SEC Filing - United Airlines Holdings, Inc.

View:

Download DOC

Download PDF

Download XLS

Download XBRL

Document

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, 2020



☐	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.
001-06033	United Airlines Holdings, Inc.					Delaware	36-2675207
	233 South Wacker Drive,		Chicago,	Illinois	60606
	(872)	825-4000

001-10323	United Airlines, Inc.					Delaware	74-2099724
	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 of 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 17, 2020 is shown below:



United Airlines Holdings, Inc.	290,983,657	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, 2020

Table of Contents



	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
United Airlines Holdings, Inc.:
Statements of Consolidated Operations	3
Statements of Consolidated Comprehensive Income (Loss)	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 (Loss)	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	31
Item 3. Quantitative and Qualitative Disclosures About Market Risk	44
Item 4. Controls and Procedures	44

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	45
Item 1A. Risk Factors	45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 6. Exhibits	55
Exhibit Index	55

Signatures	57



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,
	2020			2019			2020			2019
Operating revenue:
Passenger revenue	$	681		$	10,486		$	7,746		$	19,211
Cargo	402			295			666			581
Other operating revenue	392			621			1,042			1,199
Total operating revenue	1,475			11,402			9,454			20,991

Operating expense:
Salaries and related costs	2,170			3,057			5,125			5,930
Aircraft fuel	240			2,385			1,966			4,408
Regional capacity purchase	388			715			1,125			1,403
Landing fees and other rent	429			660			1,052			1,248
Depreciation and amortization	618			560			1,233			1,107
Aircraft maintenance materials and outside repairs	110			421			544			829
Distribution expenses	31			442			326			802
Aircraft rent	47			73			97			154
Special charges (credit)	(1,449		)	71			(1,386		)	89
Other operating expenses	528			1,546			1,981			3,054
Total operating expenses	3,112			9,930			12,063			19,024
Operating income (loss)	(1,637		)	1,472			(2,609		)	1,967

Nonoperating income (expense):
Interest expense	(196		)	(191		)	(367		)	(379		)
Interest capitalized	17			21			38			43
Interest income	11			38			37			67
Unrealized gains (losses) on investments, net	9			34			(310		)	51
Miscellaneous, net	(207		)	(20		)	(906		)	(28		)
Total nonoperating expense, net	(366		)	(118		)	(1,508		)	(246		)
Income (loss) before income taxes	(2,003		)	1,354			(4,117		)	1,721
Income tax expense (benefit)	(376		)	302			(786		)	377
Net income (loss)	$	(1,627	)	$	1,052		$	(3,331	)	$	1,344
Earnings (loss) per share, basic	$	(5.79	)	$	4.03		$	(12.59	)	$	5.09
Earnings (loss) per share, diluted	$	(5.79	)	$	4.02		$	(12.59	)	$	5.07

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 (LOSS) (UNAUDITED)

(In millions)



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Net income (loss)	$	(1,627	)	$	1,052		$	(3,331	)	$	1,344

Other comprehensive income (loss), net of tax:
Employee benefit plans	(501		)	(17		)	(542		)	(10		)
Investments and other	13			3			1			6
Total other comprehensive income (loss), net of tax	(488		)	(14		)	(541		)	(4		)

Total comprehensive income (loss), net	$	(2,115	)	$	1,038		$	(3,872	)	$	1,340

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, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	6,505		$	2,762
Short-term investments	958			2,182
Receivables, less allowance for credit losses (2020 — $11; 2019 — $9)	857			1,364
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2020 — $464; 2019 — $425)	955			1,072
Prepaid expenses and other	766			814
Total current assets	10,041			8,194
Operating property and equipment:
Flight equipment	37,339			35,421
Other property and equipment	8,350			7,926
Purchase deposits for flight equipment	1,624			1,360
Total operating property and equipment	47,313			44,707
Less — Accumulated depreciation and amortization	(15,578		)	(14,537		)
Total operating property and equipment, net	31,735			30,170

Operating lease right-of-use assets	4,738			4,758

Other assets:
Goodwill	4,523			4,523
Intangibles, less accumulated amortization (2020 — $1,467; 2019 — $1,440)	2,852			3,009
Restricted cash	73			106
Notes receivable, less allowance for credit losses (2020 — $553)	141			671
Investments in affiliates and other, net	798			1,180
Total other assets	8,387			9,489
Total assets	$	54,901		$	52,611

(continued on next page)



Table of Contents

UNITED AIRLINES HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, except shares)



	June 30, 2020			December 31, 2019
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Advance ticket sales	$	4,950		$	4,819
Accounts payable	1,725			2,703
Frequent flyer deferred revenue	840			2,440
Accrued salaries and benefits	1,669			2,271
Current maturities of long-term debt	4,454			1,407
Current maturities of finance leases	93			46
Current maturities of operating leases	598			686
Payroll Support Program deferred credit	1,508			—
Other	558			566
Total current liabilities	16,395			14,938

Long-term debt	14,318			13,145
Long-term obligations under finance leases	316			220
Long-term obligations under operating leases	5,113			4,946

Other liabilities and deferred credits:
Frequent flyer deferred revenue	4,830			2,836
Postretirement benefit liability	957			789
Pension liability	2,221			1,446
Deferred income taxes	804			1,736
Other	1,430			1,024
Total other liabilities and deferred credits	10,242			7,831
Commitments and contingencies
Stockholders' equity:
Preferred stock	—			—
Common stock at par, $0.01 par value; authorized 1,000,000,000 shares; outstanding 290,982,216 and 251,216,381 shares at June 30, 2020 and December 31, 2019, respectively	3			3
Additional capital invested	7,307			6,129
Retained earnings	6,365			9,716
Stock held in treasury, at cost	(3,899		)	(3,599		)
Accumulated other comprehensive loss	(1,259		)	(718		)
Total stockholders' equity	8,517			11,531
Total liabilities and stockholders' equity	$	54,901		$	52,611

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,
	2020			2019
Cash Flows from Operating Activities:
Net cash provided (used) by operating activities	$	(67	)	$	4,625

Cash Flows from Investing Activities:
Capital expenditures, net of returns of purchase deposits on flight equipment	(1,998		)	(2,467		)
Purchases of short-term and other investments	(550		)	(1,443		)
Proceeds from sale of short-term and other investments	1,774			1,484
Other, net	14			(10		)
Net cash used in investing activities	(760		)	(2,436		)

Cash Flows from Financing Activities:
Proceeds from issuance of short-term debt	2,750			—
Proceeds from issuance of long-term debt	1,669			996
Proceeds from equity issuance	1,135			—
Payments of long-term debt	(523		)	(473		)
Repurchases of common stock	(353		)	(1,062		)
Principal payments under finance leases	(41		)	(63		)
Capitalized financing costs	(48		)	(30		)
Other, net	(18		)	(30		)
Net cash provided (used) in financing activities	4,571			(662		)
Net increase in cash, cash equivalents and restricted cash	3,744			1,527
Cash, cash equivalents and restricted cash at beginning of the period	2,868			1,799
Cash, cash equivalents and restricted cash at end of the period (a)	$	6,612		$	3,326

Investing and Financing Activities Not Affecting Cash:
Property and equipment acquired through the issuance of debt	$	327		$	220
Property and equipment acquired through other financial liabilities	280			—
Lease modifications and lease conversions	470			36
Right-of-use assets acquired through operating leases	48			99
Property and equipment acquired through finance leases	19			8

(a) 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	$	6,505	$	3,221
Restricted cash (included in Prepaid expenses and other)	34		—
Restricted cash	73		105
Total cash, cash equivalents and restricted cash	$	6,612	$	3,326

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 (UNAUDITED)

(In millions)



	Common Stock				Additional Capital Invested			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Total
	Shares		Amount		Additional Capital Invested			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at March 31, 2020	247.3		$	3	$	6,096		$	(3,901	)	$	7,991		$	(771	)	$	9,418
Net loss	—		—		—			—			(1,627		)	—			(1,627		)
Other comprehensive loss	—		—		—			—			—			(488		)	(488		)
Stock settled share-based compensation	—		—		20			—			—			—			20
Sale of common stock	43.7		—		1,135			—			—			—			1,135
Warrants issued	—		—		57			—			—			—			57
Net treasury stock issued for share-based awards	—		—		(1		)	2			1			—			2
Balance at June 30, 2020	291.0		$	3	$	7,307		$	(3,899	)	$	6,365		$	(1,259	)	$	8,517

Balance at December 31, 2019	251.2		$	3	$	6,129		$	(3,599	)	$	9,716		$	(718	)	$	11,531
Net loss	—		—		—			—			(3,331		)	—			(3,331		)
Other comprehensive loss	—		—		—			—			—			(541		)	(541		)
Stock settled share-based compensation	—		—		42			—			—			—			42
Sale of common stock	43.7		—		1,135			—			—			—			1,135
Repurchases of common stock	(4.4	)	—		—			(342		)	—			—			(342		)
Net treasury stock issued for share-based awards	0.5		—		(56		)	42			(3		)	—			(17		)
Warrants issued	—		—		57			—			—			—			57
Adoption of new accounting standard (a)	—		—		—			—			(17		)	—			(17		)
Balance at June 30, 2020	291.0		$	3	$	7,307		$	(3,899	)	$	6,365		$	(1,259	)	$	8,517

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 income	—		—		—			—			—			(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	269.9		$	3	$	6,120		$	(1,993	)	$	6,715		$	(803	)	$	10,042
Net income	—		—		—			—			1,344			—			1,344
Other comprehensive income	—		—		—			—			—			(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

(a) Transition adjustment due to the adoption of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses. 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, INC.

STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)

(In millions)



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Operating revenue:
Passenger revenue	$	681		$	10,486		$	7,746		$	19,211
Cargo	402			295			666			581
Other operating revenue	392			621			1,042			1,199
Total operating revenue	1,475			11,402			9,454			20,991

Operating expense:
Salaries and related costs	2,170			3,057			5,125			5,930
Aircraft fuel	240			2,385			1,966			4,408
Regional capacity purchase	388			715			1,125			1,403
Landing fees and other rent	429			660			1,052			1,248
Depreciation and amortization	618			560			1,233			1,107
Aircraft maintenance materials and outside repairs	110			421			544			829
Distribution expenses	31			442			326			802
Aircraft rent	47			73			97			154
Special charges (credit)	(1,449		)	71			(1,386		)	89
Other operating expenses	527			1,546			1,980			3,053
Total operating expense	3,111			9,930			12,062			19,023
Operating income (loss)	(1,636		)	1,472			(2,608		)	1,968

Nonoperating income (expense):
Interest expense	(196		)	(191		)	(367		)	(379		)
Interest capitalized	17			21			38			43
Interest income	11			38			37			67
Unrealized gains (losses) on investments, net	9