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United Airlines Reports Second-Quarter 2016 Performance

Best quarterly on-time performance in company history
UAL generates diluted EPS of $1.78; $2.61 excluding special items

July 19, 2016

CHICAGO, July 19, 2016 /PRNewswire/ -- United Airlines (UAL) today reported its second-quarter 2016 financial results.

  • Including special items, UAL reported second-quarter net income of $588 million, earnings per share of $1.78 per diluted share and pre-tax earnings of $931 million.
  • Excluding special items, UAL reported second-quarter net income of $863 million, earnings per share of $2.61 per diluted share and pre-tax earnings of $1.4 billion.
  • During the second quarter of 2016, the company repurchased $694 million of its common stock, representing 4.4 percent of shares outstanding.
  • In July, the company's Board of Directors authorized an additional $2 billion share repurchase program.

 

United Airlines Second-Quarter 2016 Highlights

"We made significant progress in the second quarter as a direct result of the passion and dedication that United's aviation professionals around the world have for running a great airline," said Oscar Munoz, president and chief executive officer of United Airlines. "This progress is exemplified by the best six months of operational performance in our history and we will continue down the path of unlocking United's full potential."

Second-Quarter Revenue

For the second quarter of 2016, total revenue was $9.4 billion, a decrease of 5.2 percent year-over-year. Second-quarter 2016 consolidated passenger revenue per available seat mile (PRASM) decreased 6.6 percent and consolidated yield decreased 6.1 percent compared to the second quarter of 2015. The decline in PRASM continues to be driven by factors including a strong U.S. dollar, lower surcharges, travel reductions from customers impacted by declining oil prices, competitive actions and higher-yielding demand not keeping pace with industry capacity.

Second-Quarter Costs

Total operating expense including special charges was $8.3 billion in the second quarter, down 1.6 percent year-over-year. Excluding special charges, total operating expense was $7.9 billion, a 6.1 percent decrease year-over-year. Consolidated unit cost (CASM) including special charges, third-party business expenses, fuel and profit sharing decreased 1.6 percent compared to the second quarter of 2015 due mainly to lower oil prices. Consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, increased 2.5 percent year-over-year driven largely by the impact of recently ratified labor agreements.

Liquidity and Capital Allocation

In the second quarter, UAL generated $2.5 billion in operating cash flow and ended the quarter with $6.0 billion in unrestricted liquidity, including $1.35 billion of undrawn commitments under its revolving credit facility. The company continued to invest in its business through capital expenditures of $838 million in the second quarter. Including assets acquired through the issuance of debt and airport construction financing and excluding fully reimbursable projects, the company invested $767 million in adjusted capital expenditures during the second quarter. Free cash flow, measured as operating cash flow less adjusted capital expenditures, was $1.8 billion in the second quarter.

For the 12 months ended June 30, 2016, the company's return on invested capital was 20.7 percent.

In the quarter, UAL repurchased $694 million worth of its common stock, representing 4.4 percent of shares outstanding. As of June 30, 2016, the company had $255 million remaining to purchase shares under its existing share repurchase programs.

UAL's Board of Directors authorized an additional $2 billion share repurchase program. This amount represents approximately 13 percent of the company's market capitalization as of the closing stock price on July 18, 2016.

For more information on UAL's third-quarter 2016 guidance, please visit {C}ir.united.com{C} for the company's investor update.

Second-Quarter Highlights

Operations and Employees

  • Reached a tentative joint agreement with flight attendants.
  • IAM-represented employees ratified agreements.
  • Reported best six-month on-time performance and finished first or second in on-time arrivals among the four largest U.S. network carriers each month.
  • Achieved best quarterly mishandled bag rate, keeping more customers connected with their bags than ever before.
  • Employees earned cash-incentive payments of approximately $30 million for achieving operational performance goals.

Finance, Network and Fleet

  • Outlined initiatives the company is implementing to improve financial performance including commercial enhancements, cost structure improvements and operational improvement expected to drive $3.1 billion in incremental value by 2018.
  • Launched new international routes between San Francisco and Singapore and between San Francisco and Xi'an, China.
  • Took delivery of two Boeing 737-800 aircraft, two Boeing 787-9 aircraft and added 12 Embraer 175 aircraft to its United Express fleet.

Customer Experience

  • Achieved the greatest year-over-year customer satisfaction score improvement in the company's history, up 6.7 points compared to the second quarter of 2015.
  • Completed Wi-Fi installations on 100 percent of domestic and international mainline aircraft, making UAL the first U.S. airline to complete Wi-Fi installations on its international fleet.
  • Unveiled a reimagined international travel experience – United Polaris business class.

About United

United Airlines and United Express operate more than 4,500 flights a day to 339 airports across five continents. In 2015, United and United Express operated more than 1.5 million flights carrying more than 140 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C. United operates more than 720 mainline aircraft, and this year, the airline anticipates taking delivery of 21 new Boeing aircraft, including 737 NGs, 787s and 777s. The airline is a founding member of Star Alliance, which provides service to 192 countries via 28 member airlines. For more information, visit united.com, follow @United on Twitter or connect on Facebook. The common stock of United's parent, United Continental Holdings, Inc., is traded on the NYSE under the symbol UAL.

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 release are based upon information available to us on the date of this release. 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, except as required by applicable law. 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 various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our operational plans, including optimizing our revenue; our ability to control our costs, including realizing benefits from our resource optimization efforts, cost reduction initiatives and fleet replacement programs; 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 that global economic conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets); our ability to cost-effectively hedge against increases in the price of aircraft 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; industry consolidation or changes in airline alliances; competitive pressures on pricing and on demand; our capacity decisions and the capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation and other actions (including open skies agreements and environmental regulations); the impact of regulatory, investigative and legal proceedings and legal compliance risks; the impact of any management changes; 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 set forth under Item 1A., Risk Factors, of UAL's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, 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.

-tables attached-

 

UNITED CONTINENTAL HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
THREE AND SIX MONTHS ENDED June 30, 2016 AND 2015

(In millions, except per share data)

  Three Months Ended
June 30, 2016
Three Months Ended
June 30, 2015
%
Increase/
(Decrease)
Six Months Ended
June 30, 2016
Six Months Ended
June 30, 2015
%
Increase/
(Decrease)
Operating revenue:
Passenger: (A)
Mainline
$6,525 $6,961 (6.3) $12,102 $12,899 (6.2)
Operating revenue: Passenger: (A) Regional 1,578 1,715 (8.0) 2,991 3,197 (6.4)
Operating revenue: Passenger: (A) Total passenger revenue 8,103 8,676 (6.6) 15,093 16,096 (6.2)
Operating revenue: Cargo 208 229 (9.2) 402 471 (14.6)
Operating revenue: Other operating revenue 1,085 1,009 7.5 2,096 1,955 7.2
Operating revenue:Other operating revenue: Total operating revenue 9,396 9,914 (5.2) 17,591 18,522 (5.0)
Operating expense:
Salaries and related costs
2,592 2,454 5.6 5,082 4,755 6.9
Operating expense: Aircraft fuel(B) 1,437 2,106 (31.8) 2,655 3,970 (33.1)
Operating expense: Regional capacity purchase 551 583 (5.5) 1,073 1,153 (6.9)
Operating expense: Landing fees and other rent 541 553 (2.2) 1,066 1,096 (2.7)
Operating expense: Depreciation and amortization 491 445 10.3 970 874 11.0
Operating expense: Aircraft maintenance materials and outside repairs 448 431 3.9 850 828 2.7
Operating expense: Distribution expenses 339 348 (2.6) 642 660 (2.7)
Operating expense: Aircraft rent 175 194 (9.8) 353 395 (10.6)
Operating expense: Special charges (C) 434 55 NM1 624 119 NM1
Operating expense: Other operating expenses 1,328 1,300 2.2 2,567 2,486 3.3
Operating expense: Other Operating Expenses: Total operating expenses 8,336 8,469 (1.6) 15,882 16,336 (2.8)
Operating income 1,060 1,445 (26.6) 1,709 2,186 (21.8)
Nonoperating income (expense):
Interest expense
(157) (167) (6.0) (316) (340) (7.1)
Nonoperating income (expense): Interest capitalized 14 13 7.7 28 25 12.0
Nonoperating income (expense): Interest income 9 6 50.0 17 11 54.5
Nonoperating income (expense): Miscellaneous, net (C) 5 (100) NM1 (13) (174) (92.5)
Nonoperating income (expense): Miscellaneous, net (C): Total nonoperating expense (129) (248) (48.0) (284) (478) (40.6)
Income before income taxes: Income before income taxes 931 1,197 (22.2) 1,425 1,708 (16.6)
Income tax expense: Income tax expense (benefit) (D) 343 4 NM1 524 7 NM1
Net income: Net income $588 $1,193 (50.7) $901 $1,701 (47.0)
Earnings per share: Earnings per share, basic $1.78 $3.14 (43.3) $2.63 $4.46 (41.0)
Earnings per share: Earnings per share, diluted $1.78 $3.14 (43.3) $2.63 $4.45 (40.9)
Weighted average shares: Weighted average shares, basic 331 380 (12.9) 342 381 (10.2)
Weighted average shares: Weighted average shares, diluted 331 380 (12.9) 343 382 (10.2)
  1. NM means Not Meaningful

 

UNITED CONTINENTAL HOLDINGS, INC.
NOTES (UNAUDITED)

(A) Select passenger revenue information is as follows (in millions):
  2Q 2016
Passenger
Revenue
(millions)
Passenger
Revenue
vs.
2Q 2015
PRASM
vs.
2Q 2015
Yield
vs.
2Q 2015
Available
Seat Miles
vs.
2Q 2015
Domestic $3,393 (3.7%) (4.6%) (4.7%) 0.9%
Atlantic 1,506 (7.9%) (10.3%) (4.8%) 2.7%
Pacific 1,013 (8.6%) (7.6%) (8.0%) (1.1%)
Latin America 613 (11.8%) (10.5%) (13.5%) (1.5%)
International 3,132 (8.9%) (9.3%) (7.8%) 0.5%
Mainline 6,525 (6.3%) (6.9%) (6.2%) 0.7%
Regional 1,578 (8.0%) (3.4%) (4.2%) (4.8%)
Consolidated $8,103 (6.6%) (6.6%) (6.1%) 0.1%

 

UNITED CONTINENTAL HOLDINGS, INC.
NOTES (UNAUDITED)

(B) UAL's results of operations include fuel expense for both mainline and regional operations. (In millions, except per gallon)
  Three Months Ended
June 30, 2016
Three Months Ended
June 30, 2015
%
Increase/
(Decrease)
Six Months Ended
June 30, 2016
Six Months Ended
June 30, 2015
%
Increase/
(Decrease)
Mainline fuel expense excluding hedge impacts $1,166 $1,648 (29.2) $2,051 $3,044 (32.6)
Hedge losses reported in fuel expense 2 (35) (118) NM1 (173) (279) NM1
Total mainline fuel expense 1,201 1,766 (32.0) 2,224 3,323 (33.1)
Regional fuel expense 236 340 (30.6) 431 647 (33.4)
Consolidated fuel expense 1,437 2,106 (31.8) 2,655 3,970 (33.1)
Cash paid on settled hedges that did not qualify for hedge accounting 3 (75) NM1 (5) (114) NM1
Fuel expense including all losses from settled hedgesFuel expense including all losses from settled hedges $1,437 $2,181 (34.1) $2,660 $4,084 (34.9)
Mainline fuel consumption (gallons) 834 833 0.1 1,568 1,570 (0.1)
Mainline average aircraft fuel price per gallon $1.44 $2.12 (32.1) $1.42 $2.12 (33.0)
Mainline average aircraft fuel price per gallon excluding hedge losses recorded in fuel expense $1.40 $1.98 (29.3) $1.31 $1.94 (32.5)
Mainline average aircraft fuel price per gallon including cash paid on settled hedges that did not qualify for hedge accounting $1.44 $2.21 (34.8) $1.42 $2.19 (35.2)
Regional fuel consumption (gallons) 161 171 (5.8) 317 330 (3.9)
Regional average aircraft fuel price per gallon $1.47 $1.99 (26.1) $1.36 $1.96 (30.6)
Consolidated fuel consumption (gallons) 995 1,004 (0.9) 1,885 1,900 (0.8)
Consolidated average aircraft fuel price per gallon $1.44 $2.10 (31.4) $1.41 $2.09 (32.5)
Consolidated average aircraft fuel price per gallon excluding hedge losses recorded in fuel expense $1.41 $1.98 (28.8) $1.32 $1.94 (32.0)
Consolidated average aircraft fuel price per gallon including cash paid on settled hedges that did not qualify for hedge accounting $1.44 $2.17 (33.6) $1.41 $2.15 (34.4)
  1. Includes losses from settled hedges that were designated for hedge accounting. UAL allocates 100 percent of hedge accounting gains (losses) to mainline fuel expense.
  2. Includes ineffectiveness losses on settled hedges and losses on settled hedges that were not designated for hedge accounting. Ineffectiveness gains (losses) and gains (losses) on hedges that do not qualify for hedge accounting are recorded in Nonoperating income (expense): Miscellaneous, net.
UNITED CONTINENTAL HOLDINGS, INC.
NOTES (UNAUDITED)

(C) Special items include the following:
  Three Months Ended
June 30, 2016 (In millions)
Three Months Ended
June 30, 2015 (In millions)
Six Months Ended
June 30, 2016 (In millions)
Six Months Ended
June 30, 2015 (In millions)
Operating:
Impairment of intangible asset related to Newark Liberty International Airport (Newark) slots
$412 $ — $412 $ —
Operating:
Labor agreement costs
10 110
Operating:Severance and benefit costs 6 25 14 75
Operating:Cleveland airport lease restructuring 74
Operating:(Gains) losses on sale of assets and other special charges 6 30 14 44
Operating: (Gains) losses on sale of assets and other special charges:Special charges 434 55 624 119
Nonoperating and income taxes:
(Gain) Loss on extinguishment of debt and other
(9) 128 (1) 134
Nonoperating and income taxes:Income tax benefit related to special charges (153) (225)
Nonoperating and income taxes:Total operating and nonoperating special charges, net of income taxes 272 183 398 253
Nonoperating and income taxes:Mark-to-market (MTM) losses from fuel derivative contracts settling in future periods (26) (7)
Nonoperating and income taxes:Prior period gains (losses) on fuel derivative contracts settled in the current period 3 (90) (1) (105)
Nonoperating and income taxes:Total special items, net of income taxes $275 $67 $397 $141

 

 
   
 

2016 - Special items

   
 

Labor agreement costs: The fleet service, passenger service, storekeeper and other employees represented by the Int'l Association of Machinists and Aerospace Workers (IAM) ratified seven new contracts with the company which extended the contracts through 2021. The company also reached a tentative agreement with the Int'l Brotherhood of Teamsters (IBT). During the three and Six months ended June 30, 2016, the company recorded $61 million ($39 million net of taxes) and $171 million ($109 million net of taxes), respectively, of special charges primarily for payments to be made in conjunction with the IAM and IBT agreements described above. Also, as part of the recently ratified contract with the Association of Flight Attendants, the company amended two of its flight attendant postretirement medical plans. The amendments triggered curtailment accounting, resulting in the recognition of a one-time $47 million gain ($30 million net of taxes) for accelerated recognition of a prior service credit.

   
 

Severance and benefit costs: During the three and Six months ended June 30, 2016, the company recorded $13 million ($8 million net of taxes) and $27 million ($17 million net of taxes), respectively, of severance and benefit costs related to a voluntary early-out program for the company's flight attendants and other severance agreements. In 2014, more than 2,500 flight attendants elected to voluntarily separate from the company for a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through the end of 2016.

   
 

Impairment of intangible asset related to Newark slots: In April 2016, the Federal Aviation Administration (FAA) announced that it will designate Newark as a Level 2 schedule-facilitated airport under the International Air Transport Association Worldwide Slot Guidelines effective October 30, 2016. The designation was associated with an updated demand and capacity analysis of Newark by the FAA. In the second quarter of 2016, the company determined that the FAA's action impaired the entire value of its Newark slots because the slots will no longer be the mechanism that governs take-off and landing rights. Accordingly, the company recorded a $412 million special charge ($264 million net of taxes) to write off the intangible asset. The Newark slots served as part of the collateral for the term loans under the company's Credit Agreement and under the Second Amended and Restated Co-Branded Card Marketing Services Agreement with Chase Bank USA, N.A. (the Chase Agreement). The Credit Agreement and the Chase Agreement have been amended to remove the Newark slots as collateral with no replacement collateral required.

   
 

Cleveland airport lease restructuring: During the Six months ended June 30, 2016, the City of Cleveland agreed to amend the lease, which runs through 2029, associated with certain excess airport terminal space (principally Terminal D) and related facilities at Hopkins International Airport. The company recorded an accrual for remaining payments under the lease for facilities that the company no longer uses and will continue to incur costs under the lease without economic benefit to the company. This liability was measured and recorded at its fair value when the company ceased its right to use such facilities leased to it pursuant to the lease. The company recorded a net charge of $74 million ($47 million net of taxes) related to the amended lease.

   
 

(Gains) losses on sale of assets and other special charges: During the three and Six months ended June 30, 2016, the company recorded gains and losses on sale of assets and other special charges of $18 million ($12 million net of taxes) and $32 million ($20 million net of taxes), respectively.

   
 

Nonoperating losses on extinguishment of debt and other: During the Six months ended June 30, 2016, the company recorded $8 million ($5 million net of taxes) of losses due to exchange rate changes in Venezuela applicable to funds held in local currency and recorded a $9 million ($6 million net of taxes) gain on the sale of an affiliate.

   
 

MTM losses from fuel derivative contracts settling in future periods and prior period gains on fuel derivative contracts settled in the current period: The company uses certain combinations of derivative contracts that are economic hedges but do not qualify for hedge accounting under U.S. generally accepted accounting principles. Additionally, the company may enter into contracts at different times and later combine those contracts into structures designated for hedge accounting. As with derivatives that qualify for hedge accounting, the economic hedges and individual contracts are part of the company's program to mitigate the adverse financial impact of potential increases in the price of fuel. The company records changes in the fair value of these various contracts that are not designated for hedge accounting to Nonoperating income (expense): Miscellaneous, net in the statements of consolidated operations. During the three and Six months ended June 30, 2016, the company did not record any MTM gains or losses on fuel derivative contracts that will settle in future periods. For fuel derivative contracts that settled in the three and Six months ended June 30, 2016, the company recorded MTM gains of $3 million and $2 million, respectively, in prior periods.

   
 

2015 - Special items

   
 

Severance and benefit costs: During the three and Six months ended June 30, 2015, the company recorded $28 million and $103 million, respectively, of severance and benefit costs primarily related to a voluntary early-out program for its flight attendants. In 2014, more than 2,500 flight attendants elected to voluntarily separate from the company for a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through the end of 2016.

   
 

(Gains) losses on sale of assets and other special charges: During the three and Six months ended June 30, 2015, the company recorded $48 million and $92 million, respectively, for integration costs, impairment of assets and other special gains and losses.

   
 

Nonoperating loss on extinguishment of debt and other: During the third quarter of 2015, the company recorded $61 million of losses due to exchange rate changes in Venezuela applicable to funds held in local currency. During the Six months ended June 30, 2015, the company recorded a charge of $134 million due to the write-off of the unamortized non-cash debt discount related to the extinguishment of the 6% Notes due 2026 and 6% Notes due 2028. Both of the charges were recorded as part of Nonoperating income (expense): Miscellaneous, net.

   
 

MTM losses from fuel derivative contracts settling in future periods and prior period losses on fuel derivative contracts settled in the current period: The company uses certain combinations of derivative contracts that are economic hedges but do not qualify for hedge accounting under U.S. generally accepted accounting principles. Additionally, the company may enter into contracts at different times and later combine those contracts into structures designated for hedge accounting. As with derivatives that qualify for hedge accounting, the economic hedges and individual contracts are part of the company's program to mitigate the adverse financial impact of potential increases in the price of fuel. The company records changes in the fair value of these various contracts that are not designated for hedge accounting to Nonoperating income (expense): Miscellaneous, net in the statements of consolidated operations. During the three and Six months ended June 30, 2015, the company recorded $36 million and $28 million, respectively, in MTM losses on fuel derivative contracts that will settle in future periods. For fuel derivative contracts that settled in the three and Six months ended June 30, 2015, the company recorded MTM losses of $69 million and $173 million, respectively, in prior periods.

   

(D)  

The company's effective tax rate for the three and Six months ended June 30, 2016 was 36% which represented a blend of federal, state and foreign taxes and the impact of certain nondeductible items. During 2015, after considering all positive and negative evidence, the company concluded that its deferred income taxes would more likely than not be realized. The company released substantially all of its valuation allowance in the third quarter of 2015, which resulted in a $3.2 billion benefit in its provision for income taxes.

 

UNITED CONTINENTAL HOLDINGS, INC.
STATISTICS
  Three Months Ended
June 30, 2016
Three Months Ended
June 30, 2015
%
Increase/
(Decrease)
Six Months Ended
June 30, 2016
Six Months Ended
June 30, 2015
%
Increase/
(Decrease)
Mainline:
Passengers (thousands)
25,639 24,858 3.1 47,916 46,236 3.6
Mainline:Revenue passenger miles (millions) 47,842 47,859 88,698 88,519 0.2
Mainline:Available seat miles (millions) 57,452 57,048 0.7 108,617 107,173 1.3
Mainline:Cargo ton miles (millions) 679 633 7.3 1,301 1,295 0.5
Mainline:Passenger load factor:
Mainline
83.3% 83.9% (0.6) pts. 81.7% 82.6% (0.9) pts.
Mainline:Domestic 86.8% 86.6% 0.2 pts. 85.2% 85.6% (0.4) pts.
Mainline:International 79.9% 81.3% (1.4) pts. 78.3% 79.8% (1.5) pts.
Mainline:Passenger revenue per available seat mile (cents) 11.36 12.20 (6.9) 11.14 12.04 (7.5)
Mainline:Average yield per revenue passenger mile (cents) 13.64 14.54 (6.2) 13.64 14.57 (6.4)
Mainline:Aircraft in fleet at end of period 720 708 1.7 720 708 1.7
Mainline:Average stage length (miles) 1,890 1,939 (2.5) 1,875 1,928 (2.7)
Mainline:Average daily utilization of each aircraft (hours) 10:38 10:54 (2.4) 10:07 10:25 (2.9)
Regional:
Passengers (thousands)
10,777 11,373 (5.2) 20,587 21,517 (4.3)
Regional:Revenue passenger miles (millions) 6,175 6,430 (4.0) 11,901 12,214 (2.6)
Regional:Available seat miles (millions) 7,273 7,637 (4.8) 14,381 14,781 (2.7)
Regional:Passenger load factor 84.9% 84.2% 0.7 pts. 82.8% 82.6% 0.2 pts.
Regional:Passenger revenue per available seat mile (cents) 21.70 22.46 (3.4) 20.80 21.63 (3.8)
Regional:Average yield per revenue passenger mile (cents) 25.55 26.67 (4.2) 25.13 26.17 (4.0)
Regional:Aircraft in fleet at end of period 494 522 (5.4) 494 522 (5.4)
Regional:Average stage length (miles) 565 558 1.3 570 560 1.8
Consolidated (Mainline and Regional):
Passengers (thousands)
36,416 36,231 0.5 68,503 67,753 1.1
Consolidated (Mainline and Regional)Revenue passenger miles (millions) 54,017 54,289 (0.5) 100,599 100,733 (0.1)
Consolidated (Mainline and Regional)Available seat miles (millions) 64,725 64,685 0.1 122,998 121,954 0.9
Consolidated (Mainline and Regional)Passenger load factor 83.5% 83.9% (0.4) pts. 81.8% 82.6% (0.8) pts.
Consolidated (Mainline and Regional)Passenger revenue per available seat mile (cents) 12.52 13.41 (6.6) 12.27 13.20 (7.0)
Consolidated (Mainline and Regional)Total revenue per available seat mile (cents) 14.52 15.33 (5.3) 14.30 15.19 (5.9)
Consolidated (Mainline and Regional)Average yield per revenue passenger mile (cents) 15.00 15.98 (6.1) 15.00 15.98 (6.1)
Consolidated (Mainline and Regional)Aircraft in fleet at end of period 1,214 1,230 (1.3) 1,214 1,230 (1.3)
Consolidated (Mainline and Regional)Average stage length (miles) 1,496 1,500 (0.3) 1,479 1,488 (0.6)
Consolidated (Mainline and Regional)Average full-time equivalent employees (thousands) 83.2 82.3 1.1 82.8 82.0 1.0
Note:See Part II, Item 6 Selected Financial Data of the company's annual report on Form 10-K for the year ended December 31, 2015 for the definition of these statistics.

 

UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION

UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (GAAP) and Non-GAAP financial measures, including income (loss) before income taxes excluding special items, net income (loss) excluding special items, net earnings (loss) per share excluding special items, and CASM, as adjusted, among others. CASM is a common metric used in the airline industry to measure an airline's cost structure and efficiency. UAL reports CASM excluding profit sharing, third-party business expenses, fuel and special charges. Pursuant to SEC Regulation G, UAL has included the following reconciliation of reported Non-GAAP financial measures to comparable financial measures reported on a GAAP basis. UAL believes that adjusting for special charges is useful to investors because special charges are non-recurring charges not indicative of UAL's ongoing performance. In addition, the company believes that adjusting for MTM gains and losses from fuel derivative contracts settling in future periods and prior period gains and losses on fuel derivative contracts settled in the current period is useful because the adjustments allow investors to better understand the cash impact of settled fuel derivative contracts in a given period. UAL also believes that excluding third-party business expenses, such as maintenance, ground handling and catering services for third parties, fuel sales and non-air mileage redemptions, provides more meaningful disclosure because these expenses are not directly related to UAL's core business. UAL also believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management's performance excluding the effects of a significant cost item over which management has limited influence. UAL excludes profit sharing because this exclusion allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry. UAL also believes that adjusting capital expenditures for assets acquired through the issuance of debt, airport construction financing and excluding fully reimbursable projects is useful to investors in order to appropriately reflect the non-reimbursable funds spent on capital expenditures.

 

UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION (Continued)
  Three Months Ended
June 30, 2016 (In millions)
Three Months Ended
June 30, 2015 (In millions)
$
Increase/
(Decrease)
%
Increase/
(Decrease)
Six Months Ended
June 30, 2016 (In millions)
Six Months Ended
June 30, 2015 (In millions)
$
Increase/
(Decrease)
%
Increase/
(Decrease)
Operating expenses $8,336 $8,469 $(133) (1.6) $15,882 $16,336 $(454) (2.8)
Operating expenses:Less: Special charges (C) 434 55 379 NM1 624 119 505 NM1
Operating expenses, excluding special charges 7,902 8,414 (512) (6.1) 15,258 16,217 (959) (5.9)
Operating expenses, excluding special charges:Less: Third-party business expenses 60 69 (9) (13.0) 127 135 (8) (5.9)
Operating expenses, excluding special charges:Less: Fuel expense 1,437 2,106 (669) (31.8) 2,655 3,970 (1,315) (33.1)
Operating expenses, excluding special charges:Less: Profit sharing, including taxes 209 198 11 5.6 302 268 34 12.7
Operating expensesOperating expenses, excluding fuel, profit sharing, special charges and third-party business expenses $6,196 $6,041 $155 2.6 $12,174 $11,844 $330 2.8
Operating incomeIncome before income taxes $931 $1,197 $(266) (22.2) $1,425 $1,708 $(283) (16.6)
Operating incomeLess: special items before income taxes (C) 428 67 361 NM1 622 141 481 NM1
Operating incomeIncome before income taxes and excluding special items $1,359 $1,264 $95 7.5 $2,047 $1,849 $198 10.7
Operating incomeNet income $588 $1,193 $(605) (50.7) $901 $1,701 $(800) (47.0)
Operating incomeLess: special items, net of tax (C) 275 67 208 NM1 397 141 256 NM1
Operating incomeNet income, excluding special items $863 $1,260 $(397) (31.5) $1,298 $1,842 $(544) (29.5)
Diluted earnings per shareDiluted earnings per share $1.78 $3.14 $(1.36) (43.3) $2.63 $4.45 $(1.82) (40.9)
Diluted earnings per shareAdd back: special items 1.29 0.17 1.12 NM1 1.82 0.37 1.45 NM1
Diluted earnings per shareTax effect related to special items (0.46) (0.46) NM1 (0.66) (0.66) NM1
Diluted earnings per shareDiluted earnings per share, excluding special items $2.61 $3.31 $(0.70) (21.1) $3.79 $4.82 $(1.03) (21.4)

 

UNITED CONTINENTAL HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION (Continued)
  Three Months Ended
June 30, 2016 in cents
Three Months Ended
June 30, 2015 in cents
%
Increase/
(Decrease)
Six Months Ended
June 30, 2016 in cents
Six Months Ended
June 30, 2015 in cents
%
Increase/
(Decrease)
CASM Mainline Operations (cents)
Cost per available seat mile (CASM)
12.39 12.42 (0.2) 12.43 12.69 (2.0)
CASM Mainline Operations (cents): Cost per available seat mile (CASM)Less: Special charges (C) 0.76 0.10 NM1 0.58 0.12 NM1
CASM Mainline Operations (cents): Cost per available seat mile (CASM)CASM, excluding special charges 11.63 12.32 (5.6) 11.85 12.57 (5.7)
CASM Mainline Operations (cents): CASM, excluding special chargesLess: Third-party business expenses 0.10 0.12 (16.7) 0.11 0.12 (8.3)
CASM Mainline Operations (cents): CASM Mainline OperationsCASM, excluding special charges and third-party business expenses 11.53 12.20 (5.5) 11.74 12.45 (5.7)
CASM Mainline Operations (cents): CASM, excluding special charges and third-party business expensesLess: Fuel expense 2.09 3.10 (32.6) 2.05 3.10 (33.9)
CASM Mainline Operations (cents): CASM Mainline OperationsCASM, excluding special charges, third-party business expenses and fuel 9.44 9.10 3.7 9.69 9.35 3.6
CASM Mainline Operations (cents): CASM, excluding special charges, third-party business expenses and fuelLess: Profit sharing per available seat mile 0.36 0.34 5.9 0.28 0.25 12.0
CASM Mainline Operations (cents): CASM Mainline OperationsCASM, excluding special charges, third-party business expenses, fuel, and profit sharing 9.08 8.76 3.7 9.41 9.10 3.4
CASM Consolidated Operations (cents)
Cost per available seat mile (CASM)
12.88 13.09 (1.6) 12.91 13.40 (3.7)
CASM Consolidated Operations (cents): Cost per available seat mile (CASM)Less: Special charges (C) 0.67 0.08 NM1 0.50 0.10 NM1
CASM Consolidated Operations (cents): CASM, excluding special charges 12.21 13.01 (6.1) 12.41 13.30 (6.7)
CASM Consolidated Operations (cents): CASM, excluding special chargesLess: Third-party business expenses 0.09 0.11 (18.2) 0.11 0.11
CASM Consolidated Operations (cents): CASM, excluding special charges and third-party business expenses 12.12 12.90 (6.0) 12.30 13.19 (6.7)
CASM Consolidated Operations (cents): CASM, excluding special charges and third-party business expensesLess: Fuel expense 2.22 3.25 (31.7) 2.16 3.26 (33.7)
CASM Consolidated Operations (cents): CASM, excluding special charges, third-party business expenses and fuel 9.90 9.65 2.6 10.14 9.93 2.1
CASM Consolidated Operations (cents): CASM, excluding special charges, third-party business expenses and fuelLess: Profit sharing per available seat mile 0.33 0.31 6.5 0.24 0.22 9.1
CASM Consolidated Operations (cents): CASM, excluding special charges, third-party business expenses, fuel, and profit sharing 9.57 9.34 2.5 9.90 9.71 2.0

 

UNITED CONTINENTAL HOLDINGS, INC.
CAPITAL EXPENDITURES AND FREE CASH FLOW
Capital Expenditures (in millions) Three Months Ended
June 30, 2016
Six Months Ended
June 30, 2016
Capital Expenditures:Capital expenditures – GAAP $838 $1,654
Capital Expenditures: Capital expenditures – GAAP:Property and equipment acquired through the issuance of debt 59
Capital Expenditures: Capital expenditures – GAAP:Airport construction financing 26 35
Capital Expenditures: Capital expenditures – GAAP:Fully reimbursable projects (97) (158)
Capital Expenditures:Adjusted capital expenditures – Non-GAAP $767 $1,590
Free Cash Flow (in millions) Three Months Ended
June 30, 2016
Six Months Ended
June 30, 2016
Free Cash Flow (in millions):Net cash provided by operating activities $2,547 $3,746
Free Cash Flow (in millions): Net cash provided by operating activities:Less adjusted capital expenditures – Non-GAAP 767 1,590
Free Cash Flow (in millions):Free cash flow - Non-GAAP $1,780 $2,156

 

UNITED CONTINENTAL HOLDINGS, INC.
RETURN ON INVESTED CAPITAL (ROIC)

ROIC is a Non-GAAP financial measure that we believe provides useful supplemental information for management and investors by measuring the effectiveness of our operations' use of invested capital to generate profits.
  Twelve Months Ended
June 30, 2016
Return On Invested CapitalNet Operating Profit After Tax (NOPAT)
Pre-tax income excluding special items 4
$4,696
Return On Invested CapitalNOPAT adjustments 5 1,056
Return On Invested CapitalNOPAT $5,752
Return On Invested CapitalEffective cash tax rate 6 0.3%
Return On Invested CapitalInvested Capital (five-quarter average)
Total assets
$40,394
Return On Invested CapitalInvested capital adjustments 7 12,581
Return On Invested CapitalAverage Invested Capital $27,813
Return On Invested CapitalReturn on Invested Capital 20.7%
  1. Non-GAAP Financial Reconciliation
  2. NOPAT adjustments include: adding back (net of tax shield) interest expense, the interest component of capitalized aircraft rent and net interest on pension.
  3. Effective cash tax rate is calculated by dividing cash taxes paid by adjusted pre-tax income.
  4. Invested capital adjustments include: adding back capital aircraft rent (at 7.0X) and deferred income taxes, less advance ticket sales, frequent flyer deferred revenue, tax valuation allowance and other non-interest bearing liabilities.
Notes: Twelve Months Ended
June 30, 2016
Pre-tax income $3,936
Return On Invested CapitalAdd: Special items 760
Return On Invested CapitalPre-tax income excluding special items $4,696

 

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SOURCE United Airlines

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