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UAL Corporation Reports Fourth Quarter 2009 Results
Losses Narrow, Liquidity Strengthened, Operational Improvements Continue
$176 Million 4Q09 Net Loss, Excluding Charges; $391 Million Improvement From Prior Year
$240 Million 4Q09 GAAP Net Loss; $1.1 Billion Improvement From Prior Year
Breakeven on Operating Basis Excluding Charges; $74 Million 4Q09 GAAP Operating Loss
Increased Unrestricted Cash Balance by $1 Billion During 2009
No. 1 On-Time Network Carrier for 2009 Based on Preliminary Industry Results
CHICAGO, Jan. 27, 2010UAL Corporation (Nasdaq: UAUA), the holding company whose primary subsidiary is United Airlines, reported results for the fourth quarter ended Dec. 31, 2009. The company:
- Reported a fourth quarter net loss of $176 million, or $1.05 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 $391 million compared to the fourth quarter of 2008. The company reported a GAAP net loss of $240 million, or $1.44 per basic share.
- Reported a full year 2009 net loss of $1.1 billion, excluding non-cash, net mark-to-market hedge gains and certain accounting charges, an improvement of $645 million compared to the full year 2008. The company reported a full year 2009 GAAP net loss of $651 million, an improvement of $4.7 billion compared to full year 2008.
- Consolidated passenger revenue per available seat mile (PRASM) for the fourth quarter declined 5.2% year-over-year, a significant sequential improvement compared to the 14.7% year-over-year decline in the third quarter of 2009.
- Mainline unit cost per available seat mile (CASM) for the quarter was up 1.1% year-over-year, excluding fuel and certain accounting charges, despite a reduction in mainline capacity of 6.0% year-over-year. Mainline CASM, including fuel and excluding non-cash, net mark-to-market fuel hedge gains and certain accounting charges, was down 9.0% year-over-year. GAAP mainline unit cost, including these items, was down 19.8%.
- Closed the quarter with total cash of $3.4 billion, unrestricted cash of more than $3.0 billion, and restricted cash of $341 million.
- Completed financings totaling more than $2.1 billion in the fourth quarter and approximately $700 million early in the first quarter 2010, generating approximately $1.8 billion in new liquidity and reducing fixed obligations in 2010 and 2011 by more than $700 million.
- Ranked No. 1 in on-time arrivals among the major network carriers for the fourth quarter and the full year 2009 based on preliminary industry results.
- Welcomed Continental to the Star Alliance and filed an application with All Nippon Airways and Continental for antitrust immunity across the Pacific, in order to create a joint venture similar to the already approved joint venture across the Atlantic with Lufthansa, Continental and Air Canada.
"Against a backdrop of extraordinary challenges in 2009, we responded with our best work. This has been a year of solid progress against our priorities of building network strength in key geographies, creating and maximizing revenue opportunities, and improving operational performance and customer satisfaction metrics, such as finishing first among network carriers in on-time performance," said Glenn Tilton, UAL Corporation chairman, president and CEO. "We have established tight cost control across the company, and, with strengthened liquidity, we are well positioned to continue to take actions to create a stronger United and improve our competitive position."
Revenue Trends Continue Improvement from the Third Quarter
For the fourth quarter, consolidated PRASM declined 5.2% year-over-year, an improvement of 9.5 percentage points compared to the third quarter of 2009. Consolidated yield declined 8.4% and consolidated load factor increased 2.8 percentage points year-over-year.
| Geographic Area |
|
4Q 2009 Passenger Revenue (millions)
(millions) |
|
Passenger Revenue % Inc. / (Dec.) vs. 4Q 2008 |
PRASM % Inc. / (Dec.) vs. 4Q 2008 |
ASM1 % Inc. / (Dec.) vs. 4Q 2008 |
| |
|
|
|
|
|
|
| Domestic |
|
$1,732 |
|
(12.9%) |
(8.5%) |
(4.8%) |
| |
|
|
|
|
|
|
| Pacific |
|
589 |
|
(15.9%) |
(7.8%) |
(8.7%) |
| Atlantic |
|
587 |
|
(1.7%) |
1.3% |
(3.1%) |
| Latin America |
|
93 |
|
(27.0%) |
(6.0%) |
(22.3%) |
| International |
|
$1,269 |
|
(10.9%) |
(3.6%) |
(7.7%) |
| |
|
|
|
|
|
|
| Mainline |
|
$3,001 |
|
(12.1%) |
(6.4%) |
(6.0%) |
| |
|
|
|
|
|
|
| Regional Affiliates |
|
812 |
|
8.0% |
(7.8%) |
17.2% |
| |
|
|
|
|
|
|
| Consolidated |
|
$3,813 |
|
(8.5%) |
(5.2%) |
(3.4%) |
| 1ASM: Available Seat Miles |
Cargo revenue for the quarter decreased 7.8% year-over-year. This is a significant improvement from prior quarters as the improved economic environment coupled with reduced industry cargo capacity has resulted in increased yields and higher quality traffic in a number of major markets.
Mainline Unit Costs Down 0.6 Percent Year-Over-Year for the Full Year 2009
Total consolidated expense, including fuel, was down $4.6 billion year-over-year for the full year 2009, excluding non-cash, net mark-to-market hedge gains and certain accounting charges. Consolidated expense, excluding fuel and certain accounting charges, was down $963 million or 7.5%, as the company continued its success in reducing non-fuel costs as capacity declined. Total GAAP consolidated expense, including these items, was down $8.1 billion for the year.
Mainline CASM, excluding fuel and certain accounting charges, increased by only 1.1% in the fourth quarter, despite a 6.0% decline in mainline capacity. For the full year, mainline CASM, excluding fuel and certain accounting charges, decreased 0.6%, despite a 9.7% decline in mainline capacity.
Consolidated CASM, excluding fuel and certain accounting charges, increased by only 1.0% year-overyear in the fourth quarter despite a 3.4% decline in consolidated capacity. GAAP mainline and consolidated CASM, including these items, were down 19.8% and 17.5% respectively, compared to the year-ago quarter.
70% of the Company's First Quarter 2010 Fuel Consumption Hedged
The company recorded $24 million in cash losses on fuel hedges that settled in the fourth quarter. In addition, the company also recorded non-cash, net mark-to-market gains on its fuel hedges of $103 million. The cash losses on the contracts that settled during the quarter were offset by $52 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 Dec. 31, 2009
(in millions) |
| |
Included in Fuel Expense |
|
Included in
Non-Operating Expense |
|
Total |
| Non-Cash Net Mark-to-Market Gain/(Loss) |
$65 |
$38 |
$103 |
| Cash net Gain/(Loss) on Settled Contracts |
9 |
(33) |
(24) |
| Total Recorded Net Gain |
$(74) |
$(5) |
$(79) |
| Return of Hedge Collateral |
|
|
$52 |
The company's hedge book consists of roughly 50% call options and 50% swaps, providing protection against rising fuel prices, while allowing significant downside participation if fuel prices fall. For the first quarter 2010, the company has capped 70% of its estimated consolidated fuel consumption at a crudeequivalent average price of $75 per barrel. For the full year 2010, the company has capped 40% of its estimated consolidated fuel consumption at a crude-equivalent average price of $77 per barrel. The company will benefit from about 80% downside participation for the full year 2010 if fuel prices fall.
Raised Substantial Liquidity in Improved Credit Markets
The company ended the quarter with a total cash balance of $3.4 billion, which included an unrestricted cash balance of more than $3.0 billion and restricted cash of $341 million.
During the fourth quarter, the company raised more than $2.1 billion from various transactions, adding
more than $1 billion in new liquidity. 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 $60
million from asset sales and private financings. The company also raised $1.5 billion from refinancing two
enhanced equipment trust certificates (EETCs), resulting in $380 million of incremental liquidity between
closing and repayment of the existing secured notes. Of the $380 million in incremental liquidity, $130
million was received in the fourth quarter 2009 and $250 million was received in January 2010. In
addition to generating incremental liquidity, the EETC refinancings reduced the companys debt
amortization by $440 million in 2010 and by $275 million in 2011.
This month, the company completed an additional secured debt offering which raised approximately $700
million in new liquidity. This new debt offering was secured by United's route authorities to operate
between the United States and Japan and beyond Japan to points in other countries, certain airport
takeoff and landing slots and airport gate leaseholds utilized in connection with these routes. To
accommodate the transfer of the collateral from Uniteds senior secured credit facility, the proceeds from
this debt offering will remain in escrow until April 2010.
During the fourth quarter, the company generated $88 million of positive operating cash flow and breakeven
free cash flow, defined as operating cash flow less capital expenditures. The company had
scheduled debt and net capital lease payments of $221 million during the fourth quarter and non-aircraft
capital expenditures of $87 million.
"We have clearly taken the liquidity issue off the table, having improved our unrestricted cash balance by
more than $1 billion and, through our refinancings, significantly lowered our fixed obligations over the next
few years, said Kathryn Mikells, UAL Corporation chief financial officer. With business and premium
traffic strengthening and the benefit of an improved cost structure, we are well on the road to closing the
profitability gap."
No. 1 On-Time Network Carrier for 2009
Based on preliminary industry results, United ranked first among the five U.S. network carriers in on-time
arrival performance in both the fourth quarter 2009 and full year 2009. The company had a recordbreaking
November with the best on-time performance since reporting to the Department of
Transportation began in October 1987. It also tied its best ever day for arrival performance on November
28, when more than 96% of flights were on time.
Business Highlights
- United announced a significant investment in the company's future with a widebody aircraft order
that will enable the carrier to reduce operating costs and better match aircraft to key markets it
serves, while providing its customers with state-of-the-art cabin comfort. The new technology
aircraft will reduce fuel burn and environmental impact, while enabling service to a broader array
of international destinations. United ordered 25 Airbus A350 XWB aircraft and 25 Boeing 787
Dreamliner aircraft and has future purchase rights for 50 of each aircraft type.
- United announced it will inaugurate its first-ever service to Africa in 2010, with one daily, sameplane
service from Washington to Accra, Ghana, continuing on to Lagos, Nigeria. The airline also
will extend its existing daily Washington-Kuwait flight to include Bahrain, and will offer a new
nonstop flight between Chicago and Brussels, Belgium, and a new seasonal nonstop flight
between Chicago and Rome, Italy.
- Following Continental Airlines' entry into Star Alliance, United, All Nippon Airways (ANA) and
Continental filed an application with the U.S. Department of Transportation for antitrust immunity.
This first-of-its kind U.S.-Pacific joint venture builds on United's presence in the region and will
enable the three carriers to generate substantial service and pricing benefits for consumers. The
joint venture would be similar to an already approved trans-Atlantic joint venture with Lufthansa,
Continental and Air Canada.
2010 Outlook
The company expects both mainline and consolidated CASM, excluding fuel, profit sharing and certain
accounting charges for the full year 2010 to be up 2.0% to 3.0% year-over-year. The full increase is
driven by unit cost pressures in four areas: revenue-related expenses, airport rents and landing fees,
Annual Incentive Plan accruals in 2010 and accelerated aircraft depreciation. Please refer to Q2 in the
Questions & Answers section on page 8 of this release for a description of the impact of these items on
2010 non-fuel unit cost.
The company expects scheduled debt and capital lease payments of approximately $700 million, nonaircraft
capital expenditures of approximately $350 million and aircraft pre-delivery deposits of
approximately $60 million for the full year 2010. 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, 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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