United Airlines (UAL) Issues Investor Update; Q1 PRASM Fell 1.5% to 2.3%
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United Airlines (NYSE: UAL) announced the investor update:
|Issue Date: April 8, 2014|
This investor update provides guidance and certain forward looking statements about United Continental Holdings, Inc. (the “Company” or “UAL”). The information in this investor update contains preliminary financial and operational results for the Company for first quarter 2014.
The Company’s first-quarter 2014 consolidated system available seat miles (“ASMs”) decreased an estimated 0.3% as compared to the same period in the prior year. UAL’s first-quarter 2014 consolidated domestic ASMs decreased approximately 1.2% and consolidated international ASMs increased an estimated 1.0% versus the first quarter of 2013.
The Company’s operations were significantly impacted by winter storms in the first quarter, and in total UAL canceled approximately 35,000 flights, of which approximately 30,000 were regional flights. Weather-driven cancellations reduced year-over-year capacity by approximately 2 percentage points in the quarter.
The Company’s first-quarter 2014 consolidated passenger revenue per available seat mile (“PRASM”) decreased between 1.5% and 2.5% versus the first quarter of 2013. Weather-related cancellations, particularly those on our regional partners, reduced first quarter 2014 consolidated PRASM by approximately 1.5 percentage points.
The Company expects its first-quarter 2014 cargo revenue to be between $200 million and $220 million and expects its first-quarter 2014 other revenue to be between $1.09 billion and $1.11 billion.
UAL expects its first-quarter consolidated cost per ASM (“CASM”), excluding profit sharing, third-party business expense, fuel and special charges, to increase 3.0% to 4.0% year-over-year.
The Company expects to record approximately $195 million of third-party business expense in the first quarter 2014. Corresponding third-party business revenue associated with third-party business activities is recorded in other revenue.
UAL estimates its consolidated fuel price, including the impact of cash-settled hedges, to be between $3.16 and $3.21 per gallon for the first quarter 2014.
The Company estimates non-operating expense to be between $180 million and $200 million for the first quarter 2014.
The Company excludes non-cash gains/losses on fuel hedges from its non-operating expense and non-GAAP earnings.
Profit Sharing and Share-Based Compensation
For 2014, the Company will pay approximately 10% of total adjusted earnings as profit sharing to employees for adjusted earnings up to a 6.9% adjusted pre-tax margin and approximately 14% for any adjusted earnings above that amount. Adjusted earnings for the purposes of profit sharing are calculated as GAAP pre-tax earnings, excluding special items, profit sharing expense and share-based compensation program expense. Share-based compensation expense for the purposes of the profit sharing calculation is estimated to be $29 million for the first quarter 2014.
Capital Expenditures and Scheduled Debt and Capital Lease Payments
The Company expects between $730 million and $750 million of gross capital expenditures in the first quarter 2014. UAL’s gross capital expenditures exclude fully reimbursable capital projects.
The Company expects debt and capital lease payments to total approximately $640 million in the first quarter 2014.
UAL ended the first quarter 2014 with approximately $6.0 billion in unrestricted liquidity comprised of approximately $5.0 billion of unrestricted cash, cash equivalents and short-term investments and $1 billion in undrawn commitments under its revolving credit facility.
First Quarter 2014 Operational Update
|Estimated 1Q 2014||Year-Over-Year %|
Capacity (Million ASMs)
Total Mainline Capacity
Total Consolidated Capacity
Traffic (Million RPMs)
Total Mainline Traffic
Total Consolidated Traffic
Mainline Load Factor
Total Mainline Load Factor
Regional Load Factor1
Consolidated Load Factor
Total Consolidated Load Factor
1. Regional results reflect flights operated under capacity purchase agreements
First-Quarter 2014 Financial Update
Revenue (¢/ASM, except Cargo and Other Revenue)
Mainline Passenger Unit Revenue
Consolidated Passenger Unit Revenue
Cargo Revenue ($M)
Other Revenue ($B)
Operating Expense1 (¢/ASM)
Mainline Unit Cost Excluding Profit Sharing & Third-Party Business Expenses
Consolidated Unit Cost Excluding Profit Sharing & Third-Party Business Expenses
Non-Fuel Expense1 (¢/ASM)
Mainline Unit Cost Excluding Profit Sharing, Fuel & Third-Party Business Expenses
Consolidated Unit Cost Excluding Profit Sharing, Fuel & Third-Party Business Expenses
Third-Party Business Expenses ($M)
Select Expense Measures ($M)
Depreciation and Amortization
Mainline Fuel Consumption (Million Gallons)
Consolidated Fuel Consumption (Million Gallons)
Consolidated Fuel Price Excluding Hedges (Price per
Consolidated Fuel Price Including Cash-settled
Hedges (Price per Gallon)
Non-Operating Expense ($M)
Effective Income Tax Rate
Capital Expenditures ($M)
Gross Capital Expenditures incl. Purchase Deposits
Debt and Capital Lease Payments ($M)
|1.||Excludes special items|
Excludes non-cash gains/losses on fuel hedges
These share count charts are based upon several assumptions including market stock price and number of shares outstanding. The number of shares used in the actual earnings per share calculation will likely be different from those set forth below.
Non-GAAP to GAAP Reconciliations
UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (“GAAP”) and non-GAAP financial measures, including net income/loss, net earnings/loss per share and CASM, among others. Non-GAAP financial measures are presented because they provide management and investors the ability to measure and monitor UAL’s performance on a consistent basis. CASM is a common metric used in the airline industry to measure an airline’s cost structure and efficiency. 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 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 believes that adjusting for special charges is useful to investors because they are non-recurring charges not indicative of UAL’s ongoing performance. 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. In addition, UAL believes that excluding non-cash (gains)/losses on fuel hedges from non-operating expense is useful because it allows investors to better understand the impact of settled hedges on a given period’s results.
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