United Continental (UAL) Issues Outlook Update for Q211
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United Continental Holdings, Inc. (NYSE: UAL) issued the following shareholder update.
Capacity
The Company estimates its second quarter 2011 consolidated domestic available seat miles (“ASM”) to be down 1.4% and consolidated international ASM to be up 4.3% for a consolidated system ASM increase of 1.0% as compared to the same period in the prior year.
Revenue Guidance
Second quarter consolidated Passenger Revenue per ASM (“PRASM”) is expected to grow between 8.3% and 9.3% year-over-year. Cargo and Other Revenue for the second quarter is expected to be between $1,080 million and $1,110 million.
Non-Fuel Expense Guidance
Second quarter consolidated cost per ASM (“CASM”), excluding fuel, profit sharing, certain accounting charges and merger-related expenses for the Company is expected to be up 2.7% to 3.7%.
Fuel Expense
The Company estimates its consolidated fuel price, including the impact of settled cash hedges, to be $3.11 per gallon for the second quarter based on the forward curve as of June 17, 2011.
Non-Operating Income/(Expense)
Non-operating expense for the Company is estimated to be between $270 million and $290 million for the second quarter. Non-operating income/(expense) includes interest expense, capitalized interest, interest income and other non-operating income/(expense). This quarter’s estimate also includes an estimated expense resulting from ineffectiveness caused by a decrease in fuel hedge values in excess of the decrease in jet fuel prices during the quarter. The estimated impact is concentrated in the fuel hedges entered into by the Continental subsidiary as a result of the redesignation of the Continental subsidiary fuel hedge portfolio under cash flow hedge accounting as of April 1, 2011 when the portfolio was fully integrated with the United subsidiary fuel hedge portfolio. This redesignation deferred certain gains on these contracts that will be recognized as part of fuel expense as these positions settle in the future, and therefore any impact is expected to be neutral to earnings going forward, assuming current fuel prices. In future periods, the Company’s fuel price guidance will include the impact of these gains.
Capital Expenditures and Scheduled Debt and Capital Lease Payments
In the second quarter, the Company expects a total of approximately $200 million of gross capital expenditures and $170 million of net capital expenditures, both excluding purchase deposits of $26 million.
Scheduled debt and capital lease payments for the second quarter are estimated to be $1.2 billion, including approximately $726 million in cash that the Company expects to pay to repurchase the Company’s 4.5% Senior Limited-Subordination Convertible Notes due 2021 to the extent such debt is put to the Company in June 2011.
Cash Balance
The Company expects to end the second quarter with between $8.3 billion and $8.4 billion of unrestricted cash, cash equivalents and short-term investments.
Taxes
The Company currently expects to record minimal cash taxes in 2011.
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 2.6 points, mainline international advance booked seat factor is down 2.3 points, mainline Atlantic advance booked seat factor is down 3.9 points, mainline Pacific advance booked seat factor is down 5.8 points and mainline Latin America advance booked seat factor is up 1.7 points. Regional advance booked seat factor is down 0.3 points.
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Capacity
The Company estimates its second quarter 2011 consolidated domestic available seat miles (“ASM”) to be down 1.4% and consolidated international ASM to be up 4.3% for a consolidated system ASM increase of 1.0% as compared to the same period in the prior year.
Revenue Guidance
Second quarter consolidated Passenger Revenue per ASM (“PRASM”) is expected to grow between 8.3% and 9.3% year-over-year. Cargo and Other Revenue for the second quarter is expected to be between $1,080 million and $1,110 million.
Non-Fuel Expense Guidance
Second quarter consolidated cost per ASM (“CASM”), excluding fuel, profit sharing, certain accounting charges and merger-related expenses for the Company is expected to be up 2.7% to 3.7%.
Fuel Expense
The Company estimates its consolidated fuel price, including the impact of settled cash hedges, to be $3.11 per gallon for the second quarter based on the forward curve as of June 17, 2011.
Non-Operating Income/(Expense)
Non-operating expense for the Company is estimated to be between $270 million and $290 million for the second quarter. Non-operating income/(expense) includes interest expense, capitalized interest, interest income and other non-operating income/(expense). This quarter’s estimate also includes an estimated expense resulting from ineffectiveness caused by a decrease in fuel hedge values in excess of the decrease in jet fuel prices during the quarter. The estimated impact is concentrated in the fuel hedges entered into by the Continental subsidiary as a result of the redesignation of the Continental subsidiary fuel hedge portfolio under cash flow hedge accounting as of April 1, 2011 when the portfolio was fully integrated with the United subsidiary fuel hedge portfolio. This redesignation deferred certain gains on these contracts that will be recognized as part of fuel expense as these positions settle in the future, and therefore any impact is expected to be neutral to earnings going forward, assuming current fuel prices. In future periods, the Company’s fuel price guidance will include the impact of these gains.
Capital Expenditures and Scheduled Debt and Capital Lease Payments
In the second quarter, the Company expects a total of approximately $200 million of gross capital expenditures and $170 million of net capital expenditures, both excluding purchase deposits of $26 million.
Scheduled debt and capital lease payments for the second quarter are estimated to be $1.2 billion, including approximately $726 million in cash that the Company expects to pay to repurchase the Company’s 4.5% Senior Limited-Subordination Convertible Notes due 2021 to the extent such debt is put to the Company in June 2011.
Cash Balance
The Company expects to end the second quarter with between $8.3 billion and $8.4 billion of unrestricted cash, cash equivalents and short-term investments.
Taxes
The Company currently expects to record minimal cash taxes in 2011.
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 2.6 points, mainline international advance booked seat factor is down 2.3 points, mainline Atlantic advance booked seat factor is down 3.9 points, mainline Pacific advance booked seat factor is down 5.8 points and mainline Latin America advance booked seat factor is up 1.7 points. Regional advance booked seat factor is down 0.3 points.
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