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UAL Corporation Reports Third Quarter 2009 Results
Reported Operating Profit, Narrowed Loss and Enhanced Liquidity
$123 Million 3Q09 Operating Profit, Excluding Charges; $88 Million 3Q09 GAAP Operating Profit
$63 Million 3Q09 Net Loss, Excluding Charges; $57 Million 3Q09 GAAP Net Loss
$1.5 Billion Financing in 3Q09 and Early 4Q09, Including Nearly $1 Billion in New Liquidity
PRASM Down 14.7% vs. 3Q08; Improvement From 2Q09
Mainline CASM, ex. Fuel and Charges, Down 1.6% vs. 3Q08; Total GAAP Mainline CASM Down 24.8% vs. 3Q08
CHICAGO, Oct. 20, 2009 - UAL Corporation (Nasdaq: UAUA), the holding company whose primary subsidiary is United Airlines, reported results for the third quarter ended Sept. 30, 2009. The company:
- Reported a net loss of $63 million, or $0.43 per basic share, excluding non-cash, net mark-to-market hedge gains and certain accounting charges as outlined in note 6 of the attached statement of consolidated operations, narrowing its net loss by $202 million compared to the third quarter of 2008. The company reported a GAAP net loss of $57 million, or $0.39 per basic share.
- Reported a year-over-year decline in consolidated passenger revenue per available seat mile (PRASM) of 14.7%, a 2.5-percentage-point improvement compared to the 17.2% decline in the second quarter of 2009.
- Delivered a third consecutive quarter of non-fuel unit cost reduction, with mainline unit cost per available seat mile (CASM) for the quarter down 1.6% year-over-year, excluding fuel and certain accounting charges, despite a reduction in mainline capacity of 8.2% year-over-year. Mainline CASM, including fuel and excluding non-cash, net mark-to-market fuel hedge gains and certain accounting charges, was down 20.3% year-over-year. GAAP mainline unit cost, including these items, was down 24.8%.
- Closed the quarter with total cash of $2.8 billion, unrestricted cash of more than $2.5 billion, and restricted cash of $309 million.
- Completed financings totaling more than $1.5 billion, including $270 million in the third quarter and nearly $1.3 billion early in the fourth quarter, raising roughly $1 billion in new liquidity. Through these financings, the company also reduced its debt and net capital lease obligations for 2010 by $215 million and for 2011 by $100 million.
- As a part of the $1.3 billion in early fourth quarter financings, the company completed a $129 million financing with SkyWest, Inc., one of its regional flying partners. The agreement includes a contract extension on 40 existing aircraft as well as commitments for a small number of additional aircraft.
- Ranked No. 2 in on-time arrivals among the major network carriers year-to-date through September, trailing the leader by less than one half of one percentage point.
- Continued to improve the quality of its products and services, with customer satisfaction scores significantly improving across the board compared to last year.
"Against a challenging environment, our people are delivering improvements across the business. With the work we have done and the strength of our network, we are poised to see better year-over-year unit revenue performance as economies begin to recover and business travel returns," said Glenn Tilton, UAL Corporation chairman, president and CEO. "We are again demonstrating that we can improve customer satisfaction and on-time performance even while reducing our unit costs."
Unit Revenue Pressure Moderates From Second Quarter 2009
For the third quarter, consolidated PRASM declined 14.7%, an improvement of 2.5 percentage points compared to the second quarter of 2009. Consolidated yield declined 17.1% and consolidated load factor increased 2.5 points year-over-year. During the quarter, the company recorded a favorable $36 million adjustment to revenue due to certain tax adjustments.
| Geographic Area |
|
3Q 2009 Passenger Revenue (millions)
(millions) |
|
Passenger Revenue % Inc. / (Dec.) vs. 3Q 2008 |
PRASM % Inc. / (Dec.) vs. 3Q 2008 |
ASM1 % Inc. / (Dec.) vs. 3Q 2008 |
| |
|
|
|
|
|
|
| Domestic |
|
$1,951 |
|
(22.9%) |
(14.2%) |
(10.2%) |
| |
|
|
|
|
|
|
| Pacific |
|
606 |
|
(30.0%) |
(23.9%) |
(7.9%) |
| Atlantic |
|
635 |
|
(16.3%) |
(16.1%) |
(0.3%) |
| Latin America |
|
75 |
|
(40.2%) |
(26.7%) |
(18.4%) |
| International |
|
$1,316 |
|
(24.8%) |
(20.3%) |
(5.6%) |
| |
|
|
|
|
|
|
| Mainline |
|
$3,267 |
|
(23.7%) |
(16.8%) |
(8.2%) |
| |
|
|
|
|
|
|
| Regional Affiliates |
|
844 |
|
1.2% |
(12.3%) |
15.3% |
| |
|
|
|
|
|
|
| Consolidated |
|
$4,111 |
|
(19.6%) |
(14.7%) |
(5.7%) |
| 1ASM: Available Seat Miles |
Cargo revenue for the quarter decreased 43% year-over-year as a result of lower volumes and continued pressure on yields due to the weak economy. 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.
Non-Fuel Unit Costs Declined Year-Over-Year for the Third Consecutive Quarter
Total consolidated expense, including fuel, was down $1.4 billion year-over-year in the third quarter, excluding non-cash, net mark-to-market hedge gains and certain accounting charges. Consolidated expense, excluding fuel and certain accounting charges, was down $214 million or 6.7%, as the company continued its success in reducing costs as capacity declined. Total GAAP consolidated expense, including these items, was down $1.7 billion for the quarter.
Mainline CASM, excluding fuel and certain accounting charges, decreased 1.6% in the third quarter, despite an 8.2% decline in mainline capacity. This CASM reduction is about one percentage point better than the guidance provided by the company in September.
Consolidated CASM, excluding fuel and certain accounting charges, decreased 1.0% despite a 5.7% decline in consolidated capacity. GAAP mainline and consolidated CASM, including these items, was down 24.8% and 23.9% respectively, compared to the year-ago quarter.
Fuel Hedge Collateral Returns Offset Cash Hedge Losses
The company recorded $131 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 $59 million. The cash losses on the contracts that settled during the quarter were offset by $123 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 Sept. 30, 2009
(in millions) |
| |
Included in Fuel Expense |
|
Included in
Non-Operating Expense |
|
Total |
| Non-Cash Net Mark-to-Market Gain/(Loss) |
$25 |
$34 |
$59 |
| Cash net Gain/(Loss) on Settled Contracts |
(92) |
(39) |
(131) |
| Total Recorded Net Gain |
$(67) |
$(5) |
$(72) |
| Return of Hedge Collateral |
|
|
$123 |
For the fourth quarter, the company has hedged 55% of its estimated consolidated fuel consumption at an average price of $75 per barrel. Excluding the legacy positions put in place in 2008, the company has hedged 43% of estimated consumption at an average price of $63 per barrel. For the full year 2010, the company has hedged 16% of its estimated consolidated fuel consumption at an average price of $74 per barrel, including hedge coverage of 43% of estimated first quarter 2010 consumption at an average price of $74 per barrel.
Raised $1.5 Billion in New Financing, Including Nearly $1.0 Billion in New Liquidity
The company ended the quarter with a total cash balance of $2.8 billion, an unrestricted cash balance of more than $2.5 billion and restricted cash of $309 million.
The company raised approximately $270 million in the third quarter including $155 million from the spare parts financing previously announced in July 2009, $27 million from issuances of common equity to complete the December 2008 offering, $70 million from aircraft secured financings and approximately $20 million from asset sales.
Early in the fourth quarter, the company raised an additional $1.3 billion. This includes $345 million from a convertible debt offering, $138 million from the issuance of common equity, $129 million from a financing with SkyWest, Inc. and $659 million from refinancing an enhanced equipment trust certificate (EETC), resulting in $90 million of incremental liquidity between closing and repayment of the existing secured notes. In addition to generating incremental liquidity, the EETC refinancing also reduced the company's debt amortization for 2010 by $215 million and for 2011 by $100 million.
During the third quarter, the company generated $56 million of positive operating cash flow and $4 million of negative free cash flow, defined as operating cash flow less capital expenditures. The company had scheduled debt and net capital lease payments of $264 million during the third quarter and non-aircraft capital expenditures of $60 million.
"We have made significant progress relative to last year, reporting an operating profit of $123 million excluding charges, and generating what we believe will again be leading cost control among our peers, reducing our mainline unit costs even as we reduce capacity," said Kathryn Mikells, UAL Corporation's chief financial officer. "We continue to take action to improve our liquidity, and after successfully executing about $1.5 billion in transactions over the last four months, our unrestricted cash balance today stands at more than $3.1 billion, with only about $90 million in debt payments remaining this year."
Strong On-Time Performance and Customer Satisfaction Improvements Continue
United ranked second among the five U.S. network carriers in year-to-date 2009 on-time arrival performance through September, falling just one half of one percentage point behind the No. 1 spot. For the third quarter of 2009, United ranked third in on-time arrival performance, trailing the top spot by less than one percentage point.
The company continues to improve its key customer satisfaction measures among its best customers, with a significant improvement for the fourth consecutive quarter. Improvements were achieved across the travel experience, including aircraft cleanliness, seat and entertainment product workability, and employee courtesy.
Business Highlights
- UAL Corporation announced that Jane C. Garvey, former administrator of the Federal Aviation Administration, has joined the UAL Board of Directors.
- United announced it will be moving its Operations Center to Willis Tower in downtown Chicago. The City of Chicago and United have agreed to an economically viable incentive program that will ensure the city is competitive with other locations and that will make financial sense for United. The package, including tax incentives, grants and job training programs, will be used to offset United's capital and facility build-out costs.
- United announced that it will begin offering unlimited domestic upgrades to Mileage Plus members with elite status starting in the second quarter of 2010. In addition, Mileage Plus frequent flyers may now use their miles to book hotel stays worldwide and car rentals in the United States and Canada through a simple online booking process at united.com/hotelandcarawards.
- United announced the introductory launch of Premier Baggage, the latest addition to the Travel Options by Unitedsm portfolio, enabling customers to pay a flat price to check two standard bags at no additional cost every time they fly on a United- or United Express-operated flight in a year.
- United completed conversion of all of its B747s and B767s to its new international premium class configuration. Beginning in February 2010, the company will begin conversion of its B777s.
2009 Outlook
The company expects mainline CASM, excluding fuel, profit sharing and certain accounting charges for the full year 2009 to be down 0.5% to flat year-over-year. Since the company's original guidance in January, it has reduced its projected full year mainline non-fuel costs by more than $350 million.
The company expects scheduled debt and capital lease payments of $215 million and capital expenditures of approximately $70 million for the fourth quarter 2009. Complete details on United's 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, beginning on page 8.
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 47,000 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 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 report are based upon information available to us on the date of this report. 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. 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 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; 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 our 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 U.S. Securities and Exchange Commission ( SEC ). Consequently, forward-looking statements should not be regarded as representations or warranties by UAL or United that such matters will be realized.
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