United Continental (UAL) Sees Q113 PRASM of 5.4% - 6.4%; Issues Update

March 28, 2013 5:15 PM EDT
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United Continental (NYSE: UAL) issued the following outlook Thursday. This investor update provides certain forward-looking information about United Continental Holdings, Inc. (the “Company” or “UAL”) for first quarter and full year 2013.


The Company estimates its first quarter 2013 consolidated system available seat miles (“ASMs”) to decrease 5.0% as compared to the same period in the prior year. The Company estimates its first quarter 2013 consolidated domestic ASMs to decrease 4.2% and consolidated international ASMs to decrease 5.9% year-over-year.

UAL now expects full year consolidated ASMs to decrease 0.75% to 1.75% year-over-year, a 0.75% reduction from prior guidance.


The Company expects its first quarter 2013 consolidated passenger revenue per available seat mile (“PRASM”) to increase between 5.4% and 6.4%. The Company expects its first quarter 2013 cargo and other revenue to be between $1.13 billion and $1.18 billion.

Advance Booked Seat Factor (Percentage of Available Seats that are Sold)

Compared to the same period last year, for the next six weeks, mainline domestic advance booked seat factor is up 1.0 point, mainline international advance booked seat factor is up 0.7 points, mainline Atlantic advance booked seat factor is down 0.5 points, mainline Pacific advance booked seat factor is up 0.7 points and mainline Latin America advance booked seat factor is up 1.9 points. Regional advance booked seat factor is up 1.9 points.

Non-Fuel Expense

UAL expects its first quarter consolidated cost per ASM (“CASM”), excluding profit sharing, third-party business expense, fuel and special charges, to increase 11.4% to 12.4% year-over-year.

The increase in first quarter consolidated unit cost as compared to prior guidance is primarily the result of four factors. UAL experienced higher than expected winter storm activity, which reduced first quarter capacity by approximately 1% year-over-year and drove increased operational recovery expense. UAL also increased its investment in aircraft maintenance, including additional preventive maintenance, to improve fleet reliability. Salaries and wages increased, in part due to achieving a tentative joint collective bargaining agreement with the IAM earlier than expected and the incurrence of certain crew-related expenses due to the grounding of the Boeing 787 fleet. Finally, in March, UAL agreed to sell up to 30 Boeing 757 aircraft to FedEx, accelerating $12 million of additional depreciation into the first quarter and approximately $80 million into the full year 2013.

The Company expects full year 2013 CASM excluding profit sharing, third-party business expense, fuel and special charges to increase 5.5% to 6.5% year-over-year, one percentage point higher than prior guidance, in large part due to its reduced full year capacity outlook and the accelerated depreciation incurred on the sale of the Boeing 757 aircraft.

The Company expects to record approximately $125 million of third-party business expense in the first quarter. Corresponding third-party business revenue associated with third-party business activities is recorded in other revenue.

Fuel Expense

UAL estimates its consolidated fuel price, including the impact of cash-settled hedges, to be $3.27 per gallon for the first quarter based on the forward curve as of March 21, 2013.

Non-Operating Expense

The Company estimates first quarter non-operating expense to be between $190 million and $220 million, which was impacted by accelerated amortization of fees related to the recent refinancing of UAL’s term loan that was originally due in February 2014.

UAL maintains its prior full year non-operating expense guidance of between $690 million and $740 million. Non-operating expense includes interest expense, capitalized interest, interest income, mark-to-market impact of derivatives not designated for hedge accounting and other non-operating income/expense.

Profit Sharing and Share-Based Compensation

The Company pays 15% of total GAAP pre-tax earnings, excluding special items and share-based compensation program expense, as profit sharing to employees when pre-tax profit, excluding special items, profit sharing expense and share-based compensation program expense, exceeds $10 million. Share-based compensation expense for the purposes of the profit sharing calculation is estimated to be $13 million in the first quarter.

Capital Expenditures and Scheduled Debt and Capital Lease Payments

In the first quarter, the Company expects approximately $550 million of gross capital expenditures and approximately $340 million of net capital expenditures, including net purchase deposits.

UAL continued to strengthen its balance sheet year-to-date and estimates it will make $1.3 billion of debt and capital lease payments in the first quarter, including $1 billion of pre-payments. In March, UAL replaced its $1.2 billion term loan due 2014 with a new $900 million term loan due in 2019, and reduced the principal balance by $300 million in the process. Simultaneously, UAL entered into a new $1 billion revolving credit facility due 2018 that replaced the Company’s $500 million undrawn revolving credit facility due 2015, bolstering the Company’s unrestricted liquidity position. In February, UAL pre-paid $400 million of its 9.875% Senior Secured Notes and $200 million of its 12.000% Senior Second Lien Notes.

Liquidity Position

UAL expects to end the first quarter with approximately $6.3 billion in unrestricted liquidity comprised of approximately $5.3 billion of unrestricted cash, cash equivalents and short-term investments and $1 billion in undrawn commitments under its new revolving credit facility.


UAL currently expects to record minimal cash income taxes in 2013.

Single Legal Entity

The Company continues to progress with the integration of its United and Continental subsidiaries. As part of the integration, the Company plans to merge its United and Continental subsidiaries into one legal entity on March 31, 2013.

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