SEC Filing - United Airlines Holdings, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



	FORM	10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission

File Number

Exact Name of Registrant as Specified in its Charter,

Principal Executive Office Address and Telephone Number

State of

Incorporation

I.R.S. Employer

Identification No.

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

001-06033

United Airlines Holdings, Inc.

Delaware

36-2675207

United Continental Holdings, Inc.

233 South Wacker Drive,

Chicago

Illinois

60606

(872)

825-4000

001-10323

United Airlines, Inc.

Delaware

74-2099724

N/A

233 South Wacker Drive,

Chicago

Illinois

60606

(872)

825-4000



Securities registered pursuant to Section 12(b) of the Act
Registrant	Title of Each Class		Trading Symbol	Name on Each Exchange on Which Registered
United Airlines Holdings, Inc.	Common Stock,	$0.01 par value	UAL	The Nasdaq Stock Market LLC
United Airlines, Inc.	None		None	None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

United Airlines Holdings, Inc.

Yes

☒

☐

United Airlines, Inc.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

United Airlines Holdings, Inc.

Yes

☒

☐

United Airlines, Inc.

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



United Airlines Holdings, Inc.	Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐
United Airlines, Inc.	Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☒	Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



United Airlines Holdings, Inc.		☐
United Airlines, Inc.		☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



United Airlines Holdings, Inc.	Yes	☐	No	☒
United Airlines, Inc.	Yes	☐	No	☒

The number of shares outstanding of each of the issuer's classes of common stock as of July 12, 2019 is shown below:



United Airlines Holdings, Inc.	256,921,469	shares of common stock ($0.01 par value)
United Airlines, Inc.	1,000	shares of common stock ($0.01 par value) (100% owned by United Airlines Holdings, Inc.)

OMISSION OF CERTAIN INFORMATION

This combined Quarterly Report on Form 10-Q is separately filed by United Airlines Holdings, Inc. and United Airlines, Inc. United Airlines, Inc. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format allowed under that General Instruction.

United Airlines Holdings, Inc.

United Airlines, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended June 30, 2019



	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
United Airlines Holdings, Inc.:
Statements of Consolidated Operations	3
Statements of Consolidated Comprehensive Income	4
Consolidated Balance Sheets	5
Condensed Statements of Consolidated Cash Flows	7
Statement of Consolidated Stockholders' Equity	8

United Airlines, Inc.:
Statements of Consolidated Operations	9
Statements of Consolidated Comprehensive Income	10
Consolidated Balance Sheets	11
Condensed Statements of Consolidated Cash Flows	13
Statement of Consolidated Stockholder's Equity	14

Combined Notes to Condensed Consolidated Financial Statements (United Airlines Holdings, Inc. and United Airlines, Inc.)	15

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	37

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	38
Item 1A. Risk Factors	38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 6. Exhibits	40
Exhibit Index	40

Signatures	41



Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

UNITED AIRLINES HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)

(In millions, except per share amounts)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018 (a)			2019			2018 (a)
Operating revenue:
Passenger revenue	$	10,486		$	9,880		$	19,211		$	18,030
Cargo	295			314			581			607
Other operating revenue	621			583			1,199			1,172
Total operating revenue	11,402			10,777			20,991			19,809

Operating expense:
Salaries and related costs	3,057			2,878			5,930			5,604
Aircraft fuel	2,385			2,390			4,408			4,355
Regional capacity purchase	715			693			1,403			1,323
Landing fees and other rent	660			625			1,248			1,204
Depreciation and amortization	560			538			1,107			1,062
Aircraft maintenance materials and outside repairs	421			438			829			878
Distribution expenses	442			393			802			735
Aircraft rent	73			119			154			246
Special charges	71			129			89			169
Other operating expenses	1,546			1,429			3,054			2,826
Total operating expenses	9,930			9,632			19,024			18,402
Operating income	1,472			1,145			1,967			1,407

Nonoperating income (expense):
Interest expense	(191		)	(163		)	(379		)	(325		)
Interest capitalized	21			12			43			30
Interest income	38			25			67			42
Miscellaneous, net	14			(164		)	23			(117		)
Total nonoperating expense, net	(118		)	(290		)	(246		)	(370		)
Income before income taxes	1,354			855			1,721			1,037
Income tax expense	302			172			377			209
Net income	$	1,052		$	683		$	1,344		$	828
Earnings per share, basic	$	4.03		$	2.48		$	5.09		$	2.96
Earnings per share, diluted	$	4.02		$	2.48		$	5.07		$	2.95

(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842). See Note 1 to the financial statements contained in Part I, Item 1 of this report for additional information.

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.



Table of Contents

UNITED AIRLINES HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)

(In millions)



	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018 (a)		2019			2018 (a)
Net income	$	1,052		$	683	$	1,344		$	828

Other comprehensive income (loss), net of tax:
Employee benefit plans	(17		)	12		(10		)	42
Investments and other	3			—		6			(4		)
Total other comprehensive income (loss), net of tax	(14		)	12		(4		)	38

Total comprehensive income, net	$	1,038		$	695	$	1,340		$	866

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.



Table of Contents

UNITED AIRLINES HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, except shares)



	June 30, 2019			December 31, 2018 (a)
ASSETS
Current assets:
Cash and cash equivalents	$	3,221		$	1,694
Short-term investments	2,223			2,256
Receivables, less allowance for doubtful accounts (2019 — $9; 2018 — $8)	1,762			1,426
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2019 — $387; 2018 — $412)	996			985
Prepaid expenses and other	708			733
Total current assets	8,910			7,094
Operating property and equipment:
Flight equipment	33,890			32,599
Other property and equipment	7,371			6,889
Purchase deposits for flight equipment	1,351			1,177
Total operating property and equipment, at cost	42,612			40,665
Less — Accumulated depreciation and amortization	(13,694		)	(13,266		)
Total operating property and equipment, net	28,918			27,399

Operating lease right-of-use assets	4,908			5,262

Other assets:
Goodwill	4,523			4,523
Intangibles, less accumulated amortization (2019 — $1,410; 2018 — $1,380)	3,129			3,159
Restricted cash	105			105
Notes receivable, net	518			516
Investments in affiliates and other, net	1,139			966
Total other assets	9,414			9,269
Total assets	$	52,150		$	49,024

(continued on next page)



Table of Contents

UNITED AIRLINES HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, except shares)



	June 30, 2019			December 31, 2018 (a)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Advance ticket sales	$	6,126		$	4,381
Accounts payable	3,033			2,363
Frequent flyer deferred revenue	2,435			2,286
Accrued salaries and benefits	1,871			2,184
Current maturities of long-term debt	1,255			1,230
Current maturities of finance leases	117			123
Current maturities of operating leases	637			719
Other	604			553
Total current liabilities	16,078			13,839

Long-term debt	12,938			12,215
Long-term obligations under finance leases	202			224
Long-term obligations under operating leases	5,034			5,276

Other liabilities and deferred credits:
Frequent flyer deferred revenue	2,763			2,719
Postretirement benefit liability	1,277			1,295
Pension liability	1,366			1,576
Deferred income taxes	1,192			828
Other	980			1,010
Total other liabilities and deferred credits	7,578			7,428
Commitments and contingencies
Stockholders' equity:
Preferred stock	—			—
Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 257,729,166 and 269,914,769 shares at June 30, 2019 and December 31, 2018, respectively	3			3
Additional capital invested	6,096			6,120
Retained earnings	8,050			6,715
Stock held in treasury, at cost	(3,022		)	(1,993		)
Accumulated other comprehensive loss	(807		)	(803		)
Total stockholders' equity	10,320			10,042
Total liabilities and stockholders' equity	$	52,150		$	49,024

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.



Table of Contents

UNITED AIRLINES HOLDINGS, INC.

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)

(In millions)



	Six Months Ended June 30,
	2019			2018 (a)
Cash Flows from Operating Activities:
Net cash provided by operating activities	$	4,625		$	4,152

Cash Flows from Investing Activities:
Capital expenditures	(2,467		)	(1,671		)
Purchases of short-term and other investments	(1,443		)	(1,326		)
Proceeds from sale of short-term and other investments	1,484			1,455
Investment in affiliates	(27		)	(139		)
Loans made to others	—			(10		)
Other, net	17			38
Net cash used in investing activities	(2,436		)	(1,653		)

Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt	996			1,241
Payments of long-term debt	(473		)	(1,294		)
Repurchases of common stock	(1,062		)	(969		)
Principal payments under finance leases	(63		)	(35		)
Capitalized financing costs	(30		)	(25		)
Other, net	(30		)	(17		)
Net cash used in financing activities	(662		)	(1,099		)
Net increase in cash, cash equivalents and restricted cash	1,527			1,400
Cash, cash equivalents and restricted cash at beginning of the period	1,799			1,591
Cash, cash equivalents and restricted cash at end of the period (b)	$	3,326		$	2,991

Investing and Financing Activities Not Affecting Cash:
Property and equipment acquired through the issuance of debt	$	220		$	125
Operating lease conversions to finance lease	36			—
Right-of-use assets acquired through operating leases	99			103
Property and equipment acquired through finance leases	8			—

(b) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:



Cash and cash equivalents	$	3,221	$	2,884
Restricted cash (included in Prepaid expenses and other)	—		13
Restricted cash	105		94
Total cash, cash equivalents and restricted cash	$	3,326	$	2,991

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.



Table of Contents

UNITED AIRLINES HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY

(In millions)



	Common Stock				Additional Capital Invested			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	Shares		Amount		Additional Capital Invested			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at March 31, 2019	264.3		$	3	$	6,080		$	(2,487	)	$	6,999		$	(793	)	$	9,802
Net income	—		—		—			—			1,052			—			1,052
Other comprehensive loss	—		—		—			—			—			(14		)	(14		)
Stock settled share-based compensation	—		—		17			—			—			—			17
Repurchases of common stock	(6.6	)	—		—			(536		)	—			—			(536		)
Net treasury stock issued for share-based awards	—		—		(1		)	1			(1		)	—			(1		)
Balance at June 30, 2019	257.7		$	3	$	6,096		$	(3,022	)	$	8,050		$	(807	)	$	10,320

Balance at December 31, 2018 (a)	269.9		$	3	$	6,120		$	(1,993	)	$	6,715		$	(803	)	$	10,042
Net income	—		—		—			—			1,344			—			1,344
Other comprehensive loss	—		—		—			—			—			(4		)	(4		)
Stock settled share-based compensation	—		—		31			—			—			—			31
Repurchases of common stock	(12.7	)	—		—			(1,063		)	—			—			(1,063		)
Net treasury stock issued for share-based awards	0.5		—		(55		)	34			(9		)	—			(30		)
Balance at June 30, 2019	257.7		$	3	$	6,096		$	(3,022	)	$	8,050		$	(807	)	$	10,320

Balance at March 31, 2018 (a)	279.4		$	3	$	6,077		$	(1,314	)	$	4,736		$	(1,114	)	$	8,388
Net income (a)	—		—		—			—			683			—			683
Other comprehensive income	—		—		—			—			—			12			12
Stock settled share-based compensation	—		—		14			—			—			—			14
Repurchases of common stock	(6.4	)	—		—			(407		)	—			—			(407		)
Net treasury stock issued for share-based awards	—		—		—			1			—			—			1
Balance at June 30, 2018 (a)	273.0		$	3	$	6,091		$	(1,720	)	$	5,419		$	(1,102	)	$	8,691

Balance at December 31, 2017 (a)	287.0		$	3	$	6,098		$	(769	)	$	4,603		$	(1,147	)	$	8,788
Net income (a)	—		—		—			—			828			—			828
Other comprehensive income	—		—		—			—			—			38			38
Stock settled share-based compensation	—		—		29			—			—			—			29
Repurchases of common stock	(14.2	)	—		—			(976		)	—			—			(976		)
Net treasury stock issued for share-based awards	0.2		—		(36		)	25			(5		)	—			(16		)
Adoption of accounting standard related to equity investments	—		—		—			—			(7		)	7			—
Balance at June 30, 2018 (a)	273.0		$	3	$	6,091		$	(1,720	)	$	5,419		$	(1,102	)	$	8,691

The accompanying Combined Notes to Condensed Consolidated Financial Statements are an integral part of these statements.



Table of Contents

UNITED AIRLINES, INC.

STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)

(In millions)



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018 (a)		2019		2018 (a)
Operating revenue:
Passenger revenue	$	10,486	$	9,880	$	19,211	$	18,030
Cargo	295		314		581		607
Other operating revenue	621		583		1,199		1,172
Total operating revenue	11,402		10,777		20,991		19,809

Operating expense:
Salaries and related costs	3,057		2,878		5,930		5,604
Aircraft fuel	2,385		2,390		4,408		4,355
Regional capacity purchase	715		693		1,403		1,323
Landing fees and other rent	660		625		1,248		1,204
Depreciation and amortization	560		538		1,107		1,062
Aircraft maintenance materials and outside repairs	421		438		829		878
Distribution expenses	442		393		802		735
Aircraft rent	73		119		154		246
Special charges	71		129		89		169
Other operating expenses	1,546		1,428		3,053		2,825
Total operating expense	9,930