United reports a 1Q net loss of $417 million

United Airlines (Chicago) today reported a first-quarter 2013 net loss of $325 million, or $0.98 per share, excluding $92 million of special charges. Including special charges, UAL reported a first-quarter 2013 net loss of $417 million, or $1.26 per share.

  • The company achieved its best first-quarter on-time performance in a decade, with 81.0 percent of mainline flights, including both domestic and international flights, arriving within 14 minutes of scheduled arrival time.
  • UAL’s first-quarter 2013 consolidated passenger revenue increased 0.7 percent year-over-year on a consolidated capacity reduction of 4.9 percent. First-quarter consolidated passenger revenue per available seat mile (PRASM) increased 5.9 percent compared to the same period in 2012.
  • First-quarter 2013 consolidated unit costs (CASM), holding fuel rate and profit sharing constant and excluding special charges and third-party business expense, increased 7.2 percent year-over-year on a consolidated capacity reduction of 4.9 percent. First-quarter 2013 consolidated CASM increased 6.5 percent year-over-year.
  • UAL ended the first quarter with $6.4 billion in unrestricted liquidity.

“Our co-workers pulled together in the first quarter to significantly improve our operational performance and customer service despite challenging weather and high load factors, and I want to thank them for their hard work,” said Jeff Smisek, chairman, president and chief executive officer. “Although this was a difficult quarter financially, I’m very proud of our team.”

First-Quarter Revenue and Capacity

For the first quarter of 2013, total revenue was $8.7 billion, an increase of 1.4 percent year-over-year. First-quarter consolidated passenger revenue increased 0.7 percent to $7.6 billion, compared to the same period in 2012.

Consolidated revenue passenger miles (RPMs) decreased 1.2 percent on a consolidated capacity (available seat miles) decrease of 4.9 percent year-over-year for the first quarter. First-quarter 2013 consolidated load factor was 81.1 percent, an increase of 3.0 points versus the first quarter of 2012.

First-quarter 2013 consolidated PRASM increased 5.9 percent compared to the same period in 2012. Consolidated yield for the first quarter of 2013 increased 1.9 percent year-over-year.

Mainline RPMs in the first quarter of 2013 decreased 1.6 percent on a mainline capacity decrease of 5.0 percent year-over-year, resulting in a first-quarter mainline load factor of 81.4 percent. Mainline yield for the first quarter of 2013 increased 1.3 percent compared to the same period in 2012. First-quarter 2013 mainline PRASM increased 5.0 percent year-over-year.

“We are encouraged by our unit revenue performance this quarter, and we are working hard to build on our overall revenue progress this year,” said Jim Compton, UAL’s vice chairman and chief revenue officer. “My co-workers’ continued focus on our operational performance and customer service directly contributed to our improved revenue results.”

Passenger revenue for the first quarter of 2013 and period-to-period comparisons of related statistics for UAL’s mainline and regional operations are as follows:

1Q 2013PassengerRevenue  (millions) Passenger Revenue vs.1Q 2012 PRASM  vs. 1Q 2012 Yield vs. 1Q 2012 Available Seat Miles   vs.
1Q 2012
Domestic $2,909 (1.1%) 3.6% 1.1% (4.5%)
Atlantic 1,185 (0.3%) 11.0% 6.9% (10.2%)
Pacific 1,143 4.0% 7.2% 0.7% (3.0%)
Latin America 701 (3.4%) (2.6%) (5.6%) (0.8%)
International 3,029 0.5% 6.5% 1.5% (5.6%)
Mainline 5,938 (0.3%) 5.0% 1.3% (5.0%)
Regional 1,621 4.3% 8.8% 2.9% (4.1%)
Consolidated $7,559 0.7% 5.9% 1.9% (4.9%)

Year-over-year cargo and other revenue in the first quarter of 2013 increased 6.2 percent, or $68 million, to $1.2 billion.

First-Quarter Costs

First-quarter total operating expenses increased $112 million, or 1.3 percent, year-over-year. Third-party business expense was $121 million in the first quarter.

Consolidated and mainline CASM, excluding special charges and third-party business expense, increased 6.8 percent and 8.3 percent, respectively, in the first quarter of 2013 compared to the same period of 2012. First-quarter consolidated and mainline CASM, including special charges, increased 6.5 and 7.9 percent year-over-year, respectively.

In the first quarter, consolidated and mainline CASM, excluding special charges and third-party business expense and holding fuel rate and profit sharing constant, increased 7.2 percent and 8.6 percent, respectively, compared to the results for the same period in 2012.

“We are focused companywide on operating more efficiently. Moreover, we are building an infrastructure to achieve our return-on-invested-capital goals and generate long-term returns,” said John Rainey, UAL’s executive vice president and chief financial officer. “Our balance sheet is the healthiest it’s been in years, and that benefits everyone—co-workers, customers and investors.”

Liquidity, Cash Flow and Return on Invested Capital

UAL ended the quarter with $6.4 billion in unrestricted liquidity, including $1.0 billion of undrawn commitments under its new revolving credit facility. During the first quarter, the company generated $393 million of operating cash flow and had gross capital expenditures and purchase deposits of $526 million. The company made debt and capital lease principal payments of $1.3 billion in the first quarter, including $1.0 billion of prepayments. The company’s return on invested capital for the 12 months ended March 31, 2013, was 8.0 percent, below the company’s goal of 10 percent.

First-Quarter 2013 Events

  • United Airlines achieved a U.S. Department of Transportation first-quarter domestic on-time arrival rate of 81.4 percent, exceeding 80 percent in each month of the quarter. For international flights, United recorded an on-time arrival rate of 79.7 percent for the quarter. The on-time arrival rates are based on flights arriving within 14 minutes of scheduled arrival time. This was the best first-quarter on-time performance for the carrier in a decade.
  • United co-workers earned cash incentive payments totaling $22 million for on-time performance during the first quarter.
  • Co-workers earned $4.4 million for reaching the company’s customer-satisfaction target for the first quarter, as measured through online surveys of MileagePlus members flying United and United Express. United also awarded $125,000 to select employees of United and United Express for excellence in customer service as part of the company’s Outperform Recognition Program.
  • United continued its comprehensive customer service training program for all customer-facing agents and flight attendants worldwide, and nearly 13,000 co-workers completed the training in the first quarter.
  • During the first quarter, United replaced its $1.2 billion term loan due 2014 with a new $900 million term loan due 2019, and reduced the principal balance by $300 million in the process. Simultaneously, United entered into a new $1.0 billion revolving credit facility due 2018 that replaced the company’s $500 million undrawn revolving credit facility due 2015, bolstering the company’s unrestricted liquidity position.
  • The company pre-paid $400 million of its 9.875 percent Senior Secured Notes and $200 million of its 12.0 percent Senior Second Lien Notes during the first quarter.
  • United broke ground on a new widebody aircraft maintenance hangar at Newark Liberty International Airport and is constructing a new maintenance hangar at Washington Dulles International Airport, boosting United’s maintenance capabilities on the East Coast. The company signed a 10-year lease extension on its Maintenance Operations Center at San Francisco International Airport, United’s largest maintenance facility.
  • United opened the airline’s new employee health clinic at Chicago O’Hare International Airport, offering convenient on-site health services to co-workers at no charge.
  • The company took delivery of six Boeing 737-900ERs and removed from service three Boeing 737-500s and two Boeing 757-200s.
  • The company reached an agreement to sell up to 30 Boeing 757-200 aircraft to FedEx.
  • During the quarter, the company expanded its industry-leading global route network, launching new nonstop service to Nassau, Bahamas; Fort Lauderdale, Fla.; and Oklahoma City, Okla. United also added two new cities to its network, Fayetteville, N.C., and Thunder Bay, Ontario, Canada. The company announced future new nonstop markets, including the company’s first nonstop service to Dickinson, N.D., as well as additional service to Portland, Ore.; Austin, Texas; San Jose del Cabo, Mexico; Saskatoon, Saskatchewan, Canada; Anchorage, Alaska; Traverse City, Mich.; and Charleston, S.C. The airline also announced it will resume nonstop daily service from Chicago to San Juan, Puerto Rico.
  • United relaunched the Premier Access program offering customers access to expedited check-in and security checkpoint lanes along with priority boarding.
  • United launched a new baggage delivery option, enabling customers to have their checked bags delivered directly to their final destinations and skip baggage claim upon arrival. The airline will expand the service to more than 190 domestic airports in the coming months.
  • The company unveiled a new lounge standard at its United Club in Terminal 2 at Chicago O’Hare International Airport, the first to feature a new design that the airline will use when building and renovating lounges worldwide. The airline is investing more than $50 million to renovate many of its United Clubs, with three more United Clubs to be renovated this year.
  • The carrier introduced its first reconfigured transcontinental “p.s.,” Premium Service, aircraft equipped with flat-bed seats, all-new interiors, personal on-demand entertainment, Wi-Fi connectivity, in-seat power and USB ports. United offers p.s. on all nonstop flights between New York Kennedy and both Los Angeles and San Francisco.
  • The company ramped up installation of global satellite-based Wi-Fi on its mainline fleet and currently offers satellite-based Wi-Fi on 38 of its aircraft, becoming the first U.S.-based international carrier to offer customers the ability to stay connected while traveling on long-haul overseas routes.
  • United introduced a new application for Windows Phone 8 users. With the launch of the Windows app, United is now available on all mobile platforms, including iPhone, Android and Blackberry.
  • The company continued to install flat-bed seats in premium cabins on its international fleet and now has more than 7,000 new flat-bed seats on 182 aircraft, more than any other U.S. carrier. In addition, Economy Plus is now available on nearly all of United’s mainline fleet.
  • UAL merged its two operating subsidiaries, United and Continental, into a single operating entity, United, on March 31, 2013.

Copyright Photo: Mark Durbin/AirlinersGallery.com. The Continental Airlines name is being kept alive with this United Airlines’ Boeing 737-924 ER WL N75436 (msn 33531) painted in Continental’s 1947 Blue Skyway retrojet scheme.

United Airlines: AG Slide Show

Continental Airlines: AG Slide Show