, diluted |
$ | 3.01 | $ | 12.82 | (76.5 | ) | $ | 5.57 | $ | 17.15 | (67.5 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weighted average shares, diluted |
321 | 376 | (14.6 | ) | 335 | 380 | (11.8 | ) | ||||||||||||||||
| Pre-tax margin |
15.2 | % | 15.6 | % | (0.4) pts. | 10.7 | % | 11.5 | % | (0.8) pts. | ||||||||||||||
| Pre-tax margin, excluding special items (C) |
15.7 | % | 16.6 | % | (0.9) pts. | 13.1 | % | 12.3 | % | 0.8 pts. | ||||||||||||||
NM Not meaningful
5
United Airlines Reports Third-Quarter 2016 Performance
UNITED CONTINENTAL HOLDINGS, INC.
NOTES (UNAUDITED)
(A) Select passenger revenue information is as follows (in millions):
| 3Q 2016 Passenger Revenue (millions) |
Passenger Revenue vs. 3Q 2015 |
PRASM vs. 3Q 2015 |
Yield vs. 3Q 2015 |
Available Seat Miles vs. 3Q 2015 |
||||||||||||||||
| Domestic |
$ | 3,582 | (0.9 | %) | (4.9 | %) | (3.9 | %) | 4.2 | % | ||||||||||
| Atlantic |
1,619 | (9.7 | %) | (10.7 | %) | (7.6 | %) | 1.2 | % | |||||||||||
| Pacific |
1,168 | (2.6 | %) | (4.1 | %) | (7.5 | %) | 1.6 | % | |||||||||||
| Latin America |
648 | 0.3 | % | (1.3 | %) | (4.4 | %) | 1.6 | % | |||||||||||
|
|
|
|||||||||||||||||||
| International |
3,435 | (5.6 | %) | (6.9 | %) | (7.2 | %) | 1.4 | % | |||||||||||
| Mainline |
7,017 | (3.3 | %) | (5.9 | %) | (5.5 | %) | 2.8 | % | |||||||||||
| Regional |
1,586 | (7.0 | %) | (3.2 | %) | (3.9 | %) | (3.9 | %) | |||||||||||
|
|
|
|||||||||||||||||||
| Consolidated |
$ | 8,603 | (4.0 | %) | (5.8 | %) | (5.7 | %) | 2.0 | % | ||||||||||
|
|
|
|||||||||||||||||||
6
United Airlines Reports Third-Quarter 2016 Performance
UNITED CONTINENTAL HOLDINGS, INC.
NOTES (UNAUDITED)
(B) UAL’s results of operations include fuel expense for both mainline and regional operations.
| Three Months Ended September 30, |
% Increase/ (Decrease) |
Nine Months Ended September 30, |
% Increase/ (Decrease) |
|||||||||||||||||||||
| (In millions, except per gallon) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||
| Mainline fuel expense excluding hedge impacts |
$ | 1,319 | $ | 1,483 | (11.1 | ) | $ | 3,370 | $ | 4,527 | (25.6 | ) | ||||||||||||
| Hedge losses reported in fuel expense (a) |
(24 | ) | (150 | ) | NM | (197 | ) | (429 | ) | NM | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total mainline fuel expense |
1,343 | 1,633 | (17.8 | ) | 3,567 | 4,956 | (28.0 | ) | ||||||||||||||||
| Regional fuel expense |
260 | 301 | (13.6 | ) | 691 | 948 | (27.1 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Consolidated fuel expense |
1,603 | 1,934 | (17.1 | ) | 4,258 | 5,904 | (27.9 | ) | ||||||||||||||||
| Cash paid on settled hedges that did not qualify for hedge accounting (b) |
— | (100 | ) | NM | (5 | ) | (214 | ) | NM | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Fuel expense including all losses from settled hedges |
$ | 1,603 | $ | 2,034 | (21.2 | ) | $ | 4,263 | $ | 6,118 | (30.3 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Mainline fuel consumption (gallons) |
889 | 862 | 3.1 | 2,457 | 2,432 | 1.0 | ||||||||||||||||||
| Mainline average aircraft fuel price per gallon |
$ | 1.51 | $ | 1.89 | (20.1 | ) | $ | 1.45 | $ | 2.04 | (28.9 | ) | ||||||||||||
| Mainline average aircraft fuel price per gallon excluding hedge losses recorded in fuel expense |
$ | 1.48 | $ | 1.72 | (14.0 | ) | $ | 1.37 | $ | 1.86 | (26.3 | ) | ||||||||||||
| Mainline average aircraft fuel price per gallon including cash paid on settled hedges that did not qualify for hedge accounting |
$ | 1.51 | $ | 2.01 | (24.9 | ) | $ | 1.45 | $ | 2.13 | (31.9 | ) | ||||||||||||
| Regional fuel consumption (gallons) |
168 | 173 | (2.9 | ) | 485 | 503 | (3.6 | ) | ||||||||||||||||
| Regional average aircraft fuel price per gallon |
$ | 1.55 | $ | 1.74 | (10.9 | ) | $ | 1.42 | $ | 1.88 | (24.5 | ) | ||||||||||||
| Consolidated fuel consumption (gallons) |
1,057 | 1,035 | 2.1 | 2,942 | 2,935 | 0.2 | ||||||||||||||||||
| Consolidated average aircraft fuel price per gallon |
$ | 1.52 | $ | 1.87 | (18.7 | ) | $ | 1.45 | $ | 2.01 | (27.9 | ) | ||||||||||||
| Consolidated average aircraft fuel price per gallon excluding hedge losses recorded in fuel expense |
$ | 1.49 | $ | 1.72 | (13.4 | ) | $ | 1.38 | $ | 1.87 | (26.2 | ) | ||||||||||||
| Consolidated average aircraft fuel price per gallon including cash paid on settled hedges that did not qualify for hedge accounting |
$ | 1.52 | $ | 1.97 | (22.8 | ) | $ | 1.45 | $ | 2.08 | (30.3 | ) | ||||||||||||
| (a) | Includes losses from settled hedges that were designated for hedge accounting. UAL allocates 100 percent of hedge accounting gains (losses) to mainline fuel expense. |
| (b) | Includes ineffectiveness losses on settled hedges and losses on settled hedges that were not designated for hedge accounting. Ineffectiveness gains (losses) and gains (losses) on hedges that do not qualify for hedge accounting are recorded in Nonoperating income (expense): Miscellaneous, net. |
7
United Airlines Reports Third-Quarter 2016 Performance
UNITED CONTINENTAL HOLDINGS, INC.
NOTES (UNAUDITED)
(C) Special items include the following:
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| (In millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Operating: |
||||||||||||||||
| Labor agreement costs |
$ | 14 | $ | — | $ | 124 | $ | — | ||||||||
| Severance and benefit costs |
13 | 28 | 27 | 103 | ||||||||||||
| Impairment of intangible asset related to Newark Liberty International Airport (Newark) slots |
— | — | 412 | — | ||||||||||||
| Cleveland airport lease restructuring |
— | — | 74 | — | ||||||||||||
| (Gains) losses on sale of assets and other special charges |
18 | 48 | 32 | 92 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Special charges |
45 | 76 | 669 | 195 | ||||||||||||
| Nonoperating and income taxes: |
||||||||||||||||
| Losses on extinguishment of debt and other |
— | 61 | (1 | ) | 195 | |||||||||||
| Income tax benefit related to special charges |
(16 | ) | — | (241 | ) | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating and nonoperating special charges, net of income taxes |
29 | 137 | 427 | 390 | ||||||||||||
| Income tax valuation allowance release (D) |
— | (3,218 | ) | — | (3,218 | ) | ||||||||||
| Mark-to-market (MTM) losses from fuel derivative contracts settling in future periods |
— | 36 | — | 28 | ||||||||||||
| Prior period gains (losses) on fuel derivative contracts settled in the current period |
3 | (69 | ) | 2 | (173 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total special items, net of income taxes |
$ | 32 | $ | (3,114 | ) | $ | 429 | $ | (2,973 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
2016 - Special items
Labor agreement costs: The fleet service, passenger service, storekeeper and other employees represented by the Int’l Association of Machinists and Aerospace Workers (IAM) ratified seven new contracts with the company which extended the contracts through 2021. The company also reached a tentative agreement with the Int’l Brotherhood of Teamsters (IBT). During the three and nine months ended September 30, 2016, the company recorded $61 million ($39 million net of taxes) and $171 million ($109 million net of taxes), respectively, of special charges primarily for payments to be made in conjunction with the IAM and IBT agreements described above. Also, as part of the recently ratified contract with the Association of Flight Attendants, the company amended two of its flight attendant postretirement medical plans. The amendments triggered curtailment accounting, resulting in the recognition of a one-time $47 million gain ($30 million net of taxes) for accelerated recognition of a prior service credit.
Severance and benefit costs: During the three and nine months ended September 30, 2016, the company recorded $13 million ($8 million net of taxes) and $27 million ($17 million net of taxes), respectively, of severance and benefit costs related to a voluntary early-out program for the company’s flight attendants and other severance agreements. In 2014, more than 2,500 flight attendants elected to voluntarily separate from the company for a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through the end of 2016.
Impairment of intangible asset related to Newark slots: In April 2016, the Federal Aviation Administration (FAA) announced that it will designate Newark as a Level 2 schedule-facilitated airport under the International Air Transport Association Worldwide Slot Guidelines effective October 30, 2016. The designation was associated with an updated demand and capacity analysis of Newark by the FAA. In the second quarter of 2016, the company determined that the FAA’s action impaired the entire value of its Newark slots because the slots will no longer be the mechanism that governs take-off and landing rights. Accordingly, the company recorded a $412 million special charge ($264 million net of taxes) to write off the intangible asset. The Newark slots served as part of the collateral for the term loans under the company’s Credit Agreement and under the Second Amended and Restated Co-Branded Card Marketing Services Agreement with Chase Bank USA, N.A. (the Chase Agreement). The Credit Agreement and the Chase Agreement have been amended to remove the Newark slots as collateral with no replacement collateral required.
Cleveland airport lease restructuring: During the nine months ended September 30, 2016, the City of Cleveland agreed to amend the lease, which runs through 2029, associated with certain excess airport terminal space (principally Terminal D) and related facilities at Hopkins International Airport. The company recorded an accrual for remaining payments under the lease for facilities that the company no longer uses and will continue to incur costs under the lease without economic benefit to the company. This liability was measured and recorded at its fair value when the company ceased its right to use such facilities leased to it pursuant to the lease. The company recorded a net charge of $74 million ($47 million net of taxes) related to the amended lease.
8
United Airlines Reports Third-Quarter 2016 Performance
(Gains) losses on sale of assets and other special charges: During the three and nine months ended September 30, 2016, the company recorded gains and losses on sale of assets and other special charges of $18 million ($12 million net of taxes) and $32 million ($20 million net of taxes), respectively.
Nonoperating losses on extinguishment of debt and other: During the nine months ended September 30, 2016, the company recorded $8 million ($5 million net of taxes) of losses due to exchange rate changes in Venezuela applicable to funds held in local currency and recorded a $9 million ($6 million net of taxes) gain on the sale of an affiliate.
MTM losses from fuel derivative contracts settling in future periods and prior period gains on fuel derivative contracts settled in the current period: The company uses certain combinations of derivative contracts that are economic hedges but do not qualify for hedge accounting under U.S. generally accepted accounting principles. Additionally, the company may enter into contracts at different times and later combine those contracts into structures designated for hedge accounting. As with derivatives that qualify for hedge accounting, the economic hedges and individual contracts are part of the company’s program to mitigate the adverse financial impact of potential increases in the price of fuel. The company records changes in the fair value of these various contracts that are not designated for hedge accounting to Nonoperating income (expense): Miscellaneous, net in the statements of consolidated operations. During the three and nine months ended September 30, 2016, the company did not record any MTM gains or losses on fuel derivative contracts that will settle in future periods. For fuel derivative contracts that settled in the three and nine months ended September 30, 2016, the company recorded MTM gains of $3 million and $2 million, respectively, in prior periods.
2015 - Special items
Severance and benefit costs: During the three and nine months ended September 30, 2015, the company recorded $28 million and $103 million, respectively, of severance and benefit costs primarily related to a voluntary early-out program for its flight attendants. In 2014, more than 2,500 flight attendants elected to voluntarily separate from the company for a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through the end of 2016.
(Gains) losses on sale of assets and other special charges: During the three and nine months ended September 30, 2015, the company recorded $48 million and $92 million, respectively, for integration costs, impairment of assets and other special gains and losses.
Nonoperating loss on extinguishment of debt and other: During the third quarter of 2015, the company recorded $61 million of losses due to exchange rate changes in Venezuela applicable to funds held in local currency. During the nine months ended September 30, 2015, the company recorded a charge of $134 million due to the write-off of the unamortized non-cash debt discount related to the extinguishment of the 6% Notes due 2026 and 6% Notes due 2028. Both of the charges were recorded as part of Nonoperating income (expense): Miscellaneous, net.
MTM losses from fuel derivative contracts settling in future periods and prior period losses on fuel derivative contracts settled in the current period: The company uses certain combinations of derivative contracts that are economic hedges but do not qualify for hedge accounting under U.S. generally accepted accounting principles. Additionally, the company may enter into contracts at different times and later combine those contracts into structures designated for hedge accounting. As with derivatives that qualify for hedge accounting, the economic hedges and individual contracts are part of the company’s program to mitigate the adverse financial impact of potential increases in the price of fuel. The company records changes in the fair value of these various contracts that are not designated for hedge accounting to Nonoperating income (expense): Miscellaneous, net in the statements of consolidated operations. During the three and nine months ended September 30, 2015, the company recorded $36 million and $28 million, respectively, in MTM losses on fuel derivative contracts that will settle in future periods. For fuel derivative contracts that settled in the three and nine months ended September 30, 2015, the company recorded MTM losses of $69 million and $173 million, respectively, in prior periods.
| (D) | The company’s effective tax rate for the three and nine months ended September 30, 2016 was 36% which represented a blend of federal, state and foreign taxes and the impact of certain nondeductible items. During 2015, after considering all positive and negative evidence, the company concluded that its deferred income taxes would more likely than not be realized. The company released substantially all of its valuation allowance in the third quarter of 2015, which resulted in a $3.2 billion benefit in its provision for income taxes. |
9
United Airlines Reports Third-Quarter 2016 Performance
UNITED CONTINENTAL HOLDINGS, INC.
STATISTICS
| Three Months Ended September 30, |
% Increase/ (Decrease) |
Nine Months Ended September 30, |
% Increase/ (Decrease) |
|||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
| Mainline: |
||||||||||||||||||||||||
| Passengers (thousands) |
27,501 | 25,922 | 6.1 | 75,417 | 72,158 | 4.5 | ||||||||||||||||||
| Revenue passenger miles (millions) |
51,875 | 50,653 | 2.4 | 140,573 | 139,172 | 1.0 | ||||||||||||||||||
| Available seat miles (millions) |
60,635 | 59,002 | 2.8 | 169,252 | 166,175 | 1.9 | ||||||||||||||||||
| Cargo ton miles (millions) |
714 | 640 | 11.6 | 2,015 | 1,935 | 4.1 | ||||||||||||||||||
| Passenger load factor: |
||||||||||||||||||||||||
| Mainline |
85.6 | % | 85.8 | % | (0.2 | ) pts. | 83.1 | % | 83.8 | % | (0.7 | ) pts. | ||||||||||||
| Domestic |
86.8 | % | 87.7 | % | (0.9 | ) pts. | 85.8 | % | 86.3 | % | (0.5 | ) pts. | ||||||||||||
| International |
84.3 | % | 84.1 | % | 0.2 | pts. | 80.4 | % | 81.3 | % | (0.9 | ) pts. | ||||||||||||
| Passenger revenue per available seat mile (cents) |
11.57 | 12.29 | (5.9 | ) | 11.30 | 12.13 | (6.8 | ) | ||||||||||||||||
| Average yield per revenue passenger mile (cents) |
13.53 | 14.32 | (5.5 | ) | 13.60 | 14.48 | (6.1 | ) | ||||||||||||||||
| Aircraft in fleet at end of period |
724 | 717 | 1.0 | 724 | 717 | 1.0 | ||||||||||||||||||
| Average stage length (miles) |
1,882 | 1,960 | (4.0 | ) | 1,878 | 1,939 | (3.1 | ) | ||||||||||||||||
| Average daily utilization of each aircraft (hours) |
10:59 | 10:47 | 1.9 | 10:25 | 10:32 | (1.1 | ) | |||||||||||||||||
| Regional: |
||||||||||||||||||||||||
| Passengers (thousands) |
11,150 | 11,542 | (3.4 | ) | 31,737 | 33,059 | (4.0 | ) | ||||||||||||||||
| Revenue passenger miles (millions) |
6,297 | 6,507 | (3.2 | ) | 18,198 | 18,721 | (2.8 | ) | ||||||||||||||||
| Available seat miles (millions) |
7,439 | 7,743 | (3.9 | ) | 21,820 | 22,524 | (3.1 | ) | ||||||||||||||||
| Passenger load factor |
84.6 | % | 84.0 | % | 0.6 | pts. | 83.4 | % | 83.1 | % | 0.3 | pts. | ||||||||||||
| Passenger revenue per available seat mile (cents) |
21.32 | 22.03 | (3.2 | ) | 20.98 | 21.77 | (3.6 | ) | ||||||||||||||||
| Average yield per revenue passenger mile (cents) |
25.19 | 26.22 | (3.9 | ) | 25.15 | 26.19 | (4.0 | ) | ||||||||||||||||
| Aircraft in fleet at end of period |
490 | 527 | (7.0 | ) | 490 | 527 | (7.0 | ) | ||||||||||||||||
| Average stage length (miles) |
556 | 555 | 0.2 | 565 | 558 | 1.3 | ||||||||||||||||||
| Consolidated (Mainline and Regional): |
||||||||||||||||||||||||
| Passengers (thousands) |
38,651 | 37,464 | 3.2 | 107,154 | 105,217 | 1.8 | ||||||||||||||||||
| Revenue passenger miles (millions) |
58,172 | 57,160 | 1.8 | 158,771 | 157,893 | 0.6 | ||||||||||||||||||
| Available seat miles (millions) |
68,074 | 66,745 | 2.0 | 191,072 | 188,699 | 1.3 | ||||||||||||||||||
| Passenger load factor |
85.5 | % | 85.6 | % | (0.1 | ) pts. | 83.1 | % | 83.7 | % | (0.6 | ) pts. | ||||||||||||
| Passenger revenue per available seat mile (cents) |
12.64 | 13.42 | (5.8 | ) | 12.40 | 13.28 | (6.6 | ) | ||||||||||||||||
| Total revenue per available seat mile (cents) |
14.56 | 15.44 | (5.7 | ) | 14.39 | 15.28 | (5.8 | ) | ||||||||||||||||
| Average yield per revenue passenger mile (cents) |
14.79 | 15.68 | (5.7 | ) | 14.92 | 15.87 | (6.0 | ) | ||||||||||||||||
| Aircraft in fleet at end of period |
1,214 | 1,244 | (2.4 | ) | 1,214 | 1,244 | (2.4 | ) | ||||||||||||||||
| Average stage length (miles) |
1,493 | 1,515 | (1.5 | ) | 1,484 | 1,497 | (0.9 | ) | ||||||||||||||||
| Average full-time equivalent employees (thousands) |
85.1 | 82.4 | 3.3 | 83.6 | 82.1 | 1.8 | ||||||||||||||||||
Note: See Part II, Item 6 Selected Financial Data of the company’s annual report on Form 10-K for the year ended December 31, 2015 for the definition of these statistics.
10
United Airlines Reports Third-Quarter 2016 Performance
UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION
UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (GAAP) and Non-GAAP financial measures, including operating income (loss) excluding special items, income (loss) before income taxes excluding special items, net income (loss) excluding special items, net earnings (loss) per share excluding special items, and CASM, as adjusted, among others. CASM is a common metric used in the airline industry to measure an airline’s cost structure and efficiency. UAL reports CASM excluding profit sharing, third-party business expenses, fuel, and special charges. 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 adjusting for special charges is useful to investors because special charges are non-recurring charges not indicative of UAL’s ongoing performance. In addition, the company believes that adjusting for MTM gains and losses from fuel derivative contracts settling in future periods and prior period gains and losses on fuel derivative contracts settled in the current period is useful because the adjustments allow investors to better understand the cash impact of settled fuel derivative contracts in a given period. UAL also believes that excluding third-party business expenses, such as maintenance, ground handling and catering services for third parties, fuel sales and non-air mileage redemptions, provides more meaningful disclosure because these expenses are not directly related to UAL’s core business. UAL also believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management’s performance excluding the effects of a significant cost item over which management has limited influence. UAL excludes profit sharing because this exclusion allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry. UAL also presented diluted earnings per share excluding special items for the third quarter of 2015 adjusted for the impact of tax expense using the effective tax rate from the third quarter of 2016 in order to make the financial measures more comparable. UAL had minimal income tax expense in the third quarter of 2015 that was offset by the release of its deferred tax asset valuation allowance in that period resulting in a net income tax benefit.
11
United Airlines Reports Third-Quarter 2016 Performance
UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION (Continued)
| Three Months Ended September 30, |
$ Increase/ (Decrease) |
% Increase/ (Decrease) |
Nine Months Ended September 30, |
$ Increase/ (Decrease) |
% Increase/ (Decrease) |
|||||||||||||||||||||||||||
| (in millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||
| Operating expenses |
$ | 8,289 | $ | 8,407 | $ | (118 | ) | (1.4 | ) | $ | 24,171 | $ | 24,743 | $ | (572 | ) | (2.3 | ) | ||||||||||||||
| Less: Special charges (C) |
45 | 76 | (31 | ) | NM | 669 | 195 | 474 | NM | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Operating expenses, excluding special charges |
8,244 | 8,331 | (87 | ) | (1.0 | ) | 23,502 | 24,548 | (1,046 | ) | (4.3 | ) | ||||||||||||||||||||
| Less: Third-party business expenses |
61 | 70 | (9 | ) | (12.9 | ) | 188 | 205 | (17 | ) | (8.3 | ) | ||||||||||||||||||||
| Less: Fuel expense |
1,603 | 1,934 | (331 | ) | (17.1 | ) | 4,258 | 5,904 | (1,646 | ) | (27.9 | ) | ||||||||||||||||||||
| Less: Profit sharing, including taxes |
204 | 277 | (73 | ) | (26.4 | ) | 506 | 545 | (39 | ) | (7.2 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Operating expenses, excluding fuel, profit sharing, special charges and third-party business expenses |
$ | 6,376 | $ | 6,050 | $ | 326 | 5.4 | $ | 18,550 | $ | 17,894 | $ | 656 | 3.7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Operating income |
$ | 1,624 | $ | 1,899 | $ | (275 | ) | (14.5 | ) | $ | 3,333 | $ | 4,085 | $ | (752 | ) | (18.4 | ) | ||||||||||||||
| Less: Special charges (C) |
45 | 76 | (31 | ) | NM | 669 | 195 | 474 | NM | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Operating income, excluding special charges |
$ | 1,669 | $ | 1,975 | $ | (306 | ) | (15.5 | ) | $ | 4,002 | $ | 4,280 | $ | (278 | ) | (6.5 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Income before income taxes |
$ | 1,510 | $ | 1,606 | $ | (96 | ) | (6.0 | ) | $ | 2,935 | $ | 3,314 | $ | (379 | ) | (11.4 | ) | ||||||||||||||
| Less: special items before income taxes (C) |
48 | 104 | (56 | ) | NM | 670 | 245 | 425 | NM | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Income before income taxes and excluding special items |
$ | 1,558 | $ | 1,710 | $ | (152 | ) | (8.9 | ) | $ | 3,605 | $ | 3,559 | $ | 46 | 1.3 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Net income |
$ | 965 | $ | 4,816 | $ | (3,851 | ) | (80.0 | ) | $ | 1,866 | $ | 6,517 | $ | (4,651 | ) | (71.4 | ) | ||||||||||||||
| Less: special items, net of tax (C) |
32 | (3,114 | ) | 3,146 | NM | 429 | (2,973 | ) | 3,402 | NM | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Net income, excluding special items |
$ | 997 | $ | 1,702 | $ | (705 | ) | (41.4 | ) | $ | 2,295 | $ | 3,544 | $ | (1,249 | ) | (35.2 | ) | ||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Less: Income tax adjustment using 3Q 2016 tax rate for 3Q 2015 |
— | (608 | ) | 608 | NM | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Tax adjusted net income, excluding special items |
$ | 997 | $ | 1,094 | $ | (97 | ) | (8.9 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Diluted earnings per share |
$ | 3.01 | $ | 12.82 | $ | (9.81 | ) | (76.5 | ) | $ | 5.57 | $ | 17.15 | $ | (11.58 | ) | (67.5 | ) | ||||||||||||||
| Add back: special items |
0.15 | (8.29 | ) | 8.44 | NM | 2.00 | (7.83 | ) | 9.83 | NM | ||||||||||||||||||||||
| Tax effect related to special items |
(0.05 | ) | — | (0.05 | ) | NM | (0.72 | ) | — | (0.72 | ) | NM | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Diluted earnings per share, excluding special items |
$ | 3.11 | $ | 4.53 | $ | (1.42 | ) | (31.3 | ) | $ | 6.85 | $ | 9.32 | $ | (2.47 | ) | (26.5 | ) | ||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Less: Income tax adjustment using 3Q 2016 tax rate for 3Q 2015 |
— | (1.62 | ) | 1.62 | NM | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Tax adjusted diluted earnings per share, excluding special items |
$ | 3.11 | $ | 2.91 | $ | 0.20 | 6.9 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
12
United Airlines Reports Third-Quarter 2016 Performance
UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION (Continued)
| Three Months Ended September 30, |
% Increase/ (Decrease) |
Nine Months Ended September 30, |
% Increase/ (Decrease) |
|||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
| CASM Mainline Operations (cents) |
||||||||||||||||||||||||
| Cost per available seat mile (CASM) |
11.65 | 11.97 | (2.7 | ) | 12.15 | 12.43 | (2.3 | ) | ||||||||||||||||
| Less: Special charges (C) |
0.08 | 0.13 | NM | 0.40 | 0.12 | NM | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| CASM, excluding special charges |
11.57 | 11.84 | (2.3 | ) | 11.75 | 12.31 | (4.5 | ) | ||||||||||||||||
| Less: Third-party business expenses |
0.10 | 0.12 | (16.7 | ) | 0.11 | 0.12 | (8.3 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| CASM, excluding special charges and third-party business expenses |
11.47 | 11.72 | (2.1 | ) | 11.64 | 12.19 | (4.5 | ) | ||||||||||||||||
| Less: Fuel expense |
2.21 | 2.77 | (20.2 | ) | 2.11 | 2.98 | (29.2 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| CASM, excluding special charges, third-party business expenses and fuel |
9.26 | 8.95 | 3.5 | 9.53 | 9.21 | 3.5 | ||||||||||||||||||
| Less: Profit sharing per available seat mile |
0.34 | 0.47 | (27.7 | ) | 0.30 | 0.33 | (9.1 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| CASM, excluding special charges, third-party business expenses, fuel, and profit sharing |
8.92 | 8.48 | 5.2 | 9.23 | 8.88 | 3.9 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| CASM Consolidated Operations (cents) |
||||||||||||||||||||||||
| Cost per available seat mile (CASM) |
12.18 | 12.60 | (3.3 | ) | 12.65 | 13.11 | (3.5 | ) | ||||||||||||||||
| Less: Special charges (C) |
0.07 | 0.12 | NM | 0.35 | 0.10 | NM | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| CASM, excluding special charges |
12.11 | 12.48 | (3.0 | ) | 12.30 | 13.01 | (5.5 | ) | ||||||||||||||||
| Less: Third-party business expenses |
0.09 | 0.10 | (10.0 | ) | 0.10 | 0.11 | (9.1 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| CASM, excluding special charges and third-party business expenses |
12.02 | 12.38 | (2.9 | ) | 12.20 | 12.90 | (5.4 | ) | ||||||||||||||||
| Less: Fuel expense |
2.35 | 2.90 | (19.0 | ) | 2.23 | 3.13 | (28.8 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| CASM, excluding special charges, third-party business expenses and fuel |
9.67 | 9.48 | 2.0 | 9.97 | 9.77 | 2.0 | ||||||||||||||||||
| Less: Profit sharing per available seat mile |
0.30 | 0.42 | (28.6 | ) | 0.26 | 0.29 | (10.3 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| CASM, excluding special charges, third-party business expenses, fuel, and profit sharing |
9.37 | 9.06 | 3.4 | 9.71 | 9.48 | 2.4 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
13
United Airlines Reports Third-Quarter 2016 Performance
UNITED CONTINENTAL HOLDINGS, INC.
FINANCIAL METRICS
UAL provides financial metrics, including operating margin, pre-tax margin, earnings before interest, taxes, depreciation and amortization (EBITDA) as well as earnings before interest, taxes, depreciation and amortization, and aircraft rent (EBITDAR), that we believe provides useful supplemental information for management and investors by measuring profit and profit as a percentage of total operating revenues. These financial metrics are adjusted for special charges/items that are non-recurring and that management believes are not indicative of UAL’s ongoing performance.
| Three Months Ended September 30, |
% Increase/ (Decrease) |
Nine Months Ended September 30, |
% Increase/ (Decrease) |
|||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
| Operating margin |
16.4 | % | 18.4 | % | (2.0 | ) pts. | 12.1 | % | 14.2 | % | (2.1 | ) pts. | ||||||||||||
| Operating margin, excluding Special charges (C) |
16.8 | % | 19.2 | % | (2.4 | ) pts. | 14.6 | % | 14.8 | % | (0.2 | ) pts. | ||||||||||||
| Net income |
$ | 965 | $ | 4,816 | (80.0 | ) | $ | 1,866 | $ | 6,517 | (71.4 | ) | ||||||||||||
| Adjusted for: |
||||||||||||||||||||||||
| Depreciation and amortization |
503 | 469 | 7.2 | 1,473 | 1,343 | 9.7 | ||||||||||||||||||
| Interest expense |
150 | 164 | (8.5 | ) | 466 | 504 | (7.5 | ) | ||||||||||||||||
| Interest capitalized |
(20 | ) | (13 | ) | 53.8 | (48 | ) | (38 | ) | 26.3 | ||||||||||||||
| Interest income |
(14 | ) | (5 | ) | 180.0 | (31 | ) | (16 | ) | 93.8 | ||||||||||||||
| Income tax expense (benefit) (D) |
545 | (3,210 | ) | NM | 1,069 | (3,203 | ) | NM | ||||||||||||||||
| Special items before income taxes (C) |
48 | 104 | NM | 670 | 245 | NM | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Adjusted EBITDA, excluding special items |
$ | 2,177 | $ | 2,325 | (6.4 | ) | $ | 5,465 | $ | 5,352 | 2.1 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Aircraft rent |
168 | 185 | (9.2 | ) | 521 | 580 | (10.2 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Adjusted EBITDAR, excluding special items |
$ | 2,345 | $ | 2,510 | (6.6 | ) | $ | 5,986 | $ | 5,932 | 0.9 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
14
United Airlines Reports Third-Quarter 2016 Performance
UNITED CONTINENTAL HOLDINGS, INC.
CAPITAL EXPENDITURES AND FREE CASH FLOW
UAL believes that adjusting capital expenditures for assets acquired through the issuance of debt, airport construction financing and excluding fully reimbursable projects is useful to investors in order to appropriately reflect the non-reimbursable funds spent on capital expenditures.
| Three Months Ended September 30, 2016 |
Nine Months Ended September 30, 2016 |
|||||||
| Capital Expenditures (in millions) |
||||||||
| Capital expenditures – GAAP |
$ | 689 | $ | 2,343 | ||||
| Property and equipment acquired through the issuance of debt |
56 | 115 | ||||||
| Airport construction financing |
33 | 68 | ||||||
| Fully reimbursable projects |
(99 | ) | (257 | ) | ||||
|
|
|
|
|
|||||
| Adjusted capital expenditures – Non-GAAP |
$ | 679 | $ | 2,269 | ||||
|
|
|
|
|
|||||
| Three Months Ended September 30, 2016 |
Nine Months Ended September 30, 2016 |
|||||||
| Free Cash Flow (in millions) |
||||||||
| Net cash provided by operating activities |
$ | 1,138 | $ | 4,884 | ||||
| Less adjusted capital expenditures – Non-GAAP |
679 | 2,269 | ||||||
|
|
|
|
|
|||||
| Free cash flow - Non-GAAP |
$ | 459 | $ | 2,615 | ||||
|
|
|
|
|
|||||
15
United Airlines Reports Third-Quarter 2016 Performance
UNITED CONTINENTAL HOLDINGS, INC.
RETURN ON INVESTED CAPITAL (ROIC)
ROIC is a Non-GAAP financial measure that we believe provides useful supplemental information for management and investors by measuring the effectiveness of our operations’ use of invested capital to generate profits.
| (in millions) | Twelve Months Ended September 30, 2016 |
|||
| Net Operating Profit After Tax (NOPAT) |
||||
| Pre-tax income excluding special items (a) |
$ | 4,543 | ||
| NOPAT adjustments (b) |
1,037 | |||
|
|
|
|||
| NOPAT |
$ | 5,580 | ||
|
|
|
|||
| Effective cash tax rate (c) |
0.2 | % | ||
| Invested Capital (five-quarter average) |
||||
| Total assets |
$ | 40,746 | ||
| Invested capital adjustments (d) |
12,314 | |||
|
|
|
|||
| Average Invested Capital |
$ | 28,432 | ||
|
|
|
|||
| Return on Invested Capital |
19.6 | % | ||
|
|
|
|||
| Notes: | Twelve Months Ended September 30, 2016 |
|||
| (a) Non-GAAP Financial Reconciliation |
||||
| Pre-tax income |
$ | 3,840 | ||
| Add: Special items |
703 | |||
|
|
|
|||
| Pre-tax income excluding special items |
$ | 4,543 | ||
|
|
|
|||
| (b) | NOPAT adjustments include: adding back (net of tax shield) interest expense, the interest component of capitalized aircraft rent and net interest on pension. |
| (c) | Effective cash tax rate is calculated by dividing cash taxes paid by adjusted pre-tax income. |
| (d) | Invested capital adjustments include: adding back capital aircraft rent (at 7.0X) and deferred income taxes, less advance ticket sales, frequent flyer deferred revenue, tax valuation allowance and other non-interest bearing liabilities. |
# # #
16
Exhibit 99.2
|
| |
| Investor Update |
Issue Date: October 17, 2016 | |
This investor update provides guidance and certain forward-looking statements about United Continental Holdings, Inc. (the “Company” or “UAL”). The information in this investor update contains the financial and operational outlook for the Company for fourth-quarter and full-year 2016.
| Fourth-Quarter and Full-Year 2016 Outlook |
Estimated 4Q 2016 | Estimated FY 2016 | ||||||||||||||||||||||
| Consolidated Capacity Year-Over-Year Change Higher/(Lower) |
1.0 | % | — | 2.0 | % | 1.2 | % | — | 1.4 | % | ||||||||||||||
| Pre-Tax Margin, as adjusted1 |
5.0 | % | — | 7.0 | % | 11.2 | % | — | 11.6 | % | ||||||||||||||
| Revenue |
||||||||||||||||||||||||
| Consolidated PRASM (¢/ASM) |
11.85 | — | 12.11 | 12.26 | — | 12.32 | ||||||||||||||||||
| Year-Over-Year Change Higher/(Lower) |
(6.0 | %) | — | (4.0 | %) | (6.5 | %) | — | (6.0 | %) | ||||||||||||||
| Cargo and Other Revenue ($M) |
$ | 1,240 | — | $ | 1,340 | $ | 5,048 | — | $ | 5,148 | ||||||||||||||
| Non-Fuel Operating Expense |
||||||||||||||||||||||||
| Consolidated CASM Excluding Fuel, Profit Sharing & Third-Party Business Expenses1 (¢/ASM) |
10.19 | — | 10.29 | 9.80 | — | 9.85 | ||||||||||||||||||
| Year-Over-Year Change Higher/(Lower) |
4.75 | % | — | 5.75 | % | 2.75 | % | — | 3.25 | % | ||||||||||||||
| Third-Party Business Expenses2 ($M) |
$ | 80 | — | $ | 90 | $ | 268 | — | $ | 278 | ||||||||||||||
| Aircraft Rent ($M) |
$ | 165 | — | $ | 170 | $ | 686 | — | $ | 691 | ||||||||||||||
| Depreciation and Amortization ($M) |
$ | 500 | — | $ | 505 | $ | 1,973 | — | $ | 1,978 | ||||||||||||||
| Profit Sharing ($M) |
$ | 35 | — | $ | 75 | $ | 541 | — | $ | 581 | ||||||||||||||
| Consolidated Fuel Expense |
||||||||||||||||||||||||
| Fuel Consumption (Million Gallons) |
~965 | ~3,910 | ||||||||||||||||||||||
| Fuel Price Including Operating Cash-Settled Hedges (Price per Gallon)3,4 |
$ | 1.63 | — | $ | 1.68 | $ | 1.47 | — | $ | 1.52 | ||||||||||||||
| Operating Cash-Settled Hedge Loss (Price per Gallon) |
($0.02) | ($0.05) | ||||||||||||||||||||||
| Fuel Price Excluding Hedges (Price per Gallon)3 |
$ | 1.61 | — | $ | 1.66 | $ | 1.42 | — | $ | 1.47 | ||||||||||||||
| Fuel Price Including Operating Cash-Settled Hedges (Price per Gallon)3,4 |
$ | 1.63 | — | $ | 1.68 | $ | 1.47 | — | $ | 1.52 | ||||||||||||||
| Non-Operating Cash-Settled Hedge Loss (Price per Gallon)3,5 |
$ | 0.00 | $0.00 | |||||||||||||||||||||
| Fuel Price Including All Cash-Settled Hedges (Price per Gallon)3,6 |
$ | 1.63 | — | $ | 1.68 | $ | 1.47 | — | $ | 1.52 | ||||||||||||||
| Non-Operating Expense7 ($M) |
$ | 105 | — | $ | 135 | $ | 499 | — | $ | 529 | ||||||||||||||
| Effective Income Tax Rate |
~37 | % | ~36 | % | ||||||||||||||||||||
| Gross Capital Expenditures8 ($M) |
$ | 935 | — | $ | 955 | $ | 3,204 | — | $ | 3,224 | ||||||||||||||
| Debt and Capital Lease Payments ($M) |
$ | 340 | $1,340 | |||||||||||||||||||||
| Pension ($M) |
||||||||||||||||||||||||
| Expense |
~$180 | |||||||||||||||||||||||
| Cash contribution |
~$400 | |||||||||||||||||||||||
| Diluted Share Count9 (M) |
317 | 331 | ||||||||||||||||||||||
| 1. | Excludes special charges, the nature and amount of which are not determinable at this time |
| 2. | Third-party business revenue associated with third-party business expenses is recorded in other revenue |
| 3. | Fuel price including taxes and fees |
| 4. | This price per gallon corresponds to fuel expense in the income statement |
| 5. | This price per gallon corresponds to the impact of non-operating hedges that appear in non-operating expense in the income statement |
| 6. | This price per gallon corresponds to the total economic cost of the Company’s fuel consumption including all cash-settled hedges but does not directly correspond to fuel expense in the income statement |
| 7. | The Company excludes the non-cash impact of fuel hedges and other special items from its non-operating expense guidance |
| 8. | Capital expenditures include net purchase deposits, assets acquired through the issuance of debt , airport construction financing and exclude fully reimbursable capital projects |
| 9. | Does not include an assumption related to future share repurchases. Diluted share count is approximately equal to basic share count |
(more)
Passenger Revenue: The Company expects the decline in fourth-quarter 2016 unit passenger revenue to be driven primarily by yield weakness and the timing of certain holidays.
Non-Fuel Expense: The guidance provided in the investor update includes the impact of ratified labor agreements as of October 17, 2016, including pilots, flight attendants, IAM-represented employees and dispatchers.
Profit Sharing: Due to recently ratified labor agreements, the Company’s profit sharing plans have changed for 2016. The Company now expects to pay:
| • | Approximately 8.6% of total adjusted earnings up to a 6.9% adjusted pre-tax margin |
| • | Approximately 13.7% for any adjusted earnings above a 6.9% adjusted pre-tax margin |
| • | Approximately 1.6% for any adjusted earnings above the prior year’s adjusted pre-tax earnings |
Adjusted earnings for the purposes of profit sharing are calculated as GAAP pre-tax earnings, excluding special items, profit sharing expense and share-based compensation program expense. These estimates are consistent with the Company’s current labor agreements. The Company estimates that share-based compensation expense for the purposes of the profit sharing calculation will be approximately $60 million year-to-date through the fourth quarter of 2016.
Fuel Expense: Based on the October 12, 2016 fuel forward curve, the Company expects a total fourth-quarter 2016 hedge loss of approximately $20 million, or $0.02 per gallon, which is recorded in fuel expense in the income statement. For the full-year 2016, the Company expects a loss of approximately $220 million, or $0.05 per gallon.
Taxes: The Company expects a tax rate of approximately 37% for the fourth quarter of 2016. However, the Company expects that there will be no material cash taxes due to United’s net operating loss carryforwards (NOLs), which were approximately $8 billion as of year-end 2015. These NOLs are projected to offset (or minimize) cash income taxes for several years.
(more)
2
Fourth-Quarter and Full-Year 2016 Capacity
| Estimated 4Q 2016 | Year-Over-Year % Change Higher/(Lower) |
Estimated FY 2016 | Year-Over-Year % Change Higher/(Lower) |
|||||||||||||||||||||||||||||||||||||||||||||
| Capacity (Million ASMs) |
||||||||||||||||||||||||||||||||||||||||||||||||
| Mainline Capacity |
||||||||||||||||||||||||||||||||||||||||||||||||
| Domestic |
28,039 | — | 28,311 | 3.2 | % | — | 4.2 | % | ||||||||||||||||||||||||||||||||||||||||
| Atlantic |
10,368 | — | 10,475 | (3.4 | %) | — | (2.4 | %) | ||||||||||||||||||||||||||||||||||||||||
| Pacific |
10,830 | — | 10,930 | 7.5 | % | — | 8.5 | % | ||||||||||||||||||||||||||||||||||||||||
| Latin America |
5,677 | — | 5,736 | (2.7 | %) | — | (1.7 | %) | ||||||||||||||||||||||||||||||||||||||||
| Total Mainline Capacity |
54,914 | — | 55,452 | 2.0 | % | — | 3.0 | % | ||||||||||||||||||||||||||||||||||||||||
| Regional |
7,004 | — | 7,079 | (6.5 | %) | — | (5.5 | %) | ||||||||||||||||||||||||||||||||||||||||
| Consolidated Capacity |
||||||||||||||||||||||||||||||||||||||||||||||||
| Domestic |
34,737 | — | 35,081 | 1.1 | % | — | 2.1 | % | 138,719 | — | 139,063 | 1.3 | % | — | 1.6 | % | ||||||||||||||||||||||||||||||||
| International |
27,181 | — | 27,450 | 0.9 | % | — | 1.9 | % | 114,271 | — | 114,540 | 1.1 | % | — | 1.3 | % | ||||||||||||||||||||||||||||||||
| Total Consolidated Capacity |
61,918 | — | 62,531 | 1.0 | % | — | 2.0 | % | 252,990 | — | 253,603 | 1.2 | % | — | 1.4 | % | ||||||||||||||||||||||||||||||||
Fuel Price Sensitivity
As of October 12, 2016, the Company had hedged 13% of its projected fuel requirements for fourth-quarter 2016. The Company uses a variety of hedges including swaps and options on aircraft fuel and crude oil. The Company expects to participate in 95% of declines below current price levels and 100% of declines below Brent spot price of $45 per barrel for the remaining three months of 2016.
The table below outlines the Company’s estimated hedge impacts at various price points based on the October 12th, 2016 fuel forward curve, where Brent spot price was $51.81 per barrel and rest of year average forward price is $52.49 per barrel. With the current hedge portfolio, all hedge gains/losses are recognized in Fuel Expense.
| Fuel Scenarios* | Cash Hedge Impact | 4Q16 | ||||
|
|
forecast
|
| ||||
| +40% | Commodity Price Increase/(Decrease)** ($/gal) | 0.58 | ||||
| Hedge Gain/(Loss) ($/gal) | 0.00 | |||||
| +30% | Commodity Price Increase/(Decrease)** ($/gal) | 0.43 | ||||
| Hedge Gain/(Loss) ($/gal) | (0.01) | |||||
| +20% | Commodity Price Increase/(Decrease)** ($/gal) | 0.29 | ||||
| Hedge Gain/(Loss) ($/gal) | (0.02) | |||||
| +10% | Commodity Price Increase/(Decrease)** ($/gal) | 0.14 | ||||
| Hedge Gain/(Loss) ($/gal) | (0.02) | |||||
| Current | Commodity Price Increase/(Decrease)** ($/gal) | 0.00 | ||||
| Forward Curve | Hedge Gain/(Loss) ($/gal) | (0.02) | ||||
| (10%) | Commodity Price Increase/(Decrease)** ($/gal) | (0.14) | ||||
| Hedge Gain/(Loss) ($/gal) | (0.02) | |||||
| (20%) | Commodity Price Increase/(Decrease)** ($/gal) | (0.29) | ||||
| Hedge Gain/(Loss) ($/gal) | (0.03) | |||||
| (30%) | Commodity Price Increase/(Decrease)** ($/gal) | (0.43) | ||||
| Hedge Gain/(Loss) ($/gal) | (0.03) | |||||
| (40%) | Commodity Price Increase/(Decrease)** ($/gal) | (0.58) | ||||
| Hedge Gain/(Loss) ($/gal) | (0.03) | |||||
| * | Projected fuel scenarios represent hypothetical fuel forward curves parallel to the baseline October 12, 2016 fuel forward curve and are meant to illustrate the behavior of our fuel hedge portfolio at different commodity price points, assuming equal magnitude change across all hedged commodities |
| ** | Change in UAL’s realized fuel price is not equal to the change in commodity prices due to timing and purchasing patterns |
(more)
3
Company Outlook
Fleet Plan
As of October 17, 2016, the Company’s fleet plan was as follows:
| YE 2015 | YE 2016 | FY D | ||||||||||
| B747-400 |
22 | 20 | (2 | ) | ||||||||
| B777-200/300 |
74 | 75 | 1 | |||||||||
| B787-8/9 |
25 | 30 | 5 | |||||||||
| B767-300/400 |
51 | 51 | — | |||||||||
| B757-200/300 |
81 | 77 | (4 | ) | ||||||||
| B737-700/800/900 |
310 | 325 | 15 | |||||||||
| A319/A320 |
152 | 158 | 6 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Mainline Aircraft |
715 | 736 | 21 | |||||||||
| YE 2015 | YE 2016 | FY D | ||||||||||
| Q400 |
13 | — | (13 | ) | ||||||||
| Q300 |
5 | 5 | — | |||||||||
| Q200 |
16 | 16 | — | |||||||||
| Embraer ERJ 145 |
199 | 183 | (16 | ) | ||||||||
| Embraer ERJ 135 |
5 | 5 | — | |||||||||
| CRJ200 |
50 | 50 | — | |||||||||
| CRJ700 |
115 | 79 | (36 | ) | ||||||||
| Embraer 170 |
38 | 38 | — | |||||||||
| Embraer E175 |
80 | 114 | 34 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Regional Aircraft |
521 | 490 | (31 | ) | ||||||||
GAAP to Non-GAAP Reconciliations
UAL is providing guidance utilizing various accounting principles generally accepted in the United States of America (“GAAP”) and Non-GAAP financial measures, including pre-tax margin, as adjusted, non-operating expense and cost per available seat mile (“CASM”), as adjusted. CASM is a common metric used in the airline industry to measure an airline’s cost structure and efficiency. UAL reports CASM excluding profit sharing, third-party business expenses, fuel and special charges. Non-GAAP financial measures are presented because they provide management and investors the ability to measure and monitor UAL’s performance on a consistent basis.
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 excluding profit sharing allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry. UAL believes that adjusting for special charges is useful to investors because they are non-recurring charges not indicative of UAL’s ongoing performance. UAL also believes that excluding third-party business expenses, such as maintenance, ground handling and catering services for third parties, fuel sales and non-air mileage redemptions, provides more meaningful disclosure because these expenses are not directly related to UAL’s core business. 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. In addition, UAL believes that excluding non-cash (gains)/losses on fuel derivative contracts from non-operating expense is useful because it allows investors to better understand the impact of settled hedges on a given period’s results.
| Consolidated Unit Cost (¢/ASM) | Estimated 4Q 2016 |
Estimated FY 2016 |
||||||||||||||||||||||
| Consolidated CASM Excluding Special Charges (a) |
12.91 | — | 13.16 | 12.39 | — | 12.54 | ||||||||||||||||||
| Less: Profit Sharing Expense |
0.06 | — | 0.12 | 0.21 | — | 0.23 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Consolidated CASM Excluding Profit Sharing & Special Charges |
12.85 | — | 13.04 | 12.18 | — | 12.31 | ||||||||||||||||||
| Less: Third-Party Business Expense |
0.13 | — | 0.14 | 0.11 | — | 0.11 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Consolidated CASM Excluding Profit Sharing, Third-Party Business Expenses & Special Charges |
12.72 | — | 12.90 | 12.07 | — | 12.20 | ||||||||||||||||||
| Less: Fuel Expense (b) |
2.53 | — | 2.61 | 2.27 | — | 2.35 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Consolidated CASM Excluding Fuel, Profit Sharing, Third-Party Business Expense, & Special Charges |
10.19 | — | 10.29 | 9.80 | — | 9.85 | ||||||||||||||||||
| Non-operating Expense ($M) | Estimated 4Q 2016 |
Estimated FY 2016 |
||||||||||||||||||||||
| Non-operating expense |
$ | 107 | — | $ | 137 | $ | 505 | — | $ | 535 | ||||||||||||||
| Hedge program adjustments (c) |
(2 | ) | — | (2 | ) | (5 | ) | — | (5 | ) | ||||||||||||||
| Exclude: other special items |
— | — | — | (1 | ) | — | (1 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Non-operating expense, adjusted |
$ | 105 | — | $ | 135 | $ | 499 | — | $ | 529 | ||||||||||||||
| (a) | Excludes special charges, such as the impact of certain primarily non-cash impairment, severance and other similar accounting charges. While the Company anticipates that it will record such special charges throughout the year, at this time the Company is unable to provide an estimate of these charges, as well as an estimate of full-year profit sharing, with reasonable certainty. |
| (b) | Both the cost and availability of fuel are subject to many economic and political factors and are therefore beyond the Company’s control. |
| (c) | Hedge program adjustments consist of excluding mark-to-market (MTM) (gains) and losses from fuel derivative contracts settling in future periods and adding back prior period gains and losses on fuel contracts settled in the current period. The purpose of hedge program adjustments is to adjust GAAP fuel derivative contract (gains) / losses to a cash-settled amount. |
(more)
4
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
Certain statements included in this investor update 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 that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this investor update are based upon information available to us on the date of this investor update. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: our ability to comply with the terms of our various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our operational plans and revenue-generating initiatives, including optimizing our revenue; our ability to control our costs, including realizing benefits from our resource optimization efforts, cost reduction initiatives and fleet replacement programs; our ability to utilize our net operating losses; our ability to attract and retain customers; demand for transportation in the markets in which we operate; an outbreak of a disease that affects travel demand or travel behavior; demand for travel and the impact that global economic conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets); economic and political instability and other risks of doing business globally; our ability to cost-effectively hedge against increases in the price of aircraft fuel; any potential realized or unrealized gains or losses related to fuel or currency hedging programs; the effects of any hostilities, act of war or terrorist attack; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; disruptions to our regional network; the costs and availability of aviation and other insurance; industry consolidation or changes in airline alliances; competitive pressures on pricing and on demand; our capacity decisions and the capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation and other actions (including open skies agreements and environmental regulations); the impact of regulatory, investigative and legal proceedings and legal compliance risks; the impact of any management changes; labor costs; our ability to maintain satisfactory labor relations and the results of the collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; weather conditions; and other risks and uncertainties set forth under Part 1, Item 1A., “Risk Factors,” of UAL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission.
For further questions, contact Investor Relations at (872) 825-8610 or investorrelations@united.com.
####
5