United Airlines Reports Second-Quarter 2016 Performance

CHICAGO, July 19, 2016 /PRNewswire/ -- United Airlines (UAL) today reported its second-quarter 2016 financial results. 

• Including special items, UAL reported second-quarter net income of $588 million, earnings per share of $1.78 per diluted share and pre-tax earnings of $931 million.
• Excluding special items, UAL reported second-quarter net income of $863 million, earnings per share of $2.61 per diluted share and pre-tax earnings of $1.4 billion.
• During the second quarter of 2016, the company repurchased $694 million of its common stock, representing 4.4 percent of shares outstanding.
• In July, the company's Board of Directors authorized an additional $2 billion share repurchase program.

"We made significant progress in the second quarter as a direct result of the passion and dedication that United's aviation professionals around the world have for running a great airline," said Oscar Munoz, president and chief executive officer of United Airlines. "This progress is exemplified by the best six months of operational performance in our history and we will continue down the path of unlocking United's full potential."

Second-Quarter Revenue

For the second quarter of 2016, total revenue was $9.4 billion, a decrease of 5.2 percent year-over-year. Second-quarter 2016 consolidated passenger revenue per available seat mile (PRASM) decreased 6.6 percent and consolidated yield decreased 6.1 percent compared to the second quarter of 2015. The decline in PRASM continues to be driven by factors including a strong U.S. dollar, lower surcharges, travel reductions from customers impacted by declining oil prices, competitive actions and higher-yielding demand not keeping pace with industry capacity.

Second-Quarter Costs

Total operating expense including special charges was $8.3 billion in the second quarter, down 1.6 percent year-over-year. Excluding special charges, total operating expense was $7.9 billion, a 6.1 percent decrease year-over-year. Consolidated unit cost (CASM) including special charges, third-party business expenses, fuel and profit sharing decreased 1.6 percent compared to the second quarter of 2015 due mainly to lower oil prices. Consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, increased 2.5 percent year-over-year driven largely by the impact of recently ratified labor agreements.

Liquidity and Capital Allocation

In the second quarter, UAL generated $2.5 billion in operating cash flow and ended the quarter with $6.0 billion in unrestricted liquidity, including $1.35 billion of undrawn commitments under its revolving credit facility. The company continued to invest in its business through capital expenditures of $838 million in the second quarter. Including assets acquired through the issuance of debt and airport construction financing and excluding fully reimbursable projects, the company invested $767 million in adjusted capital expenditures during the second quarter. Free cash flow, measured as operating cash flow less adjusted capital expenditures, was $1.8 billion in the second quarter.   

For the 12 months ended June 30, 2016, the company's return on invested capital was 20.7 percent.

In the quarter, UAL repurchased $694 million worth of its common stock, representing 4.4 percent of shares outstanding. As of June 30, 2016, the company had $255 million remaining to purchase shares under its existing share repurchase programs.

UAL's Board of Directors authorized an additional $2 billion share repurchase program. This amount represents approximately 13 percent of the company's market capitalization as of the closing stock price on July 18, 2016.

For more information on UAL's third-quarter 2016 guidance, please visit ir.united.com for the company's investor update.

Second-Quarter Highlights
Operations and Employees

• Reached a tentative joint agreement with flight attendants.
• IAM-represented employees ratified agreements.
• Reported best six-month on-time performance and finished first or second in on-time arrivals among the four largest U.S. network carriers each month.
• Achieved best quarterly mishandled bag rate, keeping more customers connected with their bags than ever before.
• Employees earned cash-incentive payments of approximately $30 million for achieving operational performance goals.

Finance, Network and Fleet

• Outlined initiatives the company is implementing to improve financial performance including commercial enhancements, cost structure improvements and operational improvement expected to drive $3.1 billion in incremental value by 2018.
• Launched new international routes between San Francisco and Singapore and between San Francisco and Xi'an, China.
• Took delivery of two Boeing 737-800 aircraft, two Boeing 787-9 aircraft and added 12 Embraer 175 aircraft to its United Express fleet.

Customer Experience

• Achieved the greatest year-over-year customer satisfaction score improvement in the company's history, up 6.7 points compared to the second quarter of 2015.
• Completed Wi-Fi installations on 100 percent of domestic and international mainline aircraft, making UAL the first U.S. airline to complete Wi-Fi installations on its international fleet.
• Unveiled a reimagined international travel experience – United Polaris business class.

About United

United Airlines and United Express operate more than 4,500 flights a day to 339 airports across five continents. In 2015, United and United Express operated more than 1.5 million flights carrying more than 140 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C. United operates more than 720 mainline aircraft, and this year, the airline anticipates taking delivery of 21 new Boeing aircraft, including 737 NGs, 787s and 777s. The airline is a founding member of Star Alliance, which provides service to 192 countries via 28 member airlines. For more information, visit united.com, follow @United on Twitter or connect on Facebook. The common stock of United's parent, United Continental Holdings, Inc., is traded on the NYSE under the symbol UAL.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
Certain statements included in this release are forward-looking and thus reflect our current expectations and beliefs with respect to certain current and future events and financial performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as "expects," "will," "plans," "anticipates," "indicates," "believes," "forecast," "guidance," "outlook" and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this release are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: our ability to comply with the terms of our various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our operational plans, including optimizing our revenue; our ability to control our costs, including realizing benefits from our resource optimization efforts, cost reduction initiatives and fleet replacement programs; our ability to utilize our net operating losses; our ability to attract and retain customers; demand for transportation in the markets in which we operate; an outbreak of a disease that affects travel demand or travel behavior; demand for travel and the impact that global economic conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets); our ability to cost-effectively hedge against increases in the price of aircraft fuel; any potential realized or unrealized gains or losses related to fuel or currency hedging programs; the effects of any hostilities, act of war or terrorist attack; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the costs and availability of aviation and other insurance; industry consolidation or changes in airline alliances; competitive pressures on pricing and on demand; our capacity decisions and the capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation and other actions (including open skies agreements and environmental regulations); the impact of regulatory, investigative and legal proceedings and legal compliance risks; the impact of any management changes; labor costs; our ability to maintain satisfactory labor relations and the results of the collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; weather conditions; and other risks and uncertainties set forth under Item 1A., Risk Factors, of UAL's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission.

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