UNITED Reports $723M Loss After Taking Special Charge

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CHICAGO – United Continental Holdings, Inc. (NYSE: UAL) today reported full-year 2012 net income of $589 million, or $1.59 per diluted share, excluding $1.3 billion of special charges.

Including special charges, UAL reported a full-year 2012 net loss of $723 million, or $2.18 per share. UAL reported a fourth-quarter 2012 net loss of $190 million, or $0.58 per share, excluding $430 million of special charges. Including special charges, UAL reported a fourth-quarter 2012 net loss of $620 million, or $1.87 per share.

* UAL full-year 2012 consolidated passenger revenue increased 0.2 percent year-over-year. Consolidated passenger revenue per available seat mile (PRASM) increased 1.7 percent in 2012 compared to 2011.

* Superstorm Sandy reduced fourth-quarter revenue by approximately $140 million and profit by approximately $85 million.

* Full-year 2012 consolidated unit costs (CASM), holding fuel rate and profit sharing constant and excluding special charges and third-party business expense, increased 2.5 percent year-over-year on a consolidated capacity reduction of 1.5 percent. Full-year 2012 consolidated CASM increased 6.7 percent year-over-year.

* UAL ended 2012 with $7.0 billion in unrestricted liquidity.

* Co-workers earned $119 million in profit sharing for full-year 2012, which will be distributed on Feb. 14, 2013.

“I want to thank my co-workers for working together in 2012 as we completed the most difficult aspects of our merger integration,” said Jeff Smisek, UAL’s chairman, president and chief executive officer. “With much of our integration behind us, our significantly improved operational performance and our increasing customer satisfaction, we can now go forward as one company. This year we will continue on our path to becoming the world’s leading airline.”

Fourth-Quarter Revenue and Capacity
For the fourth quarter of 2012, total revenue was $8.7 billion, a decrease of 2.5 percent year-over-year. Fourth-quarter consolidated passenger revenue decreased 3.6 percent to $7.5 billion, compared to the same period in 2011.

Consolidated revenue passenger miles (RPMs) decreased 3.2 percent on a consolidated capacity (available seat miles) decrease of 4.2 percent year-over-year for the fourth quarter, resulting in a fourth-quarter consolidated load factor of 82.3 percent.

Fourth-quarter 2012 consolidated PRASM increased 0.6 percent compared to the same period in 2011. Consolidated yield for the fourth quarter of 2012 decreased 0.4 percent year-over-year.

Mainline RPMs in the fourth quarter of 2012 decreased 3.7 percent on a mainline capacity decrease of 4.3 percent year-over-year, resulting in a fourth-quarter mainline load factor of 82.5 percent. Mainline yield for the fourth quarter of 2012 decreased 0.9 percent compared to the same period in 2011. Fourth-quarter 2012 mainline PRASM decreased 0.3 percent year-over-year.

“While we didn’t meet our revenue goals in 2012, we have addressed the integration issues that drove our underperformance,” said Jim Compton, UAL’s vice chairman and chief revenue officer. “We’re now positioned to capitalize on market opportunities across our network, and to earn back our share of revenue, based on solid operations and great customer service.”   

Passenger revenue for the fourth quarter of 2012 and period-to-period comparisons of related statistics for UAL’s mainline and regional operations are as follows: 

Year-over-year cargo and other revenue in the fourth quarter of 2012 increased 5.0 percent, or $56 million, to $1.2 billion.

Fourth-Quarter Costs
Total operating expenses, excluding special charges, increased $94 million, or 1.1 percent, in the fourth quarter versus the same period in 2011. Including special charges, fourth-quarter total operating expenses increased $284 million, or 3.2 percent, year-over-year. Third-party business expense was $118 million in the fourth quarter.

Consolidated and mainline CASM, excluding special charges and third-party business expense, increased 4.8 percent and 5.0 percent, respectively, in the fourth quarter of 2012 compared to the same period of 2011. Fourth-quarter consolidated and mainline CASM, including special charges, increased 7.7 and 8.5 percent year-over-year, respectively.

In the fourth quarter, consolidated and mainline CASM, excluding special charges and third-party business expense and holding fuel rate and profit sharing constant, increased 4.8 percent and 4.7 percent, respectively, compared to the results for the same period of 2011.

“While we reported a full-year profit in 2012, these results clearly fell short of our expectations and the return goals we have set,” said John Rainey, UAL’s executive vice president and chief financial officer. “2013 will be an important year for us as we take the necessary steps to create economic value and achieve a sufficient level of profitability.”

Liquidity, Cash Flow and Return on Invested Capital

UAL ended the year with $7.0 billion in unrestricted liquidity, including $500 million of undrawn commitments under a revolving credit facility. During the fourth quarter, the company generated $31 million of operating cash flow and had gross capital expenditures and purchase deposits of $1.0 billion, which included the delivery of 11 aircraft. The company made debt and capital lease principal payments of $270 million in the fourth quarter. For the full year, the company made debt and capital lease principal payments of $1.5 billion, including prepayments. The company’s return on invested capital for the year ended Dec. 31, 2012, was 8.0 percent, below the company’s goal of a 10 percent return over the business cycle.

2012 Events
* For the fourth quarter, United recorded a U.S. Department of Transportation domestic on-time arrival rate of 80.1 percent, exceeding its goal for the quarter. For the full year, United recorded a domestic on-time arrival rate of 77.3 percent and a system completion factor of 98.6 percent. For international flights, United recorded an on-time arrival rate of 73.7 percent. The on-time arrival rates are based on flights arriving within 14 minutes of scheduled arrival time.

* United co-workers earned cash incentive payments for on-time performance totaling $26 million during 2012.

* Pilots ratified a new joint labor agreement for all United Airlines pilots, and flight attendants from the company’s United, Continental and Continental Micronesia (CMI) subsidiaries ratified new labor agreements. United also reached an agreement with technicians from the CMI subsidiary. The company began the joint collective bargaining process with its flight attendants, technicians, dispatchers and airport and reservation agents.

* United introduced its Outperform Recognition Program, awarding cash prizes each quarter to employees for excellence in customer service.

* The company took delivery of six Boeing 787-8 Dreamliners in 2012 and launched its first commercial 787 flight in early November. United also took delivery of 19 Boeing 737-900ERs, and removed from service 19 Boeing 737-500s, one Boeing 757-200 and three Boeing 767-200s. In addition, the company sold or returned to lessors 37 aircraft that had been parked in long-term storage.

* United announced an order to purchase 100 Boeing 737 MAX 9 aircraft and 50 Boeing 737-900ER aircraft for delivery beginning in 2013. These new aircraft will allow United to replace older, less-efficient aircraft to reduce fuel and operating costs, enhance the customer experience and maximize network opportunities.

* UAL raised $2.2 billion of debt financing through multiple issuances of enhanced equipment trust certificates at an average interest rate of approximately 4.5 percent, with each issuance setting new average interest rate lows for this type of security. The debt proceeds are being used to finance the acquisition of seven new Boeing 787-8 and 32 new Boeing 737-900ER aircraft and to refinance the debt relating to three Boeing 737-900ER aircraft delivered in 2009.

* The company expanded its industry-leading global route network, launching nonstop flights to numerous international destinations including Istanbul; Manchester, England; Dublin; Buenos Aires, Argentina; Monterrey, Mexico; San Salvador, El Salvador; Kelowna, British Columbia, Canada; and Doha, Qatar, via Dubai, United Arab Emirates. United also announced new nonstop international flights beginning in 2013 to Taipei, Taiwan; Shannon, Ireland; Paris; Edmonton, Alberta, Fort McMurray, Alberta, and Thunder Bay, Ontario, Canada; and Denver’s first service to Asia with non-stop service to Tokyo. The company started 18 new domestic routes in 2012, including the company’s first service to Fairbanks, Alaska; Grand Forks, N.D.; Williston, N.D.; and Sarasota, Fla. United also announced eight new domestic markets for 2013 including the company’s first service to Fayetteville, N.C. and Santa Fe, N.M.

* United opened its new Network Operations Center in downtown Chicago with leading technology and tools for employees who manage the 24/7 global operation.

* United converted to a single passenger service system, launched a single website, united.com, and a single loyalty program, MileagePlus, and made policy and procedure changes to become a single airline for its customers.

* The company continued to install flat-bed seats in premium cabins on its international fleet and now has the new seats on 176 aircraft, more than any other U.S. carrier.

* United continued to install Economy Plus seating, and it is now on 91 percent of the mainline fleet.

The company began installing global satellite-based Wi-Fi on its mainline fleet and expects to have more than 300 aircraft equipped with Wi-Fi by the end of 2013.

United and Chase launched the premium MileagePlus Club co-brand card, building on the strong performance of the MileagePlus Explorer card launched in 2011.

About United
United Airlines and United Express operate an average of 5,472 flights a day to 381 airports across six continents. In 2012, United and United Express carried more passenger traffic than any other airline in the world and operated nearly two million flights carrying 140 million customers. United is investing in upgrading its onboard products and now offers more flat-bed seats in its premium cabins and more extra-legroom economy-class seating than any airline in North America. In 2013, United became the first U.S.-based international carrier to offer satellite-based Wi-Fi on long-haul overseas routes. The airline also features DIRECTV® on nearly 200 aircraft, offering customers more live television access than any other airline in the world. United operates more than 700 mainline aircraft and has made large-scale investments in its fleet. In 2013, United will continue to modernize its fleet by taking delivery of more than two dozen new Boeing aircraft. The company expanded its industry-leading global route network in 2012, launching nine new international and 18 new domestic routes. Readers of Global Traveler magazine have voted United’s MileagePlus program the best frequent flyer program for nine consecutive years. United is a founding member of Star Alliance, which provides service to 194 countries via 27 member airlines. More than 85,000 United employees reside in every U.S. state and in countries around the world. For more information, visit united.com or follow United on Twitter and Facebook. The common stock of United’s parent, United Continental Holdings, Inc., is traded on the NYSE under the symbol UAL.

 

Domestic

Atlantic

Pacific

Latin America

International

Mainline

Regional

Consolidated

Passenger
Revenue
(millions)

$2,953

1,214

1,156

590

2,960

5,913

1,620

$7,533

Passenger
Revenue vs.
4Q 2011

(6.2%)

(7.5%)

4.1%

(5.4%)

(2.8%)

(4.6%)

0.0%

(3.6%)

PRASM vs.
4Q 2011

(1.8%)

(0.3%)

5.9%

(4.2%)

1.3%

(0.3%)

3.7%

0.6%

Seat Miles
vs.
4Q 2011

Yield vs.
4Q 2011

(1.9%)

(0.3%)

3.8%

(6.5%)

0.0%

(0.9%)

0.4%

(0.4%)

(4.5%)

(7.2%)

(1.7%)

(1.3%)

(4.1%)

(4.3%)

(3.6%)

(4.2%)