![United Airlines Reports Third-Quarter 2016 Performance](media/blog/min/7528-1Qy0lhWPc8bvyANMonF8hKhXnfDlmAXk.jpg)
CHICAGO, Oct. 17, 2016 /PRNewswire/ -- United Airlines (UAL) today announced its third-quarter 2016 financial results.
- UAL reported third-quarter net income of $965 million, diluted earnings per share of $3.01, pre-tax earnings of $1.5 billion and pre-tax margin of 15.2 percent.
- Excluding special items, UAL reported third-quarter net income of $997 million, diluted earnings per share of $3.11, pre-tax earnings of $1.6 billion and pre-tax margin of 15.7 percent.
- Flight attendants ratified a joint contract and the company reached a tentative agreement with technicians and related employees for a joint contract.
"We delivered another very good quarter, demonstrating the progress United continues to make at improving our customer experience, which included our best third quarter on-time performance in company history," said Oscar Munoz, chief executive officer of United Airlines. "As we execute our strategy to build the world's best airline, we will remain intensely focused on engaging our employees, running a great operation and improving our financial performance."
Third-Quarter Revenue
For the third quarter of 2016, total revenue was $9.9 billion, a decrease of 3.8 percent year-over-year. Third-quarter 2016 consolidated passenger revenue per available seat mile (PRASM) decreased 5.8 percent and consolidated yield decreased 5.7 percent compared to the third quarter of 2015. The decline in PRASM continues to be driven by factors including a strong U.S. dollar, lower surcharges, reductions from energy-related corporate travel, and declining yields.
Third-Quarter Costs
Total operating expense including special charges was $8.3 billion in the third quarter, down 1.4 percent year-over-year. Excluding special charges, total operating expense was $8.2 billion, a 1.0 percent improvement year-over-year. Consolidated unit cost (CASM) including special charges, third-party business expenses, fuel and profit sharing decreased 3.3 percent compared to the third quarter of 2015 due mainly to lower oil prices. Consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, increased 3.4 percent year-over-year driven largely by the impact of recently ratified labor agreements.
Liquidity and Capital Allocation
In the third quarter, UAL generated $1.1 billion in operating cash flow and ended the quarter with $6.2 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 $689 million in the third quarter. Including assets acquired through the issuance of debt and airport construction financing and excluding fully reimbursable projects, the company invested $679 million in adjusted capital expenditures during the third quarter. Free cash flow, measured as operating cash flow less adjusted capital expenditures, was $459 million in the third quarter and $2.6 billion year-to-date.
For the 12 months ended Sept. 30, 2016, the company's return on invested capital was 19.6 percent.
In the quarter, UAL purchased $255 million of its common shares, representing 1.5 percent of shares outstanding. Since the initial repurchase announcement in July 2014, the company has purchased $4.0 billion of its common shares, representing approximately 20 percent of shares outstanding. As of Sept. 30, 2016, the company had $2.0 billion remaining to purchase shares under its existing share repurchase authority.
For more information on UAL's fourth-quarter 2016 guidance, please visit ir.united.com for the company's investor update.
Third-Quarter Highlights
Operations and Employees
- Flight attendants ratified a joint contract covering 25,000 employees.
- Reached a tentative agreement with technicians and related employees for a joint contract.
- Achieved best September, third-quarter and year-to-date on-time performance in company history.
- Employees earned cash-incentive payments of approximately $30 million for achieving operational performance goals in the quarter, marking ten straight months of bonus payouts.
- Solidified the company's executive leadership, bringing significant experience and expertise to the team.
Network, Fleet and Customer Experience
- Raised $920 million in financing through an enhanced equipment trust certificate transaction at a blended interest rate of 2.94 percent.
- Launched new international routes between San Francisco and Auckland, New Zealand; and between San Francisco and Hangzhou, China.
- Announced the launch of service to Havana, Cuba from the company's Newark and Houston hubs.
- Flew approximately 1,500 athletes, coaches and Team USA staff to the 2016 Rio Olympic and Paralympic Games as the company celebrated more than 35 years partnering with Team USA.
- Took delivery of four new Boeing 737NG aircraft and one used Airbus A319 aircraft.
- In the third quarter, United's industry-leading mobile app surpassed more than 24 million downloads and 1 million visits per day.
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 737NGs, 787s and 777s, as well as six used Airbus A319 aircraft. 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 and revenue-generating initiative, 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); economic and political instability and other risks of doing business globally; 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; disruptions to our regional network; 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 Part 1, 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.
-tables attached-
UNITED CONTINENTAL HOLDINGS, INC. | |||||||||||||||||||||||||||||||||
Three Months Ended |
% Increase/ (Decrease) |
Nine Months Ended |
|||||||||||||||||||||||||||||||
(In millions, except per share data) |
2016 |
2015 |
2016 |
2015 |
% Increase/ (Decrease) | ||||||||||||||||||||||||||||
Operating revenue: |
|||||||||||||||||||||||||||||||||
Passenger: (A) |
|||||||||||||||||||||||||||||||||
Mainline |
$ |
7,017 |
$ |
7,254 |
(3.3) |
$ |
19,119 |
$ |
20,153 |
(5.1) | |||||||||||||||||||||||
Regional |
1,586 |
1,706 |
(7.0) |
4,577 |
4,903 |
(6.6) | |||||||||||||||||||||||||||
Total passenger revenue |
8,603 |
8,960 |
(4.0) |
23,696 |
25,056 |
(5.4) | |||||||||||||||||||||||||||
Cargo |
224 |
235 |
(4.7) |
626 |
706 |
(11.3) | |||||||||||||||||||||||||||
Other operating revenue |
1,086 |
1,111 |
(2.3) |
3,182 |
3,066 |
3.8 | |||||||||||||||||||||||||||
Total operating revenue |
9,913 |
10,306 |
(3.8) |
27,504 |
28,828 |
(4.6) | |||||||||||||||||||||||||||
Operating expense: |
|||||||||||||||||||||||||||||||||
Salaries and related costs |
2,625 |
2,534 |
3.6 |
7,707 |
7,289 |
5.7 | |||||||||||||||||||||||||||
Aircraft fuel (B) |
1,603 |
1,934 |
(17.1) |
4,258 |
5,904 |
(27.9) | |||||||||||||||||||||||||||
Regional capacity purchase |
572 |
572 |
— |
1,645 |
1,725 |
(4.6) | |||||||||||||||||||||||||||
Landing fees and other rent |
546 |
551 |
(0.9) |
1,612 |
1,647 |
(2.1) | |||||||||||||||||||||||||||
Depreciation and amortization |
503 |
469 |
7.2 |
1,473 |
1,343 |
9.7 | |||||||||||||||||||||||||||
Aircraft maintenance materials and outside repairs |
451 |
424 |
6.4 |
1,301 |
1,252 |
3.9 | |||||||||||||||||||||||||||
Distribution expenses |
345 |
366 |
(5.7) |
987 |
1,026 |
(3.8) | |||||||||||||||||||||||||||
Aircraft rent |
168 |
185 |
(9.2) |
521 |
580 |
(10.2) | |||||||||||||||||||||||||||
Special charges (C) |
45 |
76 |
NM |
669 |
195 |
NM | |||||||||||||||||||||||||||
Other operating expenses |
1,431 |
1,296 |
10.4 |
3,998 |
3,782 |
5.7 | |||||||||||||||||||||||||||
Total operating expense |
8,289 |
8,407 |
(1.4) |
24,171 |
24,743 |
(2.3) | |||||||||||||||||||||||||||
Operating income |
1,624 |
1,899 |
(14.5) |
3,333 |
4,085 |
(18.4) | |||||||||||||||||||||||||||
Nonoperating income (expense): |
|||||||||||||||||||||||||||||||||
Interest expense |
(150) |
(164) |
(8.5) |
(466) |
(504) |
(7.5) | |||||||||||||||||||||||||||
Interest capitalized |
20 |
13 |
53.8 |
48 |
38 |
26.3 | |||||||||||||||||||||||||||
Interest income |
14 |
5 |
180.0 |
31 |
16 |
93.8 | |||||||||||||||||||||||||||
Miscellaneous, net (C) |
2 |
(147) |
NM |
(11) |
(321) |
(96.6) | |||||||||||||||||||||||||||
Total nonoperating expense |
(114) |
(293) |
(61.1) |
(398) |
(771) |
(48.4) | |||||||||||||||||||||||||||
Income before income taxes |
1,510 |
1,606 |
(6.0) |
2,935 |
3,314 |
(11.4) | |||||||||||||||||||||||||||
Income tax expense (benefit) (D) |
545 |
(3,210) |
NM |
1,069 |
(3,203) |
NM | |||||||||||||||||||||||||||
Net income |
$ |
965 |
$ |
4,816 |
(80.0) |
$ |
1,866 |
$ |
6,517 |
(71.4) | |||||||||||||||||||||||
Earnings per share, diluted |
$ |
3.01 |
$ |
12.82 |
(76.5) |
$ |
5.57 |
$ |
17.15 |
(67.5) | |||||||||||||||||||||||
Weighted average shares, diluted |
321 |
376 |
(14.6) |
335 |
380 |
(11.8) | |||||||||||||||||||||||||||
Pre-tax margin |
15.2% |
15.6% |
(0.4) pts. |
10.7% |
11.5% |
(0.8) pts. | |||||||||||||||||||||||||||
Pre-tax margin, excluding special items (C) |
15.7% |
16.6% |
(0.9) pts. |
13.1% |
12.3% |
0.8 pts. |
NM Not meaningful |
UNITED CONTINENTAL HOLDINGS, INC. | ||||||||||||
(A) Select passenger revenue information is as follows (in millions): | ||||||||||||
3Q 2016 Passenger Revenue (millions) |
Passenger Revenue vs. 3Q 2015 |
PRASM vs. 3Q 2015 |
Yield vs. 3Q 2015 |
Available Seat Miles vs. 3Q 2015 | ||||||||
Domestic |
$ |
3,582 |
(0.9%) |
(4.9%) |
(3.9%) |
4.2% | ||||||
Atlantic |
1,619 |
(9.7%) |
(10.7%) |
(7.6%) |
1.2% | |||||||
Pacific |
1,168 |
(2.6%) |
(4.1%) |
(7.5%) |
1.6% | |||||||
Latin America |
648 |
0.3% |
(1.3%) |
(4.4%) |
1.6% | |||||||
International |
3,435 |
(5.6%) |
(6.9%) |
(7.2%) |
1.4% | |||||||
Mainline |
7,017 |
(3.3%) |
(5.9%) |
(5.5%) |
2.8% | |||||||
Regional |
1,586 |
(7.0%) |
(3.2%) |
(3.9%) |
(3.9%) | |||||||
Consolidated |
$ |
8,603 |
(4.0%) |
(5.8%) |
(5.7%) |
2.0% |
UNITED CONTINENTAL HOLDINGS, INC. | ||||||||||||||||||||||
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