United Continental (UAL) Sees Q4 PRASM Up 0.5% - 1.5%, CASM Up 5.6% - 6.6%
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This investor update provides certain forward-looking information about United Continental Holdings, Inc. (NYSE: UAL) for fourth quarter and full year 2012.
Capacity
The Company estimates its fourth quarter 2012 consolidated system available seat miles (“ASMs”) to decrease 4.2% as compared to the same period in the prior year. Weather, including Superstorm Sandy, impacted UAL’s operations during the fourth quarter, reducing year-over-year consolidated ASMs by approximately 1.5 percentage points. The Company estimates its fourth quarter 2012 consolidated domestic ASMs to decrease 4.1% and consolidated international ASMs to decrease 4.3% year-over-year. For full year 2012, the Company estimates its consolidated ASMs to decrease 1.5% year-over-year.
Revenue
The Company expects its fourth quarter 2012 consolidated passenger revenue per available seat mile (“PRASM”) to increase between 0.5% and 1.5% and full year PRASM to increase between 1.7% and 1.9% year-over-year.
The Company expects its fourth quarter 2012 cargo and other revenue to be between $1.10 billion and $1.15 billion and full year 2012 cargo and other revenue to be between $4.50 billion and $4.55 billion.
Non-Fuel Expense
The Company expects its fourth quarter consolidated cost per ASM (“CASM”), excluding profit sharing, third-party business expense, fuel and special charges, to increase 5.6% to 6.6% year-over-year.
The Company’s fourth quarter consolidated CASM, excluding profit sharing, third-party business expense, fuel and special charges, was negatively impacted by approximately 1.5 percentage points due to weather-related capacity reductions, including the impact of Superstorm Sandy. Additionally, due to recent progress in negotiations for a joint collective bargaining agreement with the International Association of Machinists and Aerospace Workers, the Company made additional accruals not included in previous fourth quarter consolidated CASM guidance.
For the full year, the Company expects consolidated CASM, excluding profit sharing, third-party business expense, fuel and special charges, to increase 3.2% to 3.6% year-over-year.
The Company expects to record approximately $120 million of third-party business expense in the fourth quarter and $300 million for the full year. Corresponding third-party business revenue associated with third-party business activities is recorded in other revenue. Fourth-quarter and full-year third-party business expense guidance is higher than October 2012 guidance due to a new contract to sell aircraft fuel from the Company to a third party. The new agreement is earnings-neutral but results in revenue and expense, specifically cost of sale, which is unrelated to the operation of the airline.
Fuel Expense
The Company estimates its consolidated fuel price, including the impact of cash settled hedges, to be $3.28 per gallon for the fourth quarter and $3.27 for the full year based on the forward curve as of December 19, 2012.
Non-Operating Expense
The Company estimates fourth quarter non-operating expense to be between $165 million and $175 million. For the full year, the Company expects non-operating expense to be between $760 and $770 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 $10 million in the fourth quarter and $47 million for the full year 2012.
Capital Expenditures and Scheduled Debt and Capital Lease Payments
In the fourth quarter, the Company expects approximately $1.05 billion of gross capital expenditures and approximately $785 million of net capital expenditures, excluding net purchase deposit refunds of $150 million. For the full year, excluding $103 million of net purchase deposits paid, the Company expects approximately $2.35 billion of gross capital expenditures and $1.70 billion of net capital expenditures. Fourth quarter and full year net capital expenditures are higher than October 2012 guidance due to the timing of financing proceeds.
Scheduled debt and capital lease payments amount to $0.3 billion for the fourth quarter and $1.3 billion for the full year 2012. Including all debt pre-payments, the Company expects debt and capital lease payments of $1.5 billion in 2012. During the fourth quarter, the Company elected to redeem the $400 million outstanding of 9.875% Senior Secured Notes Due 2013 and the $200 million outstanding of 12.000% Senior Second Lien Notes Due 2013, each issued by United Air Lines, Inc. The notes will be redeemed on February 1, 2013 at a price equal to 100% of the principal amount of the notes, plus any accrued and unpaid interest.
Liquidity Position
The Company expects to end 2012 with approximately $6.9 billion in unrestricted liquidity comprised of approximately $6.4 billion of unrestricted cash, cash equivalents and short-term investments and $500 million in undrawn commitments under its revolving credit facility.
Taxes
The Company currently expects to record minimal cash income taxes in 2012.
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 6.4 points, mainline international advance booked seat factor is up 4.1 points, mainline Atlantic advance booked seat factor is up 3.0 points, mainline Pacific advance booked seat factor is up 2.8 points and mainline Latin America advance booked seat factor is up 5.6 points. Regional advance booked seat factor is up 6.6 points.
Capacity
The Company estimates its fourth quarter 2012 consolidated system available seat miles (“ASMs”) to decrease 4.2% as compared to the same period in the prior year. Weather, including Superstorm Sandy, impacted UAL’s operations during the fourth quarter, reducing year-over-year consolidated ASMs by approximately 1.5 percentage points. The Company estimates its fourth quarter 2012 consolidated domestic ASMs to decrease 4.1% and consolidated international ASMs to decrease 4.3% year-over-year. For full year 2012, the Company estimates its consolidated ASMs to decrease 1.5% year-over-year.
Revenue
The Company expects its fourth quarter 2012 consolidated passenger revenue per available seat mile (“PRASM”) to increase between 0.5% and 1.5% and full year PRASM to increase between 1.7% and 1.9% year-over-year.
The Company expects its fourth quarter 2012 cargo and other revenue to be between $1.10 billion and $1.15 billion and full year 2012 cargo and other revenue to be between $4.50 billion and $4.55 billion.
Non-Fuel Expense
The Company expects its fourth quarter consolidated cost per ASM (“CASM”), excluding profit sharing, third-party business expense, fuel and special charges, to increase 5.6% to 6.6% year-over-year.
The Company’s fourth quarter consolidated CASM, excluding profit sharing, third-party business expense, fuel and special charges, was negatively impacted by approximately 1.5 percentage points due to weather-related capacity reductions, including the impact of Superstorm Sandy. Additionally, due to recent progress in negotiations for a joint collective bargaining agreement with the International Association of Machinists and Aerospace Workers, the Company made additional accruals not included in previous fourth quarter consolidated CASM guidance.
For the full year, the Company expects consolidated CASM, excluding profit sharing, third-party business expense, fuel and special charges, to increase 3.2% to 3.6% year-over-year.
The Company expects to record approximately $120 million of third-party business expense in the fourth quarter and $300 million for the full year. Corresponding third-party business revenue associated with third-party business activities is recorded in other revenue. Fourth-quarter and full-year third-party business expense guidance is higher than October 2012 guidance due to a new contract to sell aircraft fuel from the Company to a third party. The new agreement is earnings-neutral but results in revenue and expense, specifically cost of sale, which is unrelated to the operation of the airline.
Fuel Expense
The Company estimates its consolidated fuel price, including the impact of cash settled hedges, to be $3.28 per gallon for the fourth quarter and $3.27 for the full year based on the forward curve as of December 19, 2012.
Non-Operating Expense
The Company estimates fourth quarter non-operating expense to be between $165 million and $175 million. For the full year, the Company expects non-operating expense to be between $760 and $770 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 $10 million in the fourth quarter and $47 million for the full year 2012.
Capital Expenditures and Scheduled Debt and Capital Lease Payments
In the fourth quarter, the Company expects approximately $1.05 billion of gross capital expenditures and approximately $785 million of net capital expenditures, excluding net purchase deposit refunds of $150 million. For the full year, excluding $103 million of net purchase deposits paid, the Company expects approximately $2.35 billion of gross capital expenditures and $1.70 billion of net capital expenditures. Fourth quarter and full year net capital expenditures are higher than October 2012 guidance due to the timing of financing proceeds.
Scheduled debt and capital lease payments amount to $0.3 billion for the fourth quarter and $1.3 billion for the full year 2012. Including all debt pre-payments, the Company expects debt and capital lease payments of $1.5 billion in 2012. During the fourth quarter, the Company elected to redeem the $400 million outstanding of 9.875% Senior Secured Notes Due 2013 and the $200 million outstanding of 12.000% Senior Second Lien Notes Due 2013, each issued by United Air Lines, Inc. The notes will be redeemed on February 1, 2013 at a price equal to 100% of the principal amount of the notes, plus any accrued and unpaid interest.
Liquidity Position
The Company expects to end 2012 with approximately $6.9 billion in unrestricted liquidity comprised of approximately $6.4 billion of unrestricted cash, cash equivalents and short-term investments and $500 million in undrawn commitments under its revolving credit facility.
Taxes
The Company currently expects to record minimal cash income taxes in 2012.
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 6.4 points, mainline international advance booked seat factor is up 4.1 points, mainline Atlantic advance booked seat factor is up 3.0 points, mainline Pacific advance booked seat factor is up 2.8 points and mainline Latin America advance booked seat factor is up 5.6 points. Regional advance booked seat factor is up 6.6 points.
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