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): March 15, 2017
UNITED CONTINENTAL HOLDINGS, INC.
UNITED AIRLINES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-06033 | 36-2675207 | ||
| Delaware | 001-10323 | 74-2099724 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer 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 7.01 Regulation | FD Disclosure. |
Oscar Munoz, Chief Executive Officer of United Continental Holdings, Inc., the holding company whose primary subsidiary is United Airlines, Inc., will speak at the 2017 J.P. Morgan Aviation, Transportation and Industrials Conference on March 15, 2017. Attached hereto as Exhibit 99.1 are slides that will be presented at that time.
The information in this Item 7.01, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01 Financial | Statements and Exhibits. |
| Exhibit No. |
Description | |
| 99.1* | United Continental Holdings, Inc. slide presentation delivered on March 15, 2017 | |
| * | Furnished 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 AIRLINES, INC. | ||
| By: | /s/ Chris Kenny | |
| Name: | Chris Kenny | |
| Title: | Vice President and Controller | |
Date: March 15, 2017
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1* | United Continental Holdings, Inc. slide presentation delivered on March 15, 2017 | |
| * | Furnished herewith electronically. |
| Exhibit 99.1
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J.P. Morgan Aviation, Transportation and Industrials Conference March 15, 2017 Oscar Munoz Chief Executive Officer
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Safe Harbor Statement Certain statements included in this presentation are forward-looking and thus reflect our current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as “expects,” “will,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook,” “goals” and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this presentation are based upon information available to us on the date of this presentation. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: our ability to comply with the terms of our various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our operational plans and revenue-generating initiatives, including optimizing our revenue; our ability to control our costs, including realizing benefits from our resource optimization efforts, cost reduction initiatives and fleet replacement programs; costs associated with any modification or termination of our aircraft orders; our ability to utilize our net operating losses; our ability to attract and retain customers; demand for transportation in the markets in which we operate; an outbreak of a disease that affects travel demand or travel behavior; demand for travel and the impact that global economic and political conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets); economic and political instability and other risks of doing business globally; the effects of any hostilities, act of war or terrorist attack; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the effects of any technology failures or cybersecurity breaches; disruptions to our regional network; the costs and availability of aviation and other insurance; industry consolidation or changes in airline alliances; the success of our investments in airlines in other parts of the world; competitive pressures on pricing and on demand; our capacity decisions and the capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation and other actions (including Open Skies agreements and environmental regulations); the impact of regulatory, investigative and legal proceedings and legal compliance risks; the impact of any management changes; labor costs; our ability to maintain satisfactory labor relations and the results of any collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; weather conditions; and other risks and uncertainties set forth under Part I, Item 1A., “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission.
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Following a period of turbulence… FORBES United Airlines CEO Resigns In Wake Of Federal Investigation Bloomberg United’s quest to be less Awful January 14, 2016 USA today United names acting CEO while executive recovers from heart attack The wall street journal United continental shareholders launch Battle for control March 8, 2016 Teamster Mechanics Threaten strike Against United Airlines at JP Morgan Investor Conference Mar 08, 2016 Sep 8, 2015
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…came a year of transformation in 2016 for United Pre-tax earnings and margin1 ? Achieved record operational performance ($B) 11.9% 12.2% ? Added 6 new independent, highly-credentialed 11.1% 10.4% directors to board $4.5 $4.5 $4.2 $3.8 ? Strengthened leadership team ? Rolled out the biggest product innovation in 10 years with United Polaris ? Achieved contracts with all major workgroups FY15 FY16 Including special charges ? Outlined plan to close the margin gap Pre-tax margin Excluding special charges 1 For a GAAP to Non-GAAP reconciliation, see Appendix A 3
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Building the world’s best airline Best people and culture Best network potential We believe we have the two key ingredients needed to achieve our goal 4
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Our strategy centers around six critical areas Improving Leverage our Invest in our people operational network strengths reliability Power our Ensure our long-performance Win customers at term financial through technology every price point success and mobility 5
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Earning employee trust and elevating leadership “There were days that I thought we would not survive. And now it’s as good as it’s ever been.” -United Airlines Flight Operations Employee “I feel we are finally heading back in the right direction. Back to the airline I started working for almost 30 years ago, the real United.” -United Airlines Airport Operations Employee Added more than 6 decades of industry experience to C-suite in the last year 6
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Improving operational reliability Significant progress in 2016… Departure:001 Arrival:141 63.6% 81.3% 78.1% 76.3% 56.0% 55.2% FY14 FY15 FY16 FY14 FY15 FY16 Completion factor1 Mishandled bag ratio2 99.0% 3.67 98.6% 98.7% 3.21 2.60 FY14 FY15 FY16 FY14 FY15 FY16 1 Mainline flights only 2 7 As reported to the Department of Transportation
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Improving operational reliability 2017 is off to a strong start… Finished first in January among peers in Zero cancel days1 completion factor 21 • First time we’ve ever achieved this in the 18 month of January In February, zero cancels or just one cancel 12 for half of the days in the month Fewest controllable cancels (37) ever in a month in company history 2011-2015 2016 YTD20171 • More zero cancel days year-to-date in 2017 than in 2011-2015 combined 1 Mainline flights only 2 th 8 As of March 14 , 2017
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Creating the world’s leading network EWR (#1) SFO (#3) ORD (#4) DEN (#9) IAD (#5) LAX (#2) We are committed to higher Focused on competing and gaining market IAH (#12) share in local competitive markets connectivity in our hubs Plan to increase spokes and international service by increasing service to our hubs 9 Note: Ranked by origin and destination passengers (2015)
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Creating the world’s leading network Network changes start this summer driven by bottoms up review: Driving connectivity at our hubs is key to improving domestic network profitability 10
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Creating the world’s leading network
Adding more “catchment” area flying
New cities from ORD: Rochester MN, Columbia MO, Champaign IL
Every flight added to ORD results in approximately 80 additional possible connections
Small city service from our hubs has a better pricing structure
We can generate incremental traffic and strengthen the network
Next steps:
Delivering better connectivity by re-banking several hubs through 2018
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Delivering a highly competitive customer experience
United Polaris
Successfully launched in December in 2016
Great employee and customer feedback
What’s Next?
Polaris seat in international service 1Q17 Next Polaris Lounge openings (EWR/SFO) 4Q17 777-200 reconfigurations enter service 1Q18
Premium Economy Under evaluation
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Delivering a highly competitive customer experience
Basic Economy
Operational benefits Same great onboard product Provide greater customer choice Enhancing revenue through buy-up
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Powering our business through technology
Annual technology investment is second only to our aircraft investment
Our IT investment is expected to be roughly 400 percent larger in 2017 than in 2012
Investing in reliability and efficiency
Improvements to revenue management system anticipated to begin later this year
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Building our future through financial strength
Managing business to maximize Defined strategy to close margin operating margin and ROIC gap to peers by 2020
Committed to managing costs and Maintain strong liquidity levels disciplined capital investment and healthy balance sheet
Plan to continue to return excess cash to shareholders
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It’s time to execute and deliver…
We intend to provide annual updates on our progress towards initiatives and look forward to sharing that with you in the fourth quarter of this year
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Updating full-year 2017 capacity and unit cost guidance
Estimated FY17 capacity growth
Year-over-year
Prior Update
Domestic 1.5% - 2.5% 3.5% - 4.5%
International 0.5% - 1.5% 1.0% - 2.0%
Consolidated 1.0% - 2.0% 2.5% - 3.5%
Estimated FY17 total CASM1 Estimated FY17 non-fuel CASM1,2
Year-over-year H(L) Year-over-year H/(L)
6.6% - 8.2% 3.5% - 4.5%
5.6% - 7.2% 2.5% - 3.5%
Prior Update Prior Update
1 While the Company anticipates that it will record 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. For a GAAP to non-GAAP reconciliation, see Appendix A
2 Non-fuel CASM (operating expense per available seat mile) excludes fuel, profit sharing, third-party business expenses and special charges, such as the impact of certain primarily non-cash impairment, severance and other similar non-recurring accounting charges
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What’s changed?
Completed bottoms up network review
More fully maximizing fleet utilization in peak period
UAL has lagged peers on fleet utilization
Highly margin-accretive flying opportunity
No new capital expenditures associated with capacity increase
Improved operational reliability and completion factor
Network adjustments consistent with investor day strategy and margin focus
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We are executing our strategy
We are committed to:
• Achieving our investor day earnings improvement targets
• Close the margin gap by 2020
• Optimizing network to achieve full potential
• Re-emphasize domestic flying
• Improve hub connectivity
• Increasing efficiency while maintaining reliability
• Ensuring efficient capital investment
We are managing our business to maximize margin and ROIC
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Revenue update
Reaffirmed 1Q17 PRASM guidance of (1%) to +1% last week
Despite 1.3 points higher completion factor through February
First quarter has played out largely as expected
Continued strong close-in demand
Expecting positive year-over-year PRASM growth in 2Q17
Started managing the airline more to yield than load factor in 4Q16
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Goal:
Make United the best airline for employees, customers and investors.
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UNITED
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Appendix A: reconciliation of GAAP to Non-GAAP financial measures
UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (GAAP) and Non-GAAP financial measures, including: income (loss) before taxes excluding special items, pre-tax margin excluding special items, and CASM, as adjusted, among others. UAL believes that adjusting for special items is useful to investors because special items are non-recurring charges not indicative of UAL’s ongoing performance. For additional information related to special items, see the press release issued by UAL dated January 17, 2017, filed on that date with the SEC as an exhibit to UAL’s Form 8-K.
Twelve Months Ended
(in millions, except pre-tax margin) December 31,
Income before income taxes excluding special items 2016 2015
Income before income taxes (GAAP) $3,819 $4,219 Add: special items before income taxes (a) 643 279 Income before income taxes excluding special items (Non-GAAP) $4,462 $4,498
Pre-tax margin excluding specials
Total operating revenue $36,556 $37,864
Pre-tax margin (GAAP) 10.4% 11.1% Pre-tax margin excluding special items (Non-GAAP) 12.2% 11.9%
(a) Includes impairment of intangible assets, labor agreement costs, Cleveland airport lease restructuring costs, severance and benefit costs, (gains) losses on sales of assets and other special items, losses on 23 extinguishment of debt, and hedge program adjustments.
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Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued)
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 and also presents a measure of CASM with the additional exclusion of the impact from the new labor agreements. UAL believes that adjusting for special charges is useful to investors because special charges are non-recurring charges not indicative of UAL’s ongoing performance. UAL believes that excluding third-party business expenses, such as maintenance, ground handling and catering services for third parties, fuel sales and non-air mileage redemptions, provides more meaningful disclosure because these expenses are not directly related to UAL’s core business. UAL also believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management’s performance excluding the effects of a significant cost item over which management has limited influence. UAL excludes profit sharing as the exclusion allows investors to better understand and analyze our recurring cost performance and provide a more meaningful comparison of our core operating costs to the airline industry.
Year Ended
December 31, 2017E
Non-Fuel CASM Low High
CASM, excluding special charges and profit sharing (a) (Non-GAAP) 5.6 – 7.2 %
Less: Third-party business expenses and fuel (b) 3.1 – 3.7
CASM, excluding special charges, profit sharing, third-party business expenses and fuel (Non-GAAP) 2.5 – 3.5
Excludes special charges, such as the impact of certain primarily non-cash impairment, severance and other similar non-recurring 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. Accordingly, the Company is unable to provide guidance for CASM on a GAAP basis.
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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