United Announces Second-Quarter 2013 Profit

CHICAGO, July 25, 2013 /PRNewswire/ — United Airlines (UAL) today reported second-quarter 2013 net income of $521 million, or $1.35 per diluted share, excluding $52 million of special charges. Including special charges, UAL reported second-quarter 2013 net income of $469 million, an increase of 38 percent year-over-year, or $1.21 per diluted share.

UAL generated $10 billion of revenue in the second quarter of 2013, its highest ever second-quarter revenue result.
Leading the U.S. airline industry in year-over-year passenger revenue per available seat mile (PRASM) growth for the second consecutive quarter, United’s PRASM increased 1.0 percent in the second quarter compared to the second quarter of 2012.
Second-quarter consolidated unit costs (CASM), holding fuel rate and profit sharing constant and excluding special charges and third-party business expense, increased 4.5 percent year-over-year on a consolidated capacity (available seat miles) reduction of 2.1 percent. Second-quarter consolidated CASM increased 0.7 percent year-over-year.
UAL ended the second quarter with $7.0 billion in unrestricted liquidity.
“I am encouraged by the progress we made in the second quarter – in our operations, in our customer service and in our financial performance,” said Jeff Smisek, chairman, president and chief executive officer. “I’d like to thank my co-workers for working together as we build the world’s leading airline.”

Second-Quarter Revenue and Capacity
For the second quarter, total revenue was $10.0 billion, an increase of 0.6 percent compared to the same period in 2012. Second-quarter consolidated passenger revenue decreased 1.1 percent year-over-year to $8.7 billion, on a consolidated capacity decrease of 2.1 percent year-over-year. Cargo and other revenue in the second quarter increased 13.8 percent versus the second quarter of 2012, or $162 million, to $1.3 billion.

Consolidated revenue passenger miles (RPMs) decreased 1.7 percent on a consolidated capacity decrease of 2.1 percent year-over-year in the second quarter, resulting in a consolidated load factor of 84.7 percent, the highest second-quarter consolidated load factor in United’s history.

Second-quarter consolidated PRASM increased 1.0 percent compared to the same period in 2012. Consolidated yield for the second quarter increased 0.6 percent year-over-year.

Mainline RPMs in the second quarter decreased 2.1 percent on a mainline capacity decrease of 2.4 percent year-over-year, resulting in a mainline load factor of 84.9 percent. Second-quarter mainline yield increased 0.5 percent compared to the same period in 2012. Second-quarter mainline PRASM increased 0.7 percent year-over-year.

“I’d like to thank our team for working through challenging weather and high load factors to deliver competitive on-time performance and customer service this quarter,” said Jim Compton, UAL’s vice chairman and chief revenue officer. “For the second straight quarter, our unit revenue outperformed the industry. Our investments in customer service training and in our product are paying off.”

Second-Quarter Costs
Total operating expenses decreased $133 million, or 1.4 percent, in the second quarter versus the same period in 2012. Excluding special charges, second-quarter total operating expenses increased $21 million, or 0.2 percent, year-over-year.

Second-quarter consolidated and mainline CASM increased 0.7 and 1.3 percent year-over-year, respectively. Second-quarter consolidated and mainline CASM, excluding special charges and third-party business expense, increased 1.1 percent and 1.8 percent, respectively, compared to second-quarter 2012. Third-party business expense was $170 million in the second quarter of 2013.

In the second quarter, consolidated and mainline CASM, excluding special charges and third-party business expense and holding fuel rate and profit sharing constant, increased 4.5 percent and 5.2 percent, respectively, compared to the second quarter of 2012.

“Our top financial priorities for 2013 are to operate more efficiently and to meet our return-on-invested capital target, and our performance in the second quarter puts us in good position to achieve these goals,” said John Rainey, UAL’s executive vice president and chief financial officer. “We continued to strengthen our balance sheet and make prudent long-term investments in our business, which create a more stable foundation for our future.”

Liquidity and Cash Flow
UAL ended the second quarter with $7.0 billion in unrestricted liquidity, including $1.0 billion of undrawn commitments under its revolving credit facility. During the second quarter, UAL generated $1.1 billion of operating cash flow. The company’s gross capital expenditures and purchase deposits for the quarter were $549 million. The company made debt and capital lease principal payments of $540 million in the second quarter, including $144 million of pre-payments.

Second-Quarter 2013 Accomplishments
Operations, Co-workers and Customer Service

United Airlines reported a second-quarter mainline on-time arrival rate (domestic and international) of 76.7 percent, a competitive on-time arrival rate given the abnormally high incidence of weather and air traffic control delays. The on-time arrival rate is based on flights arriving within 14 minutes of scheduled arrival time. United co-workers earned cash incentive payments totaling $4 million for on-time performance during the second quarter.
United neared completion of its comprehensive customer service training program for all customer-facing agents and flight attendants worldwide with more than 75 percent of mainline and United Express flight attendants, airport agents and reservation agents trained through the second quarter.
The company recognized each of its United 100 winners with a $500 cash prize and two roundtrip airline tickets to anywhere the airline flies. The United 100 program recognizes 100 employees each quarter who were nominated and selected by their co-workers for exemplary performance or achievements that support the cornerstones of the company’s business plan.
More than 64,000 United Airlines employees worldwide – including flight attendants, customer service agents, technicians and ramp workers – debuted newly designed uniforms, the first time members of these work groups have worn similarly styled uniforms.
Finance, Network and Fleet

United issued $300 million of senior unsecured notes due 2018 at an interest rate of 6.375 percent.
During the quarter, the company expanded its industry-leading global route network, launching new nonstop service between Paris and San Francisco; between Tokyo and Denver and between Shannon, Ireland, and Chicago. The company also launched new nonstop service to Austin, Texas; Charleston, S.C.; Fairbanks, Alaska; Edmonton, Alberta, Canada; Grand Rapids, Mich.; Guatemala City, Guatemala; Mobile, Ala.; Portland, Ore.; Saint George, Utah; San Jose, Costa Rica; San Jose del Cabo, Mexico; Traverse City, Mich.; Vancouver, British Columbia, Canada; and Wichita, Kan. United also added three new cities to its network: Dickinson, N.D.; Fort McMurray, Alberta, Canada and Santa Fe, N.M. The company announced future new nonstop markets, including the company’s first nonstop service to St. Lucia, as well as additional service to Austin, Texas, and Gunnison, Colo.
United welcomed back the Boeing 787 Dreamliner with commercial service between Houston and its other domestic hubs. The airline launched the highly anticipated Denver to Tokyo-Narita service in June, marking a successful return of the Dreamliner to United’s international skies. United also launched temporary 787 service from Houston to London in June, and in August the company will start additional 787 international service from Houston to Lagos, Nigeria, and from Los Angeles to Tokyo and Shanghai.
The company increased its Dreamliner order to 65. United will be the North American launch customer for the Boeing 787-10. The company also converted its existing order for 25 A350-900s into A350-1000s and added an additional 10 aircraft to the order, totaling 35 aircraft. United expects delivery for both the 787-10 and A350-1000 beginning in 2018, enabling the airline to further modernize its international widebody fleet by replacing older, less efficient aircraft to reduce fuel and operating costs, enhance the customer experience and maximize network opportunities.
United will introduce 70 Embraer 175 aircraft into the United Express fleet beginning in 2014. These aircraft – with 76 seats, a larger first-class cabin and larger overhead bins – will be operated by SkyWest Airlines, Inc. and another United Express carrier, with deliveries expected in 2014 and 2015.
The company took delivery of six Boeing 737-900ERs and removed from service two Boeing 757-200s and the last five Boeing 737-500s and the last five Boeing 767-200s from its fleet.
The company executed a definitive purchase agreement with AltAir Fuels for 15 million gallons of cost-competitive, commercial-scale, sustainable aviation biofuel to be used on flights departing LAX in 2014. AltAir Fuels’ renewable jet fuel is expected to achieve at least a 50 percent reduction in greenhouse gas emissions on a lifecycle basis.
Product, Loyalty Program and Facilities

United reached a milestone of being the only U.S. carrier offering 180-degree flat-bed seats and personal on-demand entertainment in premium cabins on all scheduled, long-haul international flights from the continental U.S.
The company continued outfitting aircraft with global satellite Wi-Fi, offering inflight connectivity on long-haul international flights. The airline now has 57 aircraft complete and is installing satellite Wi-Fi at a rate of over 25 aircraft per month for the remainder of 2013.
The airline introduced its 200th aircraft with live television, offering customers more than 100 channels of live programming while in-flight. United operates more live television-equipped aircraft than any other airline in the world.
United launched subscription options that offer customers access to Economy Plus seating or pre-paid checked baggage charges for a year, providing new choices for customers to tailor their travel experiences.
United introduced a revenue component to its MileagePlus premier status qualification requirements for the 2015 program year.
United debuted the MileagePlus Small Business Network, a first-of-its-kind loyalty program that enables businesses to earn and redeem miles by purchasing goods and services from the program’s vendor partners, including leading providers of printing, shipping, credit card payment processing, office supplies and computing services.
United opened its new Terminal B south concourse at Houston’s George Bush Intercontinental Airport. The $97 million south concourse is a new 225,000-square-foot facility dedicated to United Express regional flights.
United signed a 20-year lease extension at Newark Liberty International Airport and committed to invest an additional $150 million in the region’s largest hub to ensure the airport remains one of the country’s premier global gateways. The facility upgrades include a redesign of the airline’s check-in facilities, a new catering facility and an advanced checked baggage screening system.