Tag Archives: UAL

United reports second quarter net income of $919 million, a 51% increase

United Airlines (UAL) (Chicago) today reported second quarter 2014 net income of $919 million, an increase of 51 percent year-over-year, or $2.34 per diluted share, excluding $130 million of special items. Including special items, UAL reported second quarter 2014 net income of $789 million, or $2.01 per diluted share.

United’s consolidated passenger revenue per available seat mile (PRASM) increased 3.7 percent in the second quarter of 2014 compared to the second quarter of 2013.

Second-quarter 2014 consolidated unit costs (CASM), excluding special charges, third-party business expenses, fuel and profit sharing, decreased 0.2 percent year-over-year on a consolidated capacity reduction of 0.1 percent. Second-quarter 2014 CASM, including those items, increased 2.2 percent year-over-year.

The company generated $1.5 billion of operating cash flow in the second quarter of 2014.
UAL ended the second quarter with $6.8 billion in unrestricted liquidity.

The company earned a 10.3 percent return on invested capital for the 12 months ended June 30, 2014.
UAL’s Board of Directors authorized a $1.0 billion share repurchase program, which the company expects to complete within the next three years.

“I am encouraged by the solid progress we made in the second quarter. Our team is focused on improving our operations and service and on continuing to improve year-over-year revenue performance and cost control,” said Jeff Smisek, UAL’s chairman, president and chief executive officer. “The $1 billion share repurchase program we announced today demonstrates our progress and commitment to increasing value for our shareholders and the confidence we have in our plan.”

Second-Quarter Revenue and Capacity

For the second quarter of 2014, total revenue was $10.3 billion, an increase of 3.3 percent year-over-year. Second-quarter consolidated passenger revenue increased 3.6 percent to $9.0 billion, compared to the same period in 2013. Ancillary revenue per passenger in the second quarter increased 7.9 percent year-over-year to more than $21 per passenger. Second-quarter cargo revenue decreased 1.7 percent versus the second quarter of 2013 to $232 million. Other revenue in the second quarter increased 1.7 percent year-over-year to $1.1 billion.

Consolidated revenue passenger miles increased 0.6 percent and consolidated available seat miles decreased 0.1 percent year-over-year for the second quarter, resulting in a second-quarter consolidated load factor of 85.3 percent.

Second-quarter 2014 consolidated PRASM increased 3.7 percent and consolidated yield increased 3.0 percent compared to the second quarter of 2013. The company’s consolidated domestic PRASM, including both mainline and regional flying, increased 5.6 percent year-over-year.

“We are beginning to see the benefits of the changes we’re implementing to our network and revenue management processes,” said Jim Compton, UAL’s vice chairman and chief revenue officer. “We have more work to do, however, and will continue to make the appropriate adjustments to accelerate our revenue growth.”

Second-Quarter Costs

Second-quarter consolidated CASM, excluding special charges, third-party business expense, fuel and profit sharing, decreased 0.2 percent compared to the second quarter of 2013. Second-quarter consolidated CASM, including those items, increased 2.2 percent year-over-year. The company’s strong cost performance in the quarter was largely driven by execution on its cost-savings initiatives, as well as by the timing of certain expenses moving to the second half of the year.

Second-quarter total operating expenses, excluding special charges, increased $75 million, or 0.8 percent, year-over-year. Including special charges, total operating expenses increased $192 million, or 2.1 percent, in the second quarter versus the same period in 2013. Third-party business expense was $215 million in the second quarter of 2014.

Second-Quarter Liquidity and Cash Flow

UAL ended the second quarter with $6.8 billion in unrestricted liquidity, including $1.0 billion of undrawn commitments under a revolving credit facility. The company generated $1.5 billion of operating cash flow in the second quarter. During the second quarter, the company had gross capital expenditures of $871 million, excluding fully reimbursable projects. The company made debt and capital lease principal payments of $333 million in the second quarter. For the 12 months ended June 30, 2014, the company’s return on invested capital was 10.3 percent.

The company’s long-term capital structure goals include reducing its non-aircraft related debt and achieving a total gross debt balance, including capitalized operating leases, of approximately $15 billion while maintaining an unrestricted liquidity balance of $5 billion to $6 billion, including its undrawn revolver.

Share Repurchase Program

UAL’s Board authorized a $1.0 billion share repurchase program, which the company expects to complete within the next three years. This amount represents approximately 6 percent of the company’s market capitalization as of yesterday’s closing stock price. Additionally, in the second quarter, the company spent $62 million to retire convertible debt that would have converted into approximately 1.5 million shares of UAL common stock.

“We have laid a sound financial foundation over the last few years by paying off debt and investing in our business. Our earnings profile, coupled with measured capital expenditures and manageable debt maturities, enable us to take this initial step toward returning cash to our shareholders,” said John Rainey, UAL’s executive vice president and chief financial officer. “This action helps us achieve a more balanced allocation of our cash flow.”

UAL may repurchase shares through the open market, privately negotiated transactions, block trades, or accelerated share repurchase transactions from time to time in accordance with applicable securities laws. UAL will repurchase shares of common stock subject to prevailing market conditions and may discontinue such repurchases at any time.

Second-Quarter 2014 Accomplishments

Operations, Employees and Network

United Airlines reported a second-quarter mainline on-time arrival rate (domestic and international) of 76.4 percent, adversely affected by multi-month runway closures in its San Francisco and Newark hubs. The on-time arrival rate is based on flights arriving within 14 minutes of scheduled arrival time.
The company reached a joint collective bargaining agreement with the Professional Airline Flight Control Association (PAFCA) and the Transport Workers Union (TWU) for United’s dispatchers. The dispatchers subsequently ratified the new agreement.

The company began a facilitated negotiations process with the Association of Flight Attendants and held further discussions in advance of scheduled mediation with the International Brotherhood of Teamsters, representing United’s technicians.

United expanded its industry-leading global route network, launching nonstop flights from Houston to Munich; Newark to Santiago, Dominican Republic; and new seasonal service between Chicago and Edinburgh, Scotland, and from Washington, D.C., to both Madrid and Nassau, Bahamas. The company continued to develop its industry-leading Pacific gateway in San Francisco by launching service to Chengdu, China, and announcing service to Tokyo’s Haneda airport. The company also announced new service from Houston to Santiago, Chile, and announced new routes from Chicago to Belize City, Belize; Denver to Panama City; Houston to Punta Cana, Dominican Republic; and San Francisco to Kelowna, British Columbia. The airline announced nine new domestic markets and launched 14 new domestic routes in the second quarter, including United’s first service to Atlantic City, N.J.; Bangor, Maine; Pueblo, Colorado; and St. Cloud, Minnesota.

Finance and Fleet

United raised $949 million of debt financing through enhanced equipment trust certificates at a blended rate of 4.13 percent. The debt proceeds are being used to finance the acquisition of 13 Boeing 737-900 ERs, nine Embraer 175s, two Boeing 787-8 Dreamliners and one Boeing 787-9 Dreamliner.

The company took delivery of 10 Boeing 737-900 ERs and one 787-8 Dreamliner, and also exited from scheduled service nine 757-200s during the quarter.

The company introduced seven highly efficient Embraer 175 aircraft to the United Express fleet. The modern and spacious 76-seat aircraft is the newest addition to the United Express fleet, enabling the airline to offer an improved regional jet experience. These aircraft will largely replace less-efficient 50-seat regional jets, and the company expects to reduce its 50-seat regional jet fleet by 38 aircraft by the end of the year.

United continued installing slimmer, next-generation economy-class seats on certain aircraft, which enables one to two additional rows per aircraft. The airline now offers these seats, which are 10 to 15 percent lighter than the seats they are replacing, on approximately 240 aircraft.

Flyer-Friendly Product, Loyalty Program and Facilities

The company now offers Wi-Fi on more than 290 aircraft, including its entire Airbus fleet, and expects to have more than 450 Wi-Fi-equipped aircraft by the end of 2014.

United began installing its new personal device entertainment system on select aircraft, enabling customers to choose from more than 150 movies and nearly 200 television shows and watch them on their laptops or iOS devices.

United launched its all-new mobile application for the Android platform, offering innovative new features, smoother functionality and an improved touch-friendly design. The new Android app follows the airline’s redesign of its mobile app for the iOS platform.

United announced its 2015 MileagePlus program. Members will earn award miles based on ticket price – specifically the base fare and carrier-imposed surcharges – and MileagePlus status, rather than distance flown.

United consolidated its London Heathrow operation into one terminal in the new Terminal 2: The Queen’s Terminal. United’s 22 Star Alliance partners serving Heathrow are progressively moving to Terminal 2, enabling faster, more convenient connections for customers. United operates more daily flights to Heathrow than any other U.S. carrier.

The company unveiled a new 10-gate, 97,000-square-foot concourse in Boston Logan International Airport’s Terminal B that offers modern conveniences that streamline the airport experience, including self-tagging baggage kiosks, automated self-boarding gates and a new customer service center.

The airline opened new United Clubs at London Heathrow, Boston and San Francisco, featuring the latest airport lounge design concept that it unveiled at United Clubs in Chicago, San Diego and Seattle. The company also opened a new United Global First Lounge in London, offering premium customers more privacy and personal service.

Copyright Photo: Steve Bailey/AirlinersGallery.com. An unique view of the first Boeing 787-9 Dreamliner for United showing off its sleek lines.

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United posts a 3Q net profit of $590 million

United Airlines (Chicago) reported third-quarter 2013 net income of $590 million, an increase of 13.5 percent year-over-year, or $1.51 per diluted share, excluding $211 million of special charges. Including special charges, UAL reported third-quarter 2013 net income of $379 million, or $0.98 per diluted share.

  • UAL generated $10.2 billion of revenue in the third quarter of 2013.
  • United’s consolidated passenger revenue per available seat mile (PRASM) increased 2.7 percent in the third quarter compared to the third quarter of 2012.
  • Third-quarter consolidated unit costs (CASM), holding fuel rate and profit sharing constant and excluding special charges and third-party business expense, increased 3.6 percent year-over-year on a consolidated capacity (available seat miles) reduction of 1.1 percent. Third-quarter consolidated CASM increased 1.2 percent year-over-year.
  • United’s third-quarter consolidated fuel efficiency (gallons per available seat mile) improved 1.1 percent year-over-year, due primarily to replacing older aircraft with highly efficient new Boeing 737-900ERs and Boeing 787 Dreamliners.
  • UAL ended the third quarter with $6.7 billion in unrestricted liquidity.

“We have significantly improved our operations, customer service and product, and are now competitive on all those dimensions. I want to thank my co-workers as we work together to deliver on our promise of making United flyer friendly,” said Jeff Smisek, chairman, president and chief executive officer. “However, we are not satisfied with our financial performance, and are taking prompt actions to increase our revenue and operate more efficiently across the company.”

Third-Quarter Revenue and Capacity

For the third quarter, total revenue was $10.2 billion, an increase of 3.2 percent compared to the same period in 2012. Third-quarter consolidated passenger revenue increased 1.6 percent year-over-year to $8.9 billion, on a consolidated capacity decrease of 1.1 percent year-over-year. Other revenue in the third quarter increased 25.0 percent year-over-year to $1.1 billion and third-quarter cargo revenue decreased 19.1 percent versus the third quarter of 2012 to $199 million.

Consolidated revenue passenger miles (RPMs) decreased 0.3 percent on a consolidated capacity decrease of 1.1 percent year-over-year, resulting in a consolidated load factor of 85.9 percent in the third quarter.

Third-quarter consolidated PRASM increased 2.7 percent compared to the same period in 2012. Consolidated yield for the third quarter increased 1.9 percent year-over-year.

“This quarter my co-workers consistently delivered solid operational performance, and our customer satisfaction scores continue to rise,” said Jim Compton, UAL’s vice chairman and chief revenue officer. “We are, however, disappointed by the pace of our revenue improvements, and we are taking numerous actions to improve our performance to more swiftly realize our full revenue potential.”

Third-quarter passenger revenue and period-to-period comparisons of related statistics for UAL’s mainline and regional operations are as follows:

3Q 2013 Passenger
Revenue
(millions)
Passenger
Revenue vs.
3Q 2012
PRASM vs.
3Q 2012
Yield vs.
3Q 2012
Available Seat
Miles vs.
3Q 2012
Domestic $3,339 0.4% 2.9% 2.3% (2.4%)
Atlantic 1,765 11.0% 9.0% 5.6% 1.9%
Pacific 1,289 (11.0%) (9.4%) (8.4%) (1.7%)
Latin America 632 0.6% 0.5% 1.2% 0.2%
International 3,686 0.5% 0.2% (0.7%) 0.3%
Mainline 7,025 0.5% 1.6% 0.8% (1.1%)
Regional 1,893 6.3% 7.1% 6.1% (0.8%)
Consolidated $8,918 1.6% 2.7% 1.9% (1.1%)

Third-Quarter Costs

Total operating expenses increased $11 million, or 0.1 percent, in the third quarter versus the same period in 2012. Excluding special charges, third-quarter total operating expenses increased $314 million, or 3.4 percent, year-over-year.

Third-quarter consolidated CASM increased 1.2 percent year-over-year. Third-quarter consolidated CASM, excluding special charges and third-party business expense, increased 2.9 percent compared to third-quarter 2012. Third-party business expense was $205 million in the third quarter of 2013.

In the third quarter, consolidated CASM, excluding special charges and third-party business expense and holding fuel rate and profit sharing constant, increased 3.6 percent compared to the third quarter of 2012.

“We are committed to operating more efficiently across all aspects of our business,” said John Rainey, UAL’s executive vice president and chief financial officer. “We continue to improve our balance sheet and to make return-driven investments in our business, both of which are critical to creating long-term economic value for our stakeholders.”

Liquidity and Cash Flow

UAL ended the third quarter with $6.7 billion in unrestricted liquidity, including $1.0 billion of undrawn commitments under its revolving credit facility. During the third quarter, UAL generated $237 million of operating cash flow. The company’s gross capital expenditures and purchase deposits for the quarter were $598 million, and the company made debt and capital lease principal payments of $253 million in the third quarter.

Third-Quarter 2013 Accomplishments
Operations, Co-workers and Customer Service

  • United Airlines reported a third-quarter mainline on-time arrival rate (domestic and international) of 78.9 percent. The on-time arrival rate is based on flights arriving within 14 minutes of scheduled arrival time. United co-workers earned cash-incentive payments of $9 million for on-time performance during the third quarter.
  • The company reached tentative agreements on new joint collective bargaining agreements with the International Association of Machinists (IAM) for the more than 28,000 fleet service, passenger service and storekeeper employees.
  • United’s pilots established an integrated seniority list, and United announced it offered recall to nearly 600 pilots currently on furlough to address the airline’s future staffing needs.
  • United neared completion of its comprehensive customer service training program for all customer-facing co-workers worldwide with more than 90 percent of mainline and United Express flight attendants, airport agents and reservation agents trained through the third quarter.

Network, Fleet and Sustainability

  • In the third quarter, the company announced it is expanding its leading worldwide route network and will launch future nonstop service from San Francisco to Chengdu, China, the fourth-largest Chinese city, and from Chicago to Edinburgh, Scotland, beginning in June 2014. This quarter, United launched new nonstop service to St. Lucia, as well as additional nonstop service to Anchorage, Alaska; Austin, Texas; Traverse City, Mich.; and Saskatoon, Saskatchewan, Canada. The company also announced it is adding three other cities to its network: Elmira, N.Y., Topeka, Kan.; and Sun Valley, Idaho, as well as additional service to Fort Myers, Fla.; Hayden, Colo.; Indianapolis; and State College, Pa.
  • The company took delivery of seven new highly efficient aircraft, including six Boeing 737-900 ERs and one Boeing 787 Dreamliner, and removed from service seven Boeing 757-200s.
  • A United Boeing 737-800 aircraft retrofitted with the new Split Scimitar Winglet began test flights. United is the North American launch customer for the Next-Generation 737 advanced winglet that improves the efficiency of the company’s 737 fleet by approximately 2 percent while simultaneously reducing carbon emissions, and the company will begin installing the new winglets across its 737 fleet by year end.
  • United was named the Eco-Aviation “Airline of the Year” Gold Winner by Air Transport World (ATW) magazine.

Product, Loyalty Program and Facilities

  • United debuted its new brand campaign, featuring its iconic “Fly the Friendly Skies” tagline, reinterpreted for today’s travelers. The new campaign explains United’s commitment to being “user-friendly,” which to customers today means the combination of service, technology and product enhancements.
  • The company continued outfitting aircraft with global satellite Wi-Fi across its entire mainline fleet, offering inflight connectivity on long-haul international flights. The airline now has more than 115 Wi-Fi-equipped aircraft and is outfitting about one aircraft per day with global satellite Wi-Fi.
  • The airline expanded its offering of live television to more than 200 aircraft, offering customers more than 100 channels of live programming while in-flight. United operates more live television-equipped aircraft than any other airline in the world.
  • United released refreshed applications for iPhone, Android and BlackBerry 10 that include streamlined user interfaces along with a new feature that enables customers to manage their travel in real time if a flight delay or cancellation should occur.
  • United continued retrofitting its p.s. (Premium Service) transcontinental aircraft that fly from New York to Los Angeles and San Francisco. The airline already has retrofitted 12 of its 15 p.s. aircraft with the latest cabin interiors, premium-cabin flat-bed seats, and personal on-demand entertainment and Wi-Fi throughout the aircraft.
  • United debuted its Choice Menu “Bistro on Board” featuring new fresh food menu options available for sale to Economy customers on flights longer than three-and-a-half hours within North America and to and from Central America. United is providing customers innovative selections made with high-quality ingredients that will change seasonally.
  • United MileagePlus and Marriott Rewards® joined forces to provide their most loyal members with unprecedented travel benefits. Through the RewardsPlus program, United customers who are Premier Gold MileagePlus members or above can enjoy Marriott Gold Elite status and benefits. The program also offers Marriott Rewards Platinum Elite members MileagePlus Premier Silver status.
  • The company teamed up with Mercedes-Benz USA to provide innovative new benefits exclusively to United’s most frequent flyers seeking a luxury driving experience. MileagePlus Premier members receive incentives and 25,000 bonus miles when purchasing or leasing certain new Mercedes-Benz vehicles. In addition, United and Mercedes partnered to offer United’s Global Services customers tarmac transfer service at the airline’s Chicago and Houston hubs.
  • The company opened its new United Club lounge in Terminal 2 at San Diego International Airport, the third club to feature the airline’s new design concept.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. United is gradually phasing out its older Boeing 757-200s with seven retired in this quarter alone. Ex-Continental Boeing 757-224 WL N17122 (msn 27564) departs from Los Angeles.

United Airlines: AG Slide Show