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UAL Corporation Reports Second Quarter 2009 Results
United Continues to Improve Quality, Reduce Costs and Build Liquidity
- $323 Million 2Q09 Net Loss ex. Non-Cash Hedge Gains and Other Charges; $28 Million GAAP Net Profit
- Consolidated 2Q09 PRASM Down 17.2% vs. 2Q08
- Mainline Non-Fuel CASM ex. Charges Down 1.2% vs. 2Q08; GAAP CASM Down 50.2%
- Improved Full Year 2009 Outlook for Non-Fuel Costs by an Additional $150 Million
- Announced an Additional 7% International Capacity Reduction for the Last Four Months of 2009
- Improved Liquidity; Closed the Quarter with $2.6 Billion in Unrestricted Cash
- Raised an Additional $155 Million in Liquidity Early in 3Q09
- DOT Approved Continental's Application to Join Immunized Alliance with United and Other Star Members
CHICAGO, July, 21, 2009 - UAL Corporation (NASDAQ: UAUA), the holding company whose primary subsidiary is United Airlines, reported results for the second quarter ended June 30, 2009. The company:
- Reported a second quarter net loss of $323 million or $2.23 per basic share excluding non-cash, net mark-to-market hedge gains and certain accounting charges outlined in note 6 of the attached statement of consolidated operations. The company reported a GAAP net profit of $28 million or $0.19 per diluted share, including these items.
- Reported a year-over-year 17.2% decline in second quarter consolidated passenger unit revenue per available seat mile (PRASM).
- Continued to control costs with mainline non-fuel unit cost per available seat mile (CASM) for the quarter down 1.2% year-over-year, excluding certain accounting charges and despite a reduction in mainline capacity of 10.8% year-over-year. Mainline CASM, including fuel and excluding non-cash, net mark-to-market fuel hedge gains, impairments and certain accounting charges, was down 20.4% year-over-year. GAAP mainline CASM, including these items, was down 50.2%.
- Improved its full year outlook for mainline non-fuel CASM, excluding profit sharing and certain accounting charges, to down 0.5% to up 0.5% year-over-year. This reflects a $150 million increase in full year savings, bringing the full year cost reduction to $300 million compared to the company's initial 2009 non-fuel CASM outlook provided on Jan. 21, 2009. The company also reduced planned capital expenditures to $300 million, a reduction of $150 million from the $450 million the company originally planned for 2009.
- Announced an additional international capacity reduction of 7% for the last four months of 2009.
- Closed the quarter with total cash of $2.8 billion, unrestricted cash of $2.6 billion, and restricted cash of $281 million. In addition, fuel hedge collateral was $185 million.
- Raised approximately $155 million in additional cash early in the third quarter through a spare parts financing transaction.
- Ranked No. 1 year-to-date through May in on-time performance among the five major U.S. network carriers. To date, the company has paid $430 per person in on-time incentive payments to each of more than 40,000 front-line employees, or more than $18 million in total, under its new on-time incentive program.
- Received approval from the U.S. Department of Transportation (DOT) for Continental Airlines to join the existing antitrust-immunized alliance including United and eight other Star Alliance member carriers.
"This is a resilient industry, and we are a resilient company," said Glenn Tilton, UAL Corporation chairman, president and CEO. "While there is much outside our control - including the state of the economy and the price of oil - we are focused and executing against those things we can control. We're running a good airline, with industry-leading cost control and best-in-class operational performance."
Weak Global Economy Continues To Affect Revenues
For the quarter, consolidated PRASM declined 17.2%, consolidated yield declined 16.8% and consolidated load factor declined 0.4 points year-over-year. Growth in certain ancillary revenues, including bag fees and ticket change fees, improved consolidated PRASM by 1.5 percentage points year-over-year.
| Geographic Area |
|
1Q 2009 Passenger Revenue
(millions) |
|
Passenger Revenue % Increase / (Decrease) |
PRASM % Increase / (Decrease) |
ASM1 % Increase / (Decrease) |
| |
|
|
|
|
|
|
| Domestic |
|
$1,788 |
|
(26.0%) |
(14.7%) |
(13.2%) |
| |
|
|
|
|
|
|
| Pacific |
|
518 |
|
(37.7%) |
(28.9%) |
(12.4%) |
| Atlantic |
|
563 |
|
(22.0%) |
(22.5%) |
(0.6%) |
| Latin America |
|
72 |
|
(45.4%) |
(34.1%) |
(17.2%) |
| International |
|
$1.153 |
|
(31.6%) |
(25.9%) |
(7.7%) |
| |
|
|
|
|
|
|
| Mainline |
|
$2.941 |
|
(28.3%) |
(19.5%) |
(10.8%) |
| |
|
|
|
|
|
|
| Regional Affiliates |
|
749 |
|
(6.0%) |
(12.2%) |
7.1% |
| |
|
|
|
|
|
|
| Consolidated |
|
$3,690 |
|
(24.6%) |
(17.2%) |
(9.0%) |
| 1ASM: Available Seat Miles |
Cargo revenue for the quarter decreased 49% year-over-year as a result of lower demand, softer yields, lower fuel surcharges and reduced international capacity. United's significant presence in the Pacific export markets, which have been particularly impacted by the weakness in the global economy, continues to disproportionately affect its cargo revenue.
Continued Strong Cost Performance
Total consolidated expense, including fuel, was down more than $1.5 billion year-over-year in the second quarter, excluding non-cash, net mark-to-market hedge gains, impairment charges and certain accounting charges. Consolidated expense, excluding fuel, impairments and certain accounting charges, was down $288 million or 8.9%, as the company continued its efforts to successfully reduce costs as capacity declined. Total GAAP consolidated expense including these items was down $4.2 billion for the quarter, reflecting lower fuel costs, decreased capacity and impairment charges that were recorded last year.
Mainline CASM, excluding fuel and certain accounting charges, decreased 1.2% in the second quarter, despite a 10.8% decline in mainline capacity. This CASM reduction is about 1.5 percentage points better than the guidance provided by the company in June. Since January, the company has reduced its projected full year mainline non-fuel costs by about $300 million.
Consolidated CASM, excluding fuel and certain accounting charges, increased only 0.1%, despite a 9.0% decline in consolidated capacity. GAAP mainline and consolidated CASM, including these items, were down 50.2% and 46.7% respectively, compared to the year-ago quarter, reflecting the impact of lower fuel prices and impairment charges that were recorded last year.
Fuel Hedge Collateral Returns Offset Cash Hedge Losses
The company recorded $252 million in cash losses on fuel hedges that settled in the quarter. In addition, the company also recorded non-cash, net mark-to-market gains on its fuel hedges of $440 million. The cash losses on the contracts that settled during the quarter were offset by $385 million in cash collateral that was returned during the quarter. The table below details hedge impacts for the quarter:
Fuel Hedge Impacts |
Three Months Ending March 31, 2009
(in millions) |
| |
Included in Fuel Expense |
|
Included in
Non-Operating Expense |
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Total |
| Non-Cash Net Mark-to-Market Gain/(Loss) |
$305 |
$135 |
$440 |
| Cash net Gain/(Loss) on Settled Contracts |
(157) |
(95) |
(252) |
| Total Recorded Net Gain |
$148 |
$40 |
$188 |
| Return of Hedge Collateral |
|
|
$385 |
The company continues to systematically add to its fuel hedge portfolio using call options and swaps on crude oil, heating oil and jet fuel. For the second half of 2009, the company has hedged 64% of its estimated consolidated fuel requirements. Of this 64%, approximately 48% is hedged using call and swap options at a crude equivalent cap of $65 per barrel. The remaining 16% uses a variety of hedge structures (Collars, 3-way collars and 4-way collars) entered into last year. For 2010, the company has hedged 11% of its estimated consolidated fuel requirements using call options at an average crude equivalent price of $73 per barrel and swaps at an average crude equivalent price of $75 per barrel.
United Improves Liquidity
The company ended the quarter with a total cash balance of $2.8 billion, an unrestricted cash balance of $2.6 billion and restricted cash of $281 million. The company also had $185 million in cash deposits held by its fuel hedge counterparties.
During the second quarter, the company generated $396 million of positive operating cash flow and $305 million of positive free cash flow, defined as operating cash flow less capital expenditures. The company had scheduled debt and net capital lease payments of $212 million during the quarter and non-aircraft capital expenditures of $91 million.
"We are taking aggressive actions to position United for recovery, including reducing our international capacity by an additional 7 percent later this year, implementing industry-leading unit cost reductions, and bolstering our liquidity," said Kathryn Mikells, United senior vice president and chief financial officer. "We have more than $1 billion in unencumbered assets, and a proven track record of leveraging those assets to raise capital."
No. 1 Year-to-Date May On-Time Performance Ranking - Customer Satisfaction Improves
United ranked first among the five U.S. network carriers in year-to-date May 2009 on-time performance. According to DOT statistics, 80% of United flights arrived within 14 minutes of their scheduled arrival time, representing a considerable improvement from last year.
The company also continues to improve its key customer satisfaction measure among its best customers, with a significant improvement for the third consecutive quarter. Improvements were achieved across the travel experience, including aircraft cleanliness, seat and entertainment product workability, and employee courtesy.
Business Highlights
- United completed conversion of all of its B767s to its new international premium class configuration. United has also completed converting 18 of 24 aircraft in its B747 fleet, with the remaining B747s scheduled to be completed by October 2009. The company will begin the conversion of its B777s in February 2010.
- United is rolling out Premier Line at 50 additional airport locations. Premier Line offers customers the ability to purchase priority access to specifically reserved lines at check-in, security (where available) and boarding.
2009 Outlook
In an effort to better match supply with demand, the company will further reduce international capacity by 7% in the last four months of 2009. Despite these capacity reductions, the company expects mainline CASM, excluding fuel, profit sharing and certain accounting charges, for the full year 2009 to be down 0.5% to up 0.5% year-over-year, an improvement of $150 million compared to the company's April guidance, and a full $300 million compared to the company's January guidance.
The company expects scheduled debt and capital lease payments of $460 million for the remainder of 2009. Complete details on Uniteds outlook can be found in the Investor Update, available at united.com/ir.
Questions & Answers
Additional information can be found in the Q&A section of this release.
About United
United Airlines (Nasdaq: UAUA) operates approximately 3,300* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 916 destinations in 160 countries worldwide. United's 48,000 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company's Web site at united.com.
*Based on United's forward-looking flight schedule for July 2009 to June 2010
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements contained in or incorporated by reference in this press release are forward-looking and thus reflect United Air Lines, Inc.'s (referred to herein as "United") and UAL Corporation's (referred to herein as "UAL") 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 Uniteds and UAL's 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 contained or incorporated by reference in this press release are based upon information available to us on the date such statements are made. 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. Uniteds and UAL's 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 amended credit facility and other financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our operational plans; our ability to control our costs, including realizing benefits from our resource optimization efforts and cost reduction initiatives; 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; the demand for travel and the impact the economic recession has on customer travel patterns; the increasing reliance on enhanced video-conferencing and other technology as a means of conducting virtual meetings; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aviation fuel and refining capacity in relevant markets); our ability to cost-effectively hedge against increases in the price of aviation fuel; any potential realized or unrealized gains or losses related to fuel or currency hedging programs; the effects of any hostilities, act of war or terrorist attack; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the costs and availability of aviation and other insurance; the costs associated with security measures and practices; industry consolidation; competitive pressures on pricing and on demand; capacity decisions of United and/or our competitors; U.S. or foreign governmental legislation, regulation and other actions (including open skies agreements); labor costs, our ability to maintain satisfactory labor relations and the results of the collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; weather conditions; and other risks and uncertainties, including those set forth under the caption Risk Factors in Item 1A. of the 2008 Annual Report, as well as other risks and uncertainties set forth from time to time in the reports we file with the Securities Exchange Commission. Consequently, forward-looking statements should not be regarded as representations or warranties by United or UAL that such matters will be realized.
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