United Continental Holdings, Inc. Announces Third-Quarter 2011 Profit

United Continental Holdings, Inc. (NYSE: UAL) today reported third-quarter 2011 net income of $773 million or $2.00 per diluted share, excluding $120 million of net special items consisting primarily of integration-related costs. On a GAAP basis, UAL reported third-quarter 2011 net income of $653 million or $1.69 per diluted share.

UAL consolidated passenger revenue increased 9.2 percent in the third quarter of 2011 compared to the pro forma results for the same period in 2010. Third-quarter 2011 consolidated passenger revenue per available seat mile (PRASM) increased 10.1 percent compared to the pro forma results year-over-year.
Third-quarter 2011 consolidated fuel expense, excluding the impact of hedges, increased 41.3 percent, or $1.0 billion, year-over-year on a pro forma basis. During the quarter, WTI crude oil prices decreased while jet fuel prices remained high, which resulted in a $56 million charge related to fuel hedge ineffectiveness, which the company recorded in non-operating expense.
UAL ended the third quarter with $8.4 billion in unrestricted cash, cash equivalents and short-term investments.
“Our solid financial performance in the third quarter was due to the hard work and focus of my co-workers,” said Jeff Smisek, UAL’s president and chief executive officer. “Our merger integration is going well as we approach two significant milestones: our single operating certificate, which we expect to achieve by the end of this year, and our single passenger service system, which we expect to implement by the end of the first quarter of next year.”

UAL results for the third quarter include the financial results of its two operating subsidiaries, United Airlines and Continental Airlines. Prior to the merger on Oct. 1, 2010, UAL results included only the financial results of United. Pro forma results that consolidate the financial results for Continental for the third-quarter 2010 and nine months ended Sept. 30, 2010, are included for meaningful year-over-year comparisons.

Third-Quarter Revenue and Capacity

For the third quarter of 2011, total revenue was $10.2 billion, an increase of 8.7 percent compared to the pro forma results for the same period in 2010. Consolidated passenger revenue for the third quarter rose 9.2 percent to $9.0 billion, compared to the pro forma results for the same period in 2010.

Consolidated revenue passenger miles (RPMs) for the third quarter of 2011 decreased 1.5 percent year-over-year on a pro forma basis, while capacity (available seat miles or ASMs) decreased 0.8 percent year-over-year on a pro forma basis, resulting in a third-quarter consolidated load factor of 85.3 percent.

Consolidated yield for the third quarter of 2011 increased 10.9 percent year-over-year on a pro forma basis. Third-quarter 2011 consolidated PRASM increased 10.1 percent compared to the pro forma results for the same period in 2010.

Mainline RPMs in the third quarter of 2011 decreased 1.6 percent on a mainline capacity decrease of 0.9 percent year-over-year on a pro forma basis, resulting in a third-quarter mainline load factor of 86.1 percent. Mainline yield for the third quarter of 2011 increased 10.8 percent over the pro forma results for the same period in 2010. Third-quarter 2011 mainline PRASM increased 10.1 percent year-over-year on a pro forma basis.

“I want to thank my co-workers for delivering good revenue results in a challenging economic environment,” said Jim Compton, UAL’s executive vice president and chief revenue officer. “As we continue to integrate the two networks, we will stay focused on investing in our product to drive customer satisfaction and revenue growth.”

Cargo and other revenue in the third quarter of 2011 increased 4.9 percent, or $53 million, year-over-year on a pro forma basis.

Third-Quarter Costs

Total operating expenses, including special items, increased $962 million, or 11.6 percent, in the third quarter compared to the pro forma results for the same period of 2010. Third-quarter fuel costs, excluding the impact of fuel hedges, increased $1.0 billion year-over-year. Third-quarter 2011 operating expenses, excluding fuel, profit sharing and special items, increased $58 million, or 1.0 percent, year-over-year on a pro forma basis.

Consolidated costs per available seat mile (CASM), excluding special items, increased 11.7 percent and mainline CASM, excluding special items, increased 11.3 percent in the third quarter of 2011 compared to the pro forma results for the same period last year. Third-quarter consolidated and mainline CASM, including special items, increased 12.5 and 12.4 percent year-over-year on a pro forma basis, respectively.

The company has hedged approximately 56 percent of its expected remaining fuel needs for 2011.

In the third quarter, consolidated and mainline CASM, excluding special items and holding fuel rate and profit sharing constant, increased 0.7 percent and 1.0 percent, respectively, compared to the pro forma results for the same period of 2010.

“Despite the difficult fuel price environment, the team did a good job managing costs in the third quarter,” said Zane Rowe, UAL’s executive vice president and chief financial officer. “We have more work to do to achieve our integration goals, but this quarter’s results highlight our continued progress.”

Third-Quarter Liquidity and Cash Flow

UAL ended the third quarter of 2011 with $8.4 billion in unrestricted cash, cash equivalents and short-term investments. During the third quarter, the company generated $385 million of operating cash flow and had gross capital expenditures of $196 million. The company made scheduled debt and net capital lease payments of $299 million and prepaid $170 million of debt and capital leases in the third quarter. During the first nine months of the year, the company made $2.1 billion of debt and capital lease payments, including prepayments.

Integration Progress

During the quarter, United and Continental made steady progress integrating the two airlines and remain on track to achieve a single operating certificate by year end. The company announced a $550 million investment in its onboard product, including installing flat-bed seats on additional long-haul aircraft, expanding Economy Plus seating and Channel 9 air traffic control audio to Continental aircraft, nearly doubling overhead storage space on the Airbus fleet, adding Wi-Fi to its mainline fleet and completely retrofitting the p.s. fleet. United also introduced its 2012 MileagePlus loyalty program, which provides new benefits and services for United’s and Continental’s most-frequent flyers and more options for members to redeem miles.

The carriers have co-located check-in, ticket counter and gate facilities at 53 airports since closing the merger and now have a single area for check-in at 283 airports systemwide. More than half of the total fleet, or 692 aircraft, is now repainted in the new United livery.

Notable Third-Quarter 2011 Accomplishments

United and Continental recorded U.S. Department of Transportation domestic on-time arrival rates of 77.1 percent and 76.5 percent, respectively, and system completion factors of 98.2 percent and 98.5 percent, respectively, for the third quarter. For international flights, United and Continental recorded on-time arrival rates of 75.5 percent and 75.6 percent, respectively. The on-time arrival rates are based on flights arriving within 14 minutes of scheduled arrival time.
The company accrued $152 million for profit-sharing programs during the third quarter, for a total of $242 million for the first nine months of 2011.
Employees of the combined company earned cash incentive payments for operational performance totaling $5 million during the third quarter of 2011 and $27 million year-to-date.
United and its partner Chase introduced the new United MileagePlus Explorer Card, offering a wide range of benefits for cardmembers.
About United Continental Holdings, Inc.

United Continental Holdings, Inc. (NYSE: UAL) is the holding company for both United Airlines and Continental Airlines. Together with United Express, Continental Express and Continental Connection, these airlines operate an average of 5,717 flights a day to 376 airports on six continents from their hubs in Chicago, Cleveland, Denver, Guam, Houston, Los Angeles, New York/Newark Liberty, San Francisco, Tokyo and Washington, D.C. United and Continental are members of Star Alliance, which offers more than 21,200 daily flights to 1,185 airports in 185 countries. United and Continental’s more than 80,000 employees reside in every U.S. state and in many countries around the world. For more information about United Continental Holdings, Inc., go to UnitedContinentalHoldings.com. For more information about the airlines, see united.com and continental.com or follow United on Twitter and Facebook.