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UAL Corporation Reports Second Quarter 2008 Results
Taking Action to Offset Record Fuel Costs, and Position Company to Compete
CHICAGO, July 22, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Driven by a $773 million
increase in consolidated fuel expense, UAL Corporation (Nasdaq: UAUA), the
holding company whose primary subsidiary is United Airlines, reported a net
loss of $2.7 billion or $151 million, excluding certain largely non-cash
accounting charges. For the second quarter ended June 30, 2008, the company:
-- Reported basic and diluted loss per share of $1.19 excluding certain
largely non-cash accounting charges described below. United's reported
GAAP loss per share was $21.47.
-- Recorded $2.6 billion of previously announced accounting charges,
including a $2.3 billion non-cash special charge for goodwill
impairment.
-- Continued its focus on controlling costs, with mainline cost per
available seat mile (CASM), excluding fuel and the above mentioned
accounting charges, up 2.6 percent versus the same period in 2007.
Mainline CASM for the quarter was up 85.5 percent versus the second
quarter of 2007, reflecting a 55.4 percent increase in mainline fuel
price per gallon and the significant accounting charges.
-- Strengthened its cash position by raising $90 million through new
financings, asset sales and freeing up $130 million in restricted cash.
In addition, the company expects to raise $330 million in cash in the
third quarter through aircraft financings and the release of restricted
cash, resulting in a total cash balance improvement of approximately
$550 million.
-- Announced further capacity cuts and the retirement of the entire B737
fleet as well as six B747s. In total, United will retire 100 aircraft
and will reduce fourth-quarter mainline domestic capacity 15.5 percent
to 16.5 percent year-over-year. In conjunction with the capacity
reductions, the company expects to reduce its workforce by
approximately 7,000 by year-end 2009.
-- Announced an alliance partnership with Continental Airlines -- a
partnership that will create the most comprehensive domestic system by
linking networks as well as creating potential for cost savings and
operational efficiencies, while simultaneously benefiting customers.
Quarterly Net Loss Driven By Record High Fuel Prices
The company's financial results in the second quarter of 2008 were
impacted by previously disclosed largely non-cash accounting charges that,
coupled with a $773 million or 54.1 percent increase in consolidated fuel
expense, caused the company's net, pre-tax and operating results to be
significantly lower year-over-year. The accounting charges include:
-- A non-cash special charge of $2.3 billion for goodwill impairment.
-- Non-cash special charges of $194 million relating to the impairment of
B737 aircraft that are being retired from the company's operating
fleet, aircraft pre-delivery deposits and certain indefinite-lived
intangible assets other than goodwill net of a related tax benefit of
$29 million.
-- Severance charges of $82 million related to the staffing reductions
that will result from the capacity reductions the company has
announced. Cash payments related to severance will be incurred over
time as we implement our capacity reduction plans.
-- Other largely non-cash charges of $54 million related to certain
projects that have been terminated or deferred and a non-cash
adjustment to increase certain employee benefit obligations.
-- A $29 million cash gain from a litigation settlement.
These accounting charges added $2.6 billion of largely non-cash expense to
the company's operating costs for the quarter. The company may record
additional accounting charges in future quarters related to its capacity
reductions, including possible non-cash fleet and property and equipment
impairment charges, further intangible asset impairment charges, expenses to
terminate early certain facility and aircraft leases and additional severance
costs. However, at this time, the company is unable to reasonably estimate the
amount and timing of these future charges.
Excluding the above accounting charges, in the second quarter of 2008 the
company generated an operating loss of $87 million, versus operating income of
$537 million in the year ago period primarily as a result of the significant
increase in fuel expense. The company generated a net loss, excluding these
accounting charges, of $151 million in the second quarter of 2008, $425
million worse than the second quarter of 2007. Including the impact of these
accounting charges, the company reported an operating loss for the quarter of
$2.69 billion and a net loss of $2.73 billion.
Excluding a $29 million tax benefit related to the impairment of
intangible assets, the company did not recognize any income tax benefit in the
second quarter of 2008. Because of its Net Operating Loss carry-forwards, the
company expects to pay minimal cash taxes for the foreseeable future.
Despite continued unit revenue growth, and better cost performance
compared to its prior guidance, these gains were insufficient to offset the
more than 55 percent increase in average fuel price per gallon.
"Our industry is challenged as never before by the unrelenting price of
oil, and United is taking aggressive action to offset unprecedented fuel costs
and to strengthen the competitiveness of our business," said Glenn Tilton,
United president, chairman and CEO. "The elimination of our entire B737 fleet
and our alliance with Continental are examples of the different approach we
are taking to respond to dramatically changed market conditions to deliver
better results for all our stakeholders."
Taking Additional Actions to Address Unprecedented Fuel Costs
While the price of jet fuel has steadily increased over the last few
years, the rise in 2008 has been unprecedented, with fuel increasing by more
than 37 percent since the beginning of the year. United is executing an
aggressive plan to address the skyrocketing cost of fuel by:
-- Sizing the business appropriately for the environment, leading the
industry in permanently reducing capacity. United is removing 94
narrowbody aircraft and 6 widebody aircraft from its operations,
retiring its entire fleet of B737s in the process.
-- Using its capacity discipline to pass higher commodity costs to
customers through fare and fuel surcharge initiatives.
-- Creating new revenue streams by charging for a la carte service, such
as checked bags.
-- Reducing costs across the business.
-- Reducing capital expenditures.
United also recently announced a framework agreement to form a unique
partnership with Continental Airlines, one that responds to the need for
different thinking and solutions in an industry confronted by extraordinary
and volatile fuel costs and dramatically changed market conditions. This
agreement will result in extensive cooperation, linking networks and services
worldwide to the benefit of customers while creating revenue opportunities,
cost savings and other operating efficiencies. In addition, Continental plans
to join United in the Star Alliance, the largest airline alliance in the
world. This week, Continental Airlines, United Airlines and eight other member
airlines in the Star Alliance plan to ask the U.S. Department of
Transportation (DOT) to allow Continental to join the group of carriers that
already hold antitrust immunity. Approval by the DOT would enable Continental,
United and the other immunized Star Alliance carriers to work closely together
to deliver highly competitive flight schedules, fares and service.
Strengthened Cash Position With $550 Million Raised From New Transactions
During the quarter, the company raised $90 million through new aircraft
financing transactions and asset sales and freed up $130 million in restricted
cash by replacing it with a $100 million letter of credit.
In addition, early in the third quarter, the company received funds from a
$241 million aircraft financing transaction whereby it raised additional debt.
The company freed up another $50 million of restricted cash by replacing it
with letters of credit worth $34 million. The company also reached agreements
in principle for the sale of assets worth approximately $40 million.
As a result of all these actions, the company raised approximately $550
million in cash.
Despite escalating fuel prices, the company generated positive operating
and free cash flow during the quarter. The company realized $217 million of
operating cash flow and $127 million of free cash flow, defined as operating
cash flow less capital expenditures, during the second quarter.
The company reduced total on and off balance sheet debt by $292 million in
the quarter to $11.1 billion, despite entering into new debt financing. The
company ended the quarter with an unrestricted cash balance of $2.9 billion
and a restricted cash balance of $655 million. The company's quarter-end cash
balance does not include any cash deposits associated with collateral from its
fuel hedge counterparties.
In addition to its strong cash balance, and subsequent to the financings
and asset sales previously discussed, the company continues to have over $3
billion in unencumbered hard assets that it can use to further enhance
liquidity through asset sales and/or secured financing transactions.
"We continue to take the difficult, but necessary action across the
company to reduce our costs, including reducing our workforce by more than
7,000 people," said Jake Brace, United executive vice president and CFO. "We
are maintaining our cost guidance for the year even as we dramatically reduce
capacity, and are improving our liquidity, ensuring United is well positioned
to weather the current environment."
Capacity Discipline Drives Revenue Growth
The company's focus on capacity discipline and strong revenue management
drove continued revenue growth. Total revenues increased by 3.0 percent in the
second quarter of 2008 compared to the same period in 2007, as growth in
passenger unit revenue and cargo more than offset the year-over-year reduction
in capacity. The company's mainline RASM increased by 5.1 percent
year-over-year from the second quarter of 2007 due to strong passenger and
cargo yield performance partially offset by lower passenger load factors.
The company's cargo business continued its strong performance with a 30.9
percent year-over-year increase in revenue. Higher fuel surcharges, foreign
exchange gains and strong yield improvements contributed to the cargo revenue
increase.
Total passenger revenues increased by 2.6 percent in the second quarter
compared to the prior year as a result of a 7.7 percent gain in consolidated
yield, more than offsetting the 3 point decline in system load factor.
Mainline domestic PRASM for the quarter increased by 5.9 percent, aided by a
4.8 percent reduction in capacity. International PRASM grew 3.2 percent in the
second quarter compared to the same period last year, despite a 3.7 percent
increase in international capacity year-over-year. Consolidated PRASM
increased 3.9 percent year-over-year.
The company's change to deferred revenue accounting for the Mileage Plus
program, from the previous incremental cost method, decreased consolidated
passenger revenue by approximately $42 million in the second quarter of 2008.
The change to the expiration period for Mileage Plus accounts without activity
from 36 to 18 months, which the company instituted in January 2007, did not
impact the company's revenue results in the second quarter of 2008, as it did
in the second quarter of 2007.
In the second quarter of 2007 deferred revenue accounting increased
consolidated passenger revenue by a net $1 million, including $47 million of
non-cash revenue recognized from the expiration policy change. In total, these
Mileage Plus accounting changes resulted in a net year-over-year decrease in
consolidated passenger revenues of $43 million for the second quarter of 2008
compared to the same period in 2007.
As the company no longer follows the incremental cost method of
accounting, differences between the two accounting methods are calculated
using the company's best estimate of the incremental cost method. Excluding
Mileage Plus accounting impacts, consolidated PRASM increased 4.9 percent
year-over-year.
Regional affiliate PRASM was up 0.3 percent compared to last year, with a
6.6 percent increase in yield and a 1.1 percent capacity decline. Load factor
for regional affiliates decreased 4.7 points in the second quarter of 2008
compared to the second quarter of 2007, while stage length for regional
affiliates was up 5.3 percent for the same period.
Comparison of 2008 Second Quarter Geographic Passenger Revenue
Versus 2007 Second Quarter
2Q 2008 Passenger
Passenger Revenues PRASM ASM(1)
Revenue % Increase/ % Increase/ % Increase/
Geographic Area (millions) (Decrease) (Decrease) (Decrease)
North America $2,414 0.9% 5.9% (4.8)%
Pacific $830 1.7% 2.4% (0.7)%
Atlantic $723 13.0% 0.8% 12.1%
Latin America $132 11.2% 16.0% (4.1)%
Total Mainline $4,099 3.3% 4.7% (1.3)%
Regional Affiliates $797 (0.9)% 0.3% (1.1)%
Total Consolidated $4,896 2.6% 3.9% (1.3)%
Adjusted
Consolidated(2) $4,938 3.5% 4.9%
(1) ASM (available seat miles)
(2) Consolidated Passenger Revenue and PRASM adjusted for Mileage Plus
effects (See Footnote 5[b]).
Focus On Improving Operating Performance
For the twelve month period ending May 31, 2008, the latest available,
United ranked fifth among the six major U.S. network carriers in Department of
Transportation on-time rankings. As part of the company's efforts to improve
performance, it has implemented an operational agenda that stresses the
day-to-day actions required to provide a reliable product, deliver good
service and maintain industry leading safety standards and practices. To
improve reliability performance, the company is increasing crew reserves,
increasing average scheduled ground time and improving its arrival readiness
at gates. This, coupled with the reduction in ground delays expected to
result from the industry-wide cut in capacity as well as the new O'Hare runway
that will come online in November, is expected to materially improve the
company's on-time performance.
"Our focus and our energy are all about generating a step change in our
performance," said John Tague, United executive vice president and COO. "We've
set the targets, put the right leaders in place, and we're executing against
our plan with a clear understanding of what we need to achieve, how we need to
do it, and that we are ultimately accountable for that outcome."
Continued Focus on Cost Control
Mainline CASM increased by 85.5 percent year-over-year to 20.39 cents
reflecting the large special charge and other largely non-cash accounting
charges that the company took in the second quarter, as well as the steep
increase in fuel expense. Second quarter mainline CASM, excluding these
charges and fuel, increased by 2.6 percent from the year-ago quarter to 7.80
cents, better than the company's guidance due to lower than expected
maintenance costs and an airport rent cost. This result demonstrates United's
continued focus on controlling non-fuel costs.
Second Quarter Increase/(Decrease)
Mainline Consolidated
% %
2008 2007 Chg. 2008 2007 Chg.
CASM (cents) 20.39 10.99 85.5% 20.41 11.68 74.7%
CASM excluding
accounting charges
(cents) 13.03 10.99 18.6% 13.81 11.68 18.2%
CASM excluding fuel
and accounting
charges(cents) 7.80 7.60 2.6% 8.23 8.08 1.9%
The company has classified the majority of its various fuel hedging
positions as economic hedges for accounting purposes. The company recorded a
net gain of $238 million on hedge contracts in the second quarter -- a
realized gain of $30 million relating to the current quarter and an unrealized
gain of $208 million relating to contracts settling in future periods. The
cash benefit of hedging during the quarter was $51 million. These gains were
recorded in mainline aircraft fuel expense and resulted in lower fuel expense,
than would otherwise be the case, for the second quarter.
The company also recognized a net gain of $22 million from fuel hedges
that did not qualify as economic hedges and were therefore reported as
non-operating income; $1 million of this gain was realized during the current
quarter.
Business Highlights
-- In June, the company announced a new fee of $15 for first checked bags.
The company anticipates that this charge along with the $25 second
checked bag fee and several other changes to bag fees will generate
$275 million of incremental revenue on an annualized basis.
-- United became the first U.S. carrier to offer iPod and iPhone
connectivity to its in-flight entertainment system, enabling customers
to enjoy their individual content on a 15.4-inch personal television,
all while the iPod or iPhone charges. United's entire fleet of
international, widebody aircraft are being reconfigured over the next
two years with lie-flat seats, on-demand entertainment, and iPod and
iPhone connectivity in first and business class.
-- United announced several new codeshare partnerships during the second
quarter including new relationships with Hawaiian, Jet Airways and Aer
Lingus. These partnerships will significantly expand the number of
flights available to United customers in Hawaii, India and Ireland.
-- On June 12, 2008, the company held its annual meeting of shareholders.
At the meeting, the company's shareholders overwhelmingly elected each
of its directors to a one-year term and also approved an equity
incentive plan that will enable United to attract, retain and reward
key leaders.
Fresh Start Reporting
Upon emergence from its Chapter 11 reorganization in February 2006, the
company adopted fresh-start reporting in accordance with SOP 90-7. The
company's emergence resulted in a new reporting entity with no retained
earnings or accumulated deficit as of February 1, 2006. Accordingly, the
company's financial information shown for periods prior to February 1, 2006,
is not comparable to consolidated financial statements presented on or after
that date. For further discussion of fresh-start reporting, please refer to
the company's 2006 and 2007 Form 10-Ks as filed with the Securities and
Exchange Commission (SEC).
To offer additional information for investors, the company has identified
certain items consisting only of major non-cash fresh-start reporting and
exit-related credits and charges (Note 7). While it is not practical for the
company to present information for all items that are not comparable in the
pre- and post-exit periods, the company believes that the items identified in
Note 7 are the material non-cash fresh-start reporting and exit-related items
and that such information is useful to investors in understanding
year-over-year performance. These fresh-start and exit-related items are
discussed in the company's 2006 and 2007 Form 10-Ks.
Outlook
In response to higher fuel prices and a weaker domestic economic
environment, the company is reducing its capacity for 2008 and 2009 and
currently expects the following year-over-year capacity changes:
Capacity Third Quarter Fourth Quarter Full-year Full-year
(Available 2008 2008 2008 2009
Seat Miles) (versus 2008)
North
America -6.5% to -5.5% -16.5% to -15.5% -8.5% to -7.5% -13.5% to -12.5%
Inter-
national -2.0% to -1.0% -7.5% to -6.5% +0.5% to +1.5% -8.0% to -7.0%
Mainline -4.5% to -3.5% -12.5% to -11.5% -5.0% to -4.0% -11.0% to -10.0%
Express -0.5% to +0.5% -3.5% to -2.5% -2.0% to -1.0% +6.5% to +7.5%
Consoli-
dated
Domestic -5.5% to -4.5% -14.0% to -13.0% -7.5% to -6.5% -10.0% to -9.0%
Consoli-
dated -4.0% to -3.0% -11.5% to -10.5% -4.5% to -3.5% -9.0% to -8.0%
Despite the significant reduction in capacity, the company expects 2008
full-year mainline CASM, excluding fuel, special items and the largely
non-cash accounting charges discussed earlier, to increase between 1.5 and 2.5
percent, in line with prior guidance, as a result of its newly expanded $500
million cost reduction program, an increase of $100 million. Mainline CASM,
excluding fuel, severance and special items, is anticipated to increase
between 1.5 and 2.5 percent in the third quarter of 2008.
As United reduces capacity, it is reducing the number of salaried,
management and frontline employees. In addition to the 1,500 or 20 percent
reduction in the salaried and management workforce that the company announced
last quarter, the company now expects to reduce its frontline workforce by
more than 5,500 employees by the end of 2009. United is working to reduce the
impact of capacity reductions on employees through voluntary programs.
As previously announced, the company has also set a non-aircraft capital
budget of $450 million for 2008, $200 million less than originally planned.
As of July 21, the company had hedged approximately 44 percent of its
estimated 2008 third quarter mainline fuel consumption, of which approximately
34 percent is through three-way collars with upside protection beginning on
average at a crude equivalent price of $111 per barrel and capped at $127 per
barrel, with payment obligations beginning on average at a crude equivalent
price below $107 per barrel. The remaining 10 percent is hedged through
collars with upside protection beginning at an average crude equivalent price
of $111 per barrel with payment obligations on average beginning at crude
equivalent price below $100 per barrel.
As of the same date, United had hedged 47 percent of its forecasted
mainline fuel consumption for the fourth quarter of 2008, of which 29 percent
is through three-way collars with upside protection on average beginning from
$113 per barrel and capped at $134 per barrel with payment obligations on
average beginning if crude oil drops below $107 per barrel. The remaining 18
percent is hedged through collars with upside protection on average beginning
at a crude oil equivalent price of $109 per barrel with payment obligations on
average beginning if crude oil drops below $99 per barrel.
As of the same date, United had hedged 14 percent of its forecasted
mainline fuel consumption for the full year of 2009, of which 10 percent is
through three-way collars with upside protection on average beginning from
$121 per barrel and capped at $152 per barrel with payment obligations on
average beginning if crude oil drops below $102 per barrel. The remaining 4
percent is hedged through collars with upside protection on average beginning
at a crude oil equivalent price of $119 per barrel with payment obligations on
average beginning if crude oil drops below $108 per barrel.
The company expects mainline jet fuel price per gallon, including the
impact of hedges, to average $4.08 per gallon in the third quarter of 2008.
Notes 5 and 8 to the attached Statements of Consolidated Operations
provides a reconciliation of net income or loss reported under GAAP to net
income or loss adjusted for special items and accounting charges for all
periods presented as well as a reconciliation of other non-GAAP financial
measures.
About United
United Airlines (Nasdaq: UAUA) operates more than 3,200* 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 965 destinations in
162 countries worldwide. United's 55,000 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 flight schedule between Jan. 1, 2008, and Dec. 31,
2008.
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: Certain statements included in this press release are
forward-looking and thus reflect the company's 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 the operations and business environment of
the company that may cause actual results to differ materially from any future
results expressed or implied in such forward-looking statements. Factors that
could significantly affect net earnings, revenues, expenses, costs, load
factor and capacity include, without limitation, the following: the company's
ability to comply with the terms of its credit facility; the costs and
availability of financing; the company's ability to execute its business plan;
the company's ability to realize benefits from its resource optimization
efforts and cost reduction initiatives; the company's ability to attract,
motivate and/or retain key employees; the company's ability to attract and
retain customers; demand for transportation in the markets in which the
company operates; general economic conditions (including interest rates,
foreign currency exchange rates, crude oil prices and energy refining capacity
in relevant markets); the effects of any hostilities or act of war or any
terrorist attack; the ability of other air carriers with whom the company has
alliances or partnerships to provide the services contemplated by the
respective arrangements with such carriers; the costs and availability of
aircraft insurance; the costs of jet fuel; our ability to cost-effectively
hedge against increases in the price of jet fuel; the costs associated with
security measures and practices; labor costs; industry consolidation;
competitive pressures on pricing and on demand; capacity decisions of United
and/or its competitors; U.S. or foreign governmental legislation, regulation
and other actions, including the effect of open skies agreements; the
company's ability to utilize its net operating losses; the ability of the
company to maintain satisfactory labor relations and our ability to avoid any
disruptions to operations due to any potential actions by our labor groups;
weather conditions; and other risks and uncertainties set forth from time to
time in UAL's reports to the United States Securities and Exchange Commission.
Consequently, the forward-looking statements should not be regarded as
representations or warranties by the company that such matters will be
realized. The company disclaims any intent or obligation to update or revise
any of the forward-looking statements, whether in response to new information,
unforeseen events, changed circumstances or otherwise.
UAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions, except per share amounts)
Three Months Ended %
June 30, Increase/
(In accordance with GAAP) 2008 2007 (Decrease)
Operating revenues:
Passenger - United Airlines $4,099 $3,968 3.3
Passenger - Regional Affiliates 797 804 (0.9)
Cargo 237 181 30.9
Other operating revenues 238 260 (8.5)
5,371 5,213 3.0
Operating expenses:
Aircraft fuel 1,848 1,206 53.2
Salaries and related costs (Note 5) 1,179 1,019 15.7
Regional affiliates (a) 847 733 15.6
Purchased services (Note 5) 371 335 10.7
Aircraft maintenance materials and
outside repairs 295 284 3.9
Depreciation and amortization 216 229 (5.7)
Landing fees and other rent 199 215 (7.4)
Distribution expenses 193 197 (2.0)
Aircraft rent 100 105 (4.8)
Cost of third party sales 65 77 (15.6)
Goodwill impairment (Note 5) 2,277 - -
Other impairments and special
items (Note 5) 223 - -
Other operating expenses (Note 5) 252 276 (8.7)
8,065 4,676 72.5
Earnings (loss) from operations (2,694) 537 -
Other income (expense):
Interest expense (126) (139) (9.4)
Interest income 28 62 (54.8)
Interest capitalized 5 4 25.0
Miscellaneous, net 28 1 NM
(65) (72) (9.7)
Earnings (loss) before income taxes and
equity in earnings of affiliates (2,759) 465 -
Income tax expense (benefit) (Note 5) (29) 192 -
Earnings (loss) before equity in earnings
of affiliates (2,730) 273 -
Equity in earnings of affiliates, net
of tax 1 1 -
Net income (loss) $(2,729) $274 -
Earnings (loss) per share, basic $(21.47) $2.31
Earnings (loss) per share, diluted $(21.47) $1.83
Weighted average shares, basic 127.1 117.4
Weighted average shares, diluted 127.1 153.4
See accompanying notes.
(a) Regional affiliates expense includes regional aircraft rent expense.
See Note 2 for more information.
NM Not meaningful.
UAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In millions, except per share amounts)
Six Months Ended %
June 30, Increase/
(In accordance with GAAP) 2008 2007 (Decrease)
Operating revenues:
Passenger - United Airlines $7,644 $7,232 5.7
Passenger - Regional Affiliates 1,512 1,479 2.2
Cargo 455 349 30.4
Other operating revenues 471 526 (10.5)
10,082 9,586 5.2
Operating expenses:
Aircraft fuel 3,423 2,247 52.3
Salaries and related costs (Note 5) 2,225 2,087 6.6
Regional affiliates (a) 1,626 1,425 14.1
Purchased services (Note 5) 720 636 13.2
Aircraft maintenance materials and
outside repairs 612 565 8.3
Depreciation and amortization 436 449 (2.9)
Landing fees and other rent 429 453 (5.3)
Distribution expenses 377 385 (2.1)
Aircraft rent 199 205 (2.9)
Cost of third party sales 129 170 (24.1)
Goodwill impairment (Note 5) 2,277 - -
Other impairments and special
items (Note 5) 223 (22) -
Other operating expenses (Note 5) 541 541 -
13,217 9,141 44.6
Earnings (loss) from operations (3,135) 445 -
Other income (expense):
Interest expense (261) (345) (24.3)
Interest income 76 120 (36.7)
Interest capitalized 10 9 11.1
Miscellaneous, net 9 (1) -
(166) (217) (23.5)
Earnings (loss) before income taxes and
equity in earnings of affiliates (3,301) 228 -
Income tax expense (benefit) (Note 5) (32) 108 -
Earnings (loss) before equity in
earnings of affiliates (3,269) 120 -
Equity in earnings of affiliates, net
of tax 3 2 50.0
Net income (loss) $(3,266) $122 -
Earnings (loss) per share, basic $(26.33) $1.00
Earnings (loss) per share, diluted $(26.33) $0.88
Weighted average shares, basic 124.1 117.2
Weighted average shares, diluted 124.1 153.1
See accompanying notes.
(a) Regional affiliates expense includes regional aircraft rent expense.
See Note 2 for more information.
NM Not meaningful.
UAL CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In millions)
Three Months Ended % Six Months Ended %
June 30, Increase/ June 30, Increase/
(In accordance 2008 2007 (Decrease) 2008 2007 (Decrease)
with GAAP)
Cash flows
provided (used)
by operating
activities $217 $1,034 (79.0) $137 $1,660 (91.7)
Cash flows
provided (used)
by investing
activities:
Net (purchases)
sales of
short-term
investments 486 (2,389) - 2,295 (2,270) -
Additions to
property and
equipment (131) (78) 67.9 (232) (146) 58.9
(Increase)
decrease in
restricted
cash (a) 73 (15) - 101 (24) -
Proceeds from
litigation on
advance
deposits 41 - - 41 - -
Proceeds from
the sale of
property and
equipment 14 5 180.0 14 11 27.3
Other, net (11) (12) (8.3) (22) (26) (15.4)
472 (2,489) - 2,197 (2,455) -
Cash flows
provided (used)
by financing
activities:
Repayment of
Credit
Facility - - - (9) (986) (99.1)
Repayment of
other debt (169) (705) (76.0) (351) (1,023) (65.7)
Special
distribution - - - (251) - -
Principal
payments
under capital
leases (188) (35) 437.1 (200) (48) 316.7
Decrease in
capital lease
deposits 154 - - 154 - -
Increase in
deferred
financing
costs (109) (9) NM (111) (20) 455.0
Proceeds from
issuance of
secured notes 84 694 (87.9) 84 694 (87.9)
Other, net - 1 (100.0) (10) 13 -
(228) (54) 322.2 (694) (1,370) (49.3)
Increase
(decrease) in
cash and cash
equivalents
during the
period 461 (1,509) - 1,640 (2,165) -
Cash and cash
equivalents at
beginning of
the period 2,438 3,176 (23.2) 1,259 3,832 (67.1)
Cash and cash
equivalents at
end of the
period $2,899 $1,667 73.9 $2,899 $1,667 73.9
Reconciliation of cash and cash equivalents to
total cash and cash equivalents, short-term
investments and restricted cash:
As of %
June 30, Increase/
2008 2007 (Decrease)
Cash and cash
equivalents $2,899 $1,667 73.9
Short-term
investments - 2,582 (100.0)
Restricted
cash (a) 655 871 (24.8)
Total cash and
cash
equivalents,
short-term
investments
and
restricted
cash (b) $3,554 $5,120 (30.6)
(a) The Company's restricted cash primarily relates to reserves with
institutions that process its credit card ticket sales, which
fluctuate quarterly due to seasonality and the level of advance ticket
sales, security deposits for airport leases and security for workers'
compensation obligations, which decreased significantly in the second
quarter of 2008 due to the posting of letters of credit.
(b) See Note 5[i] for the Company's computation of free cash flow.
NM Not meaningful.
CONSOLIDATED NOTES (UNAUDITED)
(1) UAL Corporation ("UAL" or the "Company") is a holding company whose
principal subsidiary is United Air Lines, Inc. ("United"). On
December 9, 2002, UAL, United and twenty-six direct and indirect
wholly-owned subsidiaries filed Chapter 11 petitions for relief in the
U.S. Bankruptcy Court for the Northern District of Illinois. On
February 1, 2006 (the "Effective Date"), the Company emerged from
Chapter 11. In connection with its emergence from Chapter 11
bankruptcy protection, the Company implemented fresh-start reporting
in accordance with American Institute of Certified Public Accountants'
Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" on the Effective Date. The
application of fresh-start reporting resulted in significant changes
to the historical financial statements.
(2) United has contractual relationships with various regional carriers to
provide regional jet and turboprop service branded as United Express.
Under these agreements, United pays the regional carriers
contractually agreed fees for crew expenses, maintenance expenses and
other costs of operating these flights. These costs include aircraft
rents of $103 million and $107 million for the three months ended June
30, 2008 and 2007, respectively, and $207 million and $214 million for
the six months ended June 30, 2008 and 2007, respectively, which are
included in regional affiliate expense in our Statements of
Consolidated Operations.
(3) UAL's results of operations include aircraft fuel expense for both
United mainline jet operations and regional affiliates. Aircraft fuel
expense incurred as a result of the Company's regional affiliates'
operations is reflected in Regional affiliates operating expense. In
accordance with UAL's agreement with its regional affiliates, these
costs are incurred by the Company.
Year-Over-Year Impact of Fuel Expense
United Mainline and Regional Affiliate Operations
Three Months Ended Six Months Ended
(In millions, June 30, % June 30, %
except per gallon) 2008 2007 Change 2008 2007 Change
Mainline fuel expense $1,848 $1,206 53.2 $3,423 $2,247 52.3
Regional affiliates
fuel expense 355 224 58.5 633 418 51.4
United system fuel
expense $2,203 $1,430 54.1 $4,056 $2,665 52.2
Mainline fuel
consumption (gallons) 571 579 (1.4) 1,127 1,130 (0.3)
Mainline average jet
fuel price per gallon
(in cents) 323.6 208.3 55.4 303.7 198.8 52.8
Regional affiliates
fuel consumption
(gallons) 94 96 (2.1) 186 188 (1.1)
Regional affiliates
average jet fuel
price per gallon (in
cents) 377.7 233.3 61.9 340.3 222.3 53.1
(4) The tables below set forth certain operating statistics by geographic
region and the Company's mainline, regional affiliates and
consolidated operations:
(% change from prior year)
Three Months
Ended
June 30, North Regional
2008 America Pacific Atlantic Latin Mainline Affiliates Consolidated
Passenger
revenues 0.9 1.7 13.0 11.2 3.3 (0.9) 2.6
ASM (4.8) (0.7) 12.1 (4.1) (1.3) (1.1) (1.3)
RPM (7.1) (5.6) 7.6 (3.4) (4.5) (7.0) (4.8)
PRASM 5.9 2.4 0.8 16.0 4.7 0.3 3.9
Yield [a] 8.6 7.8 4.2 13.5 8.2 6.6 7.7
Load factor
(points) (2.2) (4.1) (3.4) 0.6 (2.7) (4.7) (3.0)
Six Months
Ended
June 30, North Regional
2008 America Pacific Atlantic Latin Mainline Affiliates Consolidated
Passenger
revenues 2.3 6.5 16.3 13.6 5.7 2.2 5.1
ASM (5.5) 2.4 15.0 (0.1) (0.7) (1.2) (0.7)
RPM (7.6) (2.7) 11.0 (1.2) (3.7) (6.4) (4.0)
PRASM 8.3 4.0 1.1 13.7 6.4 3.5 6.0
Yield [a] 10.7 9.4 4.4 15.3 9.8 9.1 9.5
Load factor
(points) (1.8) (4.1) (2.9) (0.9) (2.6) (4.1) (2.7)
[a] Yields for geographic regions exclude charter revenue, industry
reduced fares, passenger charges and related revenue passenger miles.
CONSOLIDATED NOTES (UNAUDITED)
(5) The Company incurred significant charges related to tangible and
intangible asset impairments, severance and other charges that
significantly impacted its results in the three and six months ended
June 30, 2008. Collectively, these charges are identified as
"impairments and other charges" in the Regulation G reconciliations
below. These items consist of the following:
Three Months Six Months
Ended Ended
June 30, 2008 June 30, 2008
Income
Statement
Classification
Goodwill impairment $2,277 $2,277 Goodwill
impairment
Intangible asset impairments 80 80
Aircraft and deposit impairments 143 143
Other impairments 223 223 Other
impairments
and special
items
Severance 82 82 Salaries and
related costs
Employee benefit charges 28 (a) 34 (a) Salaries and
related costs
Litigation-related settlement gain (29) (29) Other
operating
expenses
Purchased services charges 26 (b) 26 (b) Purchased
services
Pre-tax impairments and other
charges 2,607 2,613
Tax benefit on intangible asset
impairments (29) (29) Income tax
benefit
Impairments and other charges, net
of tax $2,578 $2,584
(a) Amount relates to additional charges to adjust certain employee
benefit obligations.
(b) Amount relates to expense for certain projects and transactions that
have been terminated or indefinitely postponed by the Company.
The Company recorded a special operating expense credit of $22 million
in the three months ended March 31, 2007 related to bankruptcy
facility lease secured interest litigation, which remains unresolved
from the Company's recent reorganization.
Pursuant to SEC Regulation G, the Company has included the following
reconciliation of reported non-GAAP financial measures to comparable
financial measures reported on a GAAP basis. The Company 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. The Company also believes that adjusting for
special items is useful to investors because they are non-recurring
items not indicative of the Company's on-going performance. In
addition, the Company adjusts for Mileage Plus impacts for better
comparison to several of its peers as many still apply the incremental
cost method of accounting to their loyalty plans.
The tables below set forth the reconciliation of GAAP and non-GAAP
financial measures for certain operating statistics that are used in
determining key indicators such as adjusted passenger revenue per
revenue passenger mile ("Yield"), operating revenue per available seat
mile ("RASM"), operating margin, net income (loss) and operating
expense per available seat mile ("CASM").
Three Months Ended Six Months Ended
June 30, % June 30, %
2008 2007 Change 2008 2007 Change
[a] Yield (In millions)
Mainline
Passenger - United
Airlines $4,099 $3,968 3.3 $7,644 $7,232 5.7
Less: industry
reduced fares and
passenger charges (12) (11) 9.1 (22) (21) 4.8
Mainline adjusted
passenger revenue $4,087 $3,957 3.3 $7,622 $7,211 5.7
Mainline revenue
passenger miles 29,443 30,833 (4.5) 56,370 58,562 (3.7)
Adjusted mainline
yield (in cents) 13.88 12.83 8.2 13.52 12.31 9.8
Consolidated
Consolidated
passenger revenue $4,896 $4,772 2.6 $9,156 $8,711 5.1
Less: industry
reduced fares and
passenger charges (12) (11) 9.1 (22) (21) 4.8
Consolidated
adjusted passenger
revenue $4,884 $4,761 2.6 $9,134 $8,690 5.1
Consolidated
revenue passenger
miles 32,581 34,207 (4.8) 62,317 64,913 (4.0)
Adjusted
consolidated
yield (in cents) 14.99 13.92 7.7 14.66 13.39 9.5
[b] PRASM (In millions)
Mainline
Passenger - United
Airlines $4,099 $3,968 3.3 $7,644 $7,232 5.7
Add: Mileage Plus
- effect of
accounting change 35 37 (5.4) 89 150 (40.7)
Less: Mileage Plus
- effect of
expiration period
change - (39)(100.0) - (62)(100.0)
Mainline adjusted
passenger revenue $4,134 $3,966 4.2 $7,733 $7,320 5.6
Mainline available
seat miles 35,394 35,875 (1.3) 69,922 70,410 (0.7)
Adjusted mainline
PRASM (in cents) 11.68 11.06 5.6 11.06 10.40 6.3
Regional Affiliates
Passenger - Regional
Affiliates $797 $804 (0.9) $1,512 $1,479 2.2
Add: Mileage Plus -
effect of
accounting change 7 9 (22.2) 18 31 (41.9)
Less: Mileage Plus -
effect of expiration
period change - (8)(100.0) - (13)(100.0)
Regional affiliates
passenger revenue $804 $805 (0.1) $1,530 $1,497 2.2
Regional affiliates
available seat
miles 4,126 4,174 (1.1) 8,007 8,103 (1.2)
Regional affiliates
PRASM (in cents) 19.49 19.29 1.0 19.11 18.47 3.5
Consolidated
Consolidated
passenger
revenues $4,896 $4,772 2.6 $9,156 $8,711 5.1
Add: Mileage Plus -
effect of
accounting change 42 46 (8.7) 107 181 (40.9)
Less: Mileage Plus -
effect of expiration
period change - (47)(100.0) - (75)(100.0)
Adjusted
consolidated
passenger revenues $4,938 $4,771 3.5 $9,263 $8,817 5.1
Consolidated
available seat
miles 39,520 40,049 (1.3) 77,929 78,513 (0.7)
Adjusted
consolidated PRASM
(in cents) 12.49 11.91 4.9 11.89 11.23 5.9
CONSOLIDATED NOTES (UNAUDITED)
Three Months Ended Six Months Ended
June 30, % June 30, %
2008 2007 Change 2008 2007 Change
[c] RASM (In
millions)
Mainline
Consolidated
operating
revenues $5,371 $5,213 3.0 $10,082 $9,586 5.2
Less:
Passenger -
Regional
Affiliates (797) (804) (0.9) (1,512) (1,479) 2.2
Mainline
operating
revenues $4,574 $4,409 3.7 $8,570 $8,107 5.7
Mainline
available
seat miles 35,394 35,875 (1.3) 69,922 70,410 (0.7)
Mainline
RASM
(in cents) 12.92 12.29 5.1 12.26 11.51 6.5
Consolidated
Consolidated
operating
revenues $5,371 $5,213 3.0 $10,082 $9,586 5.2
Add: Mileage
Plus - effect
of accounting
change 42 46 (8.7) 107 181 (40.9)
Less: Mileage
Plus - effect
of expiration
period change - (47) (100.0) - (75) (100.0)
Adjusted
consolidated
operating
revenues $5,413 $5,212 3.9 $10,189 $9,692 5.1
Consolidated
available
seat miles 39,520 40,049 (1.3) 77,929 78,513 (0.7)
Adjusted
consolidated
RASM
(in cents) 13.70 13.01 5.3 13.07 12.34 5.9
[d] Operating
Margin
(In millions)
Consolidated
operating
earnings
(loss) $(2,694) $537 - $(3,135) $445 -
Add (less):
impairments
and other
charges 2,607 - - 2,613 (22) -
Adjusted
operating
earnings
(loss) $(87) $537 - $(522) $423 -
Consolidated
operating
revenues $5,371 $5,213 3.0 $10,082 $9,586 5.2
Operating
margin
(loss)
(percent) (50.2) 10.3 (60.5) pt. (31.1) 4.6 (35.7) pt.
Adjusted
operating
margin (loss)
(percent) (1.6) 10.3 (11.9) pt. (5.2) 4.4 (9.6) pt.
[e] Pre-tax
income (loss)
(In millions)
Earnings (loss)
before income
taxes and
equity in
earnings of
affiliates $(2,759) $465 - $(3,301) $228 -
Add (less):
impairments
and other
charges 2,607 - - 2,613 (22) -
Adjusted
pre-tax
earnings
(loss) $(152) $465 - $(688) $206 -
Pre-tax
earnings
(loss)
(percent) (51.4) 8.9 (60.3) pt. (32.7) 2.4 (35.1) pt.
Adjusted
pre-tax
earnings
(loss)
(percent) (2.8) 8.9 (11.7) pt. (6.8) 2.1 (8.9) pt.
[f] Net income (loss)
(In millions)
Net income
(loss) $(2,729) $274 - $(3,266) $122 -
Add (less):
impairments
and other
charges 2,607 - - 2,613 (22) -
Add (less):
income tax
expense (i) (29) - - (29) 10 -
Adjusted net
income (loss) $(151) $274 - $(682) $110 -
[g] CASM (In
millions)
Mainline
Consolidated
operating
expenses $8,065 $4,676 72.5 $13,217 $9,141 44.6
Less: Regional
affiliates (847) (733) 15.6 (1,626) (1,425) 14.1
Mainline
operating
expenses $7,218 $3,943 83.1 $11,591 $7,716 50.2
Mainline
available seat
miles 35,394 35,875 (1.3) 69,922 70,410 (0.7)
Mainline CASM
(in cents) 20.39 10.99 85.5 16.58 10.96 51.3
Mainline
operating
expenses $7,218 $3,943 83.1 $11,591 $7,716 50.2
Add (less):
impairments and
other special
items (2,607) - - (2,613) 22 -
Adjusted
mainline
operating
expense $4,611 $3,943 16.9 $8,978 $7,738 16.0
Adjusted
mainline
CASM
(in cents) 13.03 10.99 18.6 12.84 10.99 16.8
Adjusted
mainline
operating
expense $4,611 $3,943 16.9 $8,978 $7,738 16.0
Less: mainline
fuel expense (1,848) (1,206) 53.2 (3,423) (2,247) 52.3
Less: cost of
third party
sales -
UAFC (ii) (3) (11) (72.7) (3) (34) (91.2)
Adjusted
mainline
operating
expense $2,760 $2,726 1.2 $5,552 $5,457 1.7
Adjusted
mainline CASM
(in cents) 7.80 7.60 2.6 7.94 7.75 2.5
CONSOLIDATED NOTES (UNAUDITED)
Three Months Ended Six Months Ended
June 30, % June 30, %
2008 2007 Change 2008 2007 Change
Consolidated
Consolidated
operating expenses $8,065 $4,676 72.5 $13,217 $9,141 44.6
Add (less):
impairments and
other charges (2,607) - - (2,613) 22 -
Adjusted
consolidated
operating expenses $5,458 $4,676 16.7 $10,604 $9,163 15.7
Consolidated
available seat
miles 39,520 40,049 (1.3) 77,929 78,513 (0.7)
Adjusted consolidated
CASM (in cents) 13.81 11.68 18.2 13.61 11.67 16.6
Consolidated
operating expenses $5,458 $4,676 16.7 $10,604 $9,163 15.7
Less: fuel expense
and UAFC(ii) (2,206) (1,441) 53.1 (4,059) (2,699) 50.4
Adjusted
consolidated
operating expenses $3,252 $3,235 0.5 $6,545 $6,464 1.3
Adjusted
consolidated CASM
(in cents) 8.23 8.08 1.9 8.40 8.23 2.1
[h] Operating expenses (In
millions)
Consolidated
operating expenses $8,065 $4,676 72.5 $13,217 $9,141 44.6
Add (less):
impairments and
other charges (2,607) - - (2,613) 22 -
Adjusted operating
expenses $5,458 $4,676 16.7 $10,604 $9,163 15.7
[i] Operating cash flow (In
millions)
Operating cash flow $217 $1,034 (79.0) $137 $1,660 (91.7)
Less: capital
expenditures (131) (78) 67.9 (232) (146) 58.9
Add: proceeds from
litigation on
advance deposits 41 - - 41 - -
Free cash flow $127 $956 (86.7) $(54) $1,514 (103.6)
[j] Loss per share (basic
and diluted)
Loss per share -
GAAP $(21.47) $(26.33)
Add: impairments
and other charges 20.28 20.82
Loss per share -
excluding
impairment and
other charges $(1.19) $(5.51)
(i) For the six months ended June 30, 2007, the income tax adjustment for
special items is the difference in the income tax provision on actual
net income (loss) and the income tax provision on adjusted net income
(loss), computed using an effective tax rate of 47%. The Company did
not record a tax benefit on the impairments and special items in the
2008 period, except for $29 million of tax benefits related to the
intangible asset impairments, which was calculated using a 36% tax
rate.
(ii) Included in UAL's operating expenses are the expenses of United's
wholly-owned subsidiary United Aviation Fuels Corporation ("UAFC").
UAFC's expenses are not derived from mainline jet operations;
therefore, UAL has excluded these expenses from the above reported
GAAP financial measures.
NM - Not meaningful.
(6) The table below sets forth the estimated exit-related and fresh-start
reporting impacts on the Company's results of operations.
2008 Increase (Decrease)
(In millions) YTD 2Q 1Q
Revenue impact: Estimate Estimate Estimate
Mileage Plus revenue $(107) $(42) $(65) [a]
Operating expense impact:
Share-based compensation 18 7 11 [b]
Mileage Plus marketing expense 7 2 5 [a]
Postretirement welfare cost 28 14 14 [c]
Depreciation and amortization 20 10 10 [d]
Deferred gain 36 18 18 [e]
Total operating expense impact 109 51 58
Non-operating expense impact:
Non-cash and fresh-start interest
expense $8 $4 $4 [f]
[a] In connection with its emergence from Chapter 11 protection effective
February 1, 2006, the Company adopted fresh-start reporting.
Accordingly, the Company elected to change its accounting policy from
an incremental cost basis to a deferred revenue model to measure the
obligation for the Mileage Plus Frequent Flyer program. Adjustments to
the obligation are recorded to operating revenues. Historically,
adjustments were based upon incremental costs and were recorded in
both operating revenues and advertising expense.
The deferred revenue model is more volatile than the incremental cost
basis. Because all miles are now accounted for under the deferred
revenue model, the amount of revenue recognized is more sensitive to
the number of miles earned and redeemed during the period than the
incremental cost basis.
CONSOLIDATED NOTES (UNAUDITED)
[b] In accordance with the plan of reorganization, the Company implemented
stock-based compensation plans for certain management employees and
non-employee directors. The Company adopted SFAS 123R effective
January 1, 2006 and recorded compensation expense for such plans.
[c] In accordance with fresh-start reporting, the Company revalued its
liabilities effective February 1, 2006 to fair value. As a result,
all prior period service credits related to postretirement costs were
eliminated.
[d] In accordance with fresh-start reporting, the Company revalued its
assets to fair value effective February 1, 2006. As a result,
definite lived intangible asset values increased substantially which
results in higher associated amortization expense. In addition, the
value of the Company's operating property and equipment was
significantly reduced which results in lower depreciation expense.
The Company has estimated the net impact of changes in asset values at
fresh-start on net depreciation and amortization.
[e] In accordance with fresh-start reporting, the Company revalued its
liabilities effective February 1, 2006 to fair value. As a result,
all deferred gains on aircraft sale/leasebacks were eliminated.
[f] As a result of fresh-start reporting, the Company recognizes certain
non-cash interest expenses, including the amortization of
mark-to-market discounts on all debt and capital leases.
(7) The following table presents additional detail on the Mileage Plus
impacts summarized in the table above. These items consist of the
additional amount of revenue that the Company estimates would have
been recognized had we continued to apply the incremental cost method
of accounting after exiting bankruptcy and, for 2007, the estimated
impact of the change in the expiration period for inactive accounts
from 36 months to 18 months. The Company utilizes this adjustment for
comparison of its performance to its peers, as certain of our peers
currently still apply the incremental cost method of accounting.
Increase (Decrease)
2008 2007
(In millions) YTD 2Q 1Q YTD 4Q 3Q 2Q 1Q
Mainline
Effect of accounting
change (89) (35) (54) (230) (50) (30) (37) (113)
Effect of expiration
period change - - - 204 100 42 39 23
Total Mainline (89) (35) (54) (26) 50 12 2 (90)
Regional Affiliates
Effect of accounting
change (18) (7) (11) (47) (11) (5) (9) (22)
Effect of expiration
period change - - - 42 21 8 8 5
Total Regional
Affiliates (18) (7) (11) (5) 10 3 (1) (17)
Consolidated
Effect of accounting
change (107) (42) (65) (277) (61) (35) (46) (135)
Effect of expiration
period change - - - 246 121 50 47 28
Total Consolidated (107) (42) (65) (31) 60 15 1 (107)
CONSOLIDATED NOTES (UNAUDITED)
(8) Pursuant to SEC Regulation G, the Company has included the following
reconciliation of reported non-GAAP financial measures to comparable
financial measures reported on a GAAP basis. Further, the Company
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. The Company also believes
that adjusting for impairments and other charges is useful to
investors because they are non-recurring income and/or charges that
are not indicative of the Company's on-going performance.
The forecasted fuel amounts shown below were estimated based on
forecasted jet fuel prices of $4.08 per gallon and $3.54 per gallon
for the third quarter and the full year of 2008, respectively.
Three Months Ending
September 30,
Operating expense per ASM - 2008 Estimate 2007 YOY
CASM (cents) Low High Actual % Change
Mainline operating expense 14.41 14.48 11.28 27.7 28.4
Less: fuel expense (6.58) (6.58) (3.63) 81.3 81.3
Mainline excluding fuel 7.83 7.90 7.65 2.4 3.3
Add: impairments and other charges - - 0.06 (100.0) (100.0)
Mainline excluding fuel and
impairments and other charges 7.83 7.90 7.71 1.5 2.5
Twelve Months Ending
December 31,
Operating expense per ASM - 2008 Estimate 2007 YOY
CASM (cents) Low High Actual % Change
Mainline operating expense 15.63 15.71 11.39 37.2 37.9
Less: fuel expense & cost
of third -party sales - UAFC (5.71) (5.71) (3.55) 60.8 60.8
Mainline excluding fuel 9.92 10.00 7.84 26.5 27.6
Add: impairments and other charges (1.93) (1.93) 0.03 - -
Mainline excluding fuel and
impairments and other charges 7.99 8.07 7.87 1.5 2.5
UAL CORPORATION AND SUBSIDIARY COMPANIES
Successor Company Operating Statistics
(Mainline and Regional Affiliates (a))
Three Months Ended
June 30, %
2008 2007 Change
Mainline revenue passengers (In
thousands) 16,994 18,190 (6.6)
Revenue passenger miles - RPM (In
millions)
Mainline 29,443 30,833 (4.5)
Regional affiliates 3,138 3,374 (7.0)
Consolidated 32,581 34,207 (4.8)
Available seat miles - ASM (In
millions)
Mainline 35,394 35,875 (1.3)
Regional affiliates 4,126 4,174 (1.1)
Consolidated 39,520 40,049 (1.3)
Passenger load factor (percent)
Mainline 83.2 85.9 (2.7) pt.
Regional affiliates 76.1 80.8 (4.7) pt.
Consolidated 82.4 85.4 (3.0) pt.
Consolidated operating breakeven
passenger load factor (percent) NM 75.8 NM
Passenger revenue per passenger mile
- Yield (cents) [See Note 5a]
Mainline adjusted 13.88 12.83 8.2
Regional affiliates 25.40 23.83 6.6
Consolidated adjusted 14.99 13.92 7.7
Passenger revenue per available seat
mile - PRASM (cents) [See Note 5b]
Mainline 11.58 11.06 4.7
Mainline adjusted for Mileage Plus 11.68 11.06 5.6
Regional affiliates 19.32 19.26 0.3
Regional affiliates adjusted for
Mileage Plus 19.49 19.29 1.0
Consolidated 12.39 11.92 3.9
Consolidated adjusted for Mileage
Plus 12.49 11.91 4.9
Operating revenue per available seat
mile - RASM (cents) [See Note 5c]
Mainline 12.92 12.29 5.1
Regional affiliates 19.32 19.26 0.3
Consolidated 13.59 13.02 4.4
Operating expense per available seat
mile - CASM (cents) [See Note 5g]
Mainline 20.39 10.99 85.5
Mainline excluding impairments and
other charges 13.03 10.99 18.6
Mainline excluding impairments and
other charges, fuel and UAFC 7.80 7.60 2.6
Regional affiliates 20.53 17.56 16.9
Consolidated 20.41 11.68 74.7
Consolidated excluding
impairments and other charges 13.81 11.68 18.2
Consolidated excluding
impairments and other charges,
fuel and UAFC 8.23 8.08 1.9
Mainline unit earnings (loss) (cents)
(b) (7.47) 1.30 -
Mainline unit earnings excluding
impairments and other charges,
fuel and UAFC (cents) (b) 5.12 4.69 9.2
Number of aircraft in operating fleet
at end of period
Mainline 457 460 (0.7)
Regional affiliates 276 288 (4.2)
Consolidated 733 748 (2.0)
Other Mainline Statistics
Mainline average price per gallon of
jet fuel (cents) 323.6 208.3 55.4
Average full-time equivalent
employees (thousands) 51.1 51.4 (0.6)
Mainline ASMs per equivalent employee
- productivity (thousands) 693 698 (0.7)
Average stage length (in miles) 1,395 1,366 2.1
Fleet utilization (in hours and
minutes) 11:09 11:09 -
(a) Mainline includes United Air Lines, Inc. scheduled and chartered jet
operations. Regional affiliates include operations from regional
carriers with whom the Company has entered into capacity purchase
agreements to provide jet and turboprop operations branded as United
Express.
(b) Unit earnings are calculated as RASM minus CASM.
NM - Not meaningful
UAL CORPORATION AND SUBSIDIARY COMPANIES
Successor Company Operating Statistics
(Mainline and Regional Affiliates (a))
Six Months Ended
June 30, %
2008 2007 Change
Mainline revenue passengers (In
thousands) 32,244 34,540 (6.6)
Revenue passenger miles - RPM (In
millions)
Mainline 56,370 58,562 (3.7)
Regional affiliates 5,947 6,351 (6.4)
Consolidated 62,317 64,913 (4.0)
Available seat miles - ASM (In
millions)
Mainline 69,922 70,410 (0.7)
Regional affiliates 8,007 8,103 (1.2)
Consolidated 77,929 78,513 (0.7)
Passenger load factor (percent)
Mainline 80.6 83.2 (2.6) pt.
Regional affiliates 74.3 78.4 (4.1) pt.
Consolidated 80.0 82.7 (2.7) pt.
Consolidated operating breakeven
passenger load factor (percent) NM 78.4 NM
Passenger revenue per passenger mile
- Yield (cents) [See Note 5a]
Mainline adjusted 13.52 12.31 9.8
Regional affiliates 25.42 23.29 9.1
Consolidated adjusted 14.66 13.39 9.5
Passenger revenue per available seat
mile - PRASM (cents) [See Note 5b]
Mainline 10.93 10.27 6.4
Mainline adjusted for Mileage Plus 11.06 10.40 6.3
Regional affiliates 18.88 18.25 3.5
Regional affiliates adjusted for
Mileage Plus 19.11 18.47 3.5
Consolidated 11.75 11.09 6.0
Consolidated adjusted for Mileage
Plus 11.89 11.23 5.9
Operating revenue per available seat
mile - RASM (cents) [See Note 5c]
Mainline 12.26 11.51 6.5
Regional affiliates 18.88 18.25 3.5
Consolidated 12.94 12.21 6.0
Operating expense per available seat
mile - CASM (cents) [See Note 5g]
Mainline 16.58 10.96 51.3
Mainline excluding impairments and
other charges 12.84 10.99 16.8
Mainline excluding impairments and
other charges, fuel and UAFC 7.94 7.75 2.5
Regional affiliates 20.31 17.59 15.5
Consolidated 16.96 11.64 45.7
Consolidated excluding
impairments and other charges 13.61 11.67 16.6
Consolidated excluding
impairments and other charges,
fuel and UAFC 8.40 8.23 2.1
Mainline unit earnings (loss) (cents)
(b) (4.32) 0.55 -
Mainline unit earnings excluding
impairments and other charges,
fuel and UAFC (cents) (b) 4.32 3.76 14.9
Number of aircraft in operating fleet
at end of period
Mainline 457 460 (0.7)
Regional affiliates 276 288 (4.2)
Consolidated 733 748 (2.0)
Other Mainline Statistics
Mainline average price per gallon of
jet fuel (cents) 303.7 198.8 52.8
Average full-time equivalent
employees (thousands) 51.9 51.5 0.8
Mainline ASMs per equivalent employee
- productivity (thousands) 1,347 1,367 (1.5)
Average stage length (in miles) 1,404 1,363 3.0
Fleet utilization (in hours and
minutes) 10:56 11:04 (1.2)
(a) Mainline includes United Air Lines, Inc. scheduled and chartered jet
operations. Regional affiliates include operations from regional
carriers with whom the Company has entered into capacity purchase
agreements to provide jet and turboprop operations branded as United
Express.
(b) Unit earnings are calculated as RASM minus CASM.
NM - Not meaningful
SOURCE UAL Corporation
http://www.united.com
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