United Continental Announces Fourth-Quarter and Full-Year 2010 Results

Merger costs lead to loss


United Continental Holdings, Inc. Announces Fourth-Quarter and Full-Year 2010 Results

UAL REPORTS PRO FORMA FULL-YEAR 2010 $1.6 BILLION NET INCOME EXCLUDING SPECIAL ITEMS, $253 MILLION NET INCOME ON GAAP BASIS

PR Newswire

CHICAGO, Jan. 26, 2011 /PRNewswire/ -- United Continental Holdings, Inc. (NYSE: UAL) today announced fourth-quarter and pro forma full-year 2010 financial results. UAL results for the fourth 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 only included the financial results of United Airlines.  Pro forma results that consolidate the financial results for Continental for periods prior to Oct. 1, 2010, are included for meaningful year-over-year comparisons.

  • UAL reported fourth-quarter 2010 net income of $160 million or $0.44 diluted earnings per share excluding $485 million of special items consisting primarily of merger-related costs and other special charges, an improvement of $347 million compared to the pro forma results year-over-year.  On a GAAP basis, UAL reported fourth-quarter net loss of $325 million or $1.01 diluted loss per share.
  • UAL reported pro forma full-year 2010 net income of $1.6 billion excluding $765 million of special items, resulting in a net margin of 4.8 percent. On a GAAP basis, UAL reported full-year 2010 net income of $253 million.
  • UAL consolidated passenger revenue increased 15.8 percent in the fourth quarter of 2010 compared to the pro forma results for the same period in 2009. Fourth-quarter 2010 consolidated passenger revenue per available seat mile (PRASM) increased 11.5 percent compared to the pro forma results year-over-year.
  • UAL ended the year with $8.7 billion in unrestricted cash, cash equivalents and short-term investments.
  • Employees of the combined company earned $224 million in profit sharing for full-year 2010.

"Thanks to the hard work of my co-workers, we made a fourth-quarter profit, excluding special items, in a typically weak quarter," said Jeff Smisek, UAL's president and chief executive officer. "While making significant progress integrating United and Continental, we never lost focus on running a good operation.  We made a solid profit for the year, and we look forward to distributing $224 million in profit sharing to our co-workers on Valentine's Day."

Fourth-Quarter Revenue and Capacity

For the fourth quarter of 2010, UAL total revenue was $8.4 billion, an increase of 15.0 percent compared to the pro forma results for the same period in 2009. Consolidated passenger revenue for the fourth quarter rose 15.8 percent, or $1.0 billion, compared to the pro forma results for the same period in 2009.  

Consolidated revenue passenger miles (RPMs) for the fourth quarter of 2010 increased 4.0 percent on a pro forma basis, while capacity (as measured by available seat miles or ASMs) increased 3.8 percent year-over-year on a pro forma basis, resulting in a fourth-quarter consolidated load factor of 82.0 percent.  

Consolidated yield for the fourth quarter of 2010 increased 11.3 percent year-over-year on a pro forma basis.  Fourth-quarter 2010 consolidated PRASM increased 11.5 percent compared to the pro forma results for the same period of 2009.

Mainline RPMs in the fourth quarter of 2010 increased 3.5 percent on a mainline capacity increase of 3.4 percent year-over-year on a pro forma basis, resulting in a fourth-quarter mainline load factor of 82.7 percent. Mainline yield for the fourth quarter of 2010 increased 12.4 percent over the pro forma results for the same period in 2009.  Fourth-quarter 2010 mainline PRASM increased 12.5 percent year-over-year on a pro forma basis.

"The great service our co-workers delivered to our customers resulted in strong fourth-quarter revenue performance,"  said Jim Compton, UAL's executive vice president and chief revenue officer. "With our focus on the customer, operational performance and capacity discipline, we look forward to improving our revenue performance as we integrate the two networks."

Passenger revenue for the fourth quarter of 2010 and period-to-period comparisons of related pro forma statistics for UAL's mainline and regional operations are as follows:




4Q 2010

Passenger

Revenue

(millions)


Passenger

Revenue

vs. 4Q 2009

PRASM

vs. 4Q 2009

Yield

vs. 4Q 2009

ASM

vs. 4Q 2009









Domestic


$  3,005


9.3%

9.4%

8.9%

(0.1%)









Atlantic


1,293


17.0%

8.0%

11.7%

8.3%

Pacific


1,093


33.8%

26.4%

20.8%

5.9%

Latin America


548


26.0%

15.7%

18.2%

8.9%

International


$  2,934


24.5%

15.8%

16.0%

7.5%









Mainline


$  5,939


16.3%

12.5%

12.4%

3.4%

Regional


1,471


13.9%

6.7%

5.5%

6.8%









Consolidated


$  7,410


15.8%

11.5%

11.3%

3.8%












Cargo revenue in the fourth quarter of 2010 increased 13.6 percent, or $37 million, year-over-year on a pro forma basis driven by an increase in fuel surcharges and strength in yields.

Other revenue in the fourth quarter of 2010 increased 8.0 percent, or $53 million, year-over-year on a pro forma basis driven by continued growth in ancillary revenue.

Fourth-Quarter Costs

Total consolidated expenses for the fourth quarter of 2010, excluding special items, increased $740 million or 10.2 percent compared to the pro forma results for the fourth quarter of 2009, of which $438 million was due to higher fuel costs.  Fourth-quarter 2010 consolidated expenses, excluding fuel, profit-sharing programs and special items, increased $317 million or 6.0 percent year-over-year on a pro forma basis on 3.8 percent higher capacity.  Total consolidated expenses increased $1.1 billion or 15.0 percent compared to the pro forma results for the fourth quarter of 2009.

Consolidated costs per available seat mile (CASM), excluding special items, increased 6.1 percent and mainline CASM, excluding special items, increased 6.3 percent in the fourth quarter of 2010 compared to the pro forma results for the same period last year. Fourth-quarter 2010 consolidated and mainline CASM increased 10.9 and 12.3 percent year-over-year on a pro forma basis, respectively.

On a pro forma basis, consolidated fuel prices, excluding the impact of hedges, for the fourth quarter of 2010 increased 17.6 percent compared to the fourth quarter of 2009, while consolidated fuel consumption increased 3.3 percent year-over-year on a pro forma basis.

In the fourth quarter, consolidated CASM excluding special items and holding fuel rate and profit sharing constant increased 1.0 percent and mainline CASM excluding special items and holding fuel rate and profit sharing constant increased 1.1 percent compared to the pro forma results for the same period of 2009. Fourth quarter 2010 includes $130 million of expense related to the execution of the trans-Atlantic joint venture for the first nine months of 2010.  

"Our fourth-quarter results demonstrate the great job our entire team did operating efficiently and controlling costs despite numerous challenges throughout the quarter," said Zane Rowe, UAL's executive vice president and chief financial officer. "We remain focused on achieving our goal of sustained profitability and this quarter's results are another step in the right direction."

Fourth-Quarter Liquidity

UAL ended the year with $8.7 billion in unrestricted cash, cash equivalents and short-term investments. During the fourth quarter, the company generated approximately $106 million of operating cash flow, made scheduled debt and net capital lease payments of $527 million and had gross capital expenditures of $257 million. In October 2010, Continental issued $427 million of enhanced equipment trust certificates securities at a blended annual interest rate of 4.88 percent. During the quarter, $175 million of Continental convertible debt was converted into UAL equity.  In addition, the company pre-paid $148 million of debt in January of 2011.

Merger Integration

Since closing the merger on Oct. 1, 2010, United and Continental continued to make significant progress integrating the two carriers.  The company has already repainted more than 200 aircraft in the new United livery, selected key technology platforms and begun the process of integrating information technology systems, and continued to co-locate check-in and ticket counter facilities to streamline operations that began when Continental joined Star Alliance in 2009.  The carriers are now co-located at 22 airports, including the company's hubs at Chicago, Denver, Houston, Narita and New York/Newark Liberty. The carriers also made strides to align several employee programs, announcing new on-time incentive and perfect attendance programs.

Notable 2010 Accomplishments

  • On Oct. 1, 2010, a wholly owned subsidiary of United Continental Holdings, Inc. merged with Continental, creating a world-class global airline.
  • Based on preliminary numbers, UAL anticipates that its carriers will lead their network peers in on time performance for domestic scheduled flights.  For the calendar year 2010, United recorded an on-time arrival rate (flights arriving within 14 minutes of scheduled arrival time) as measured by the U.S. Department of Transportation (DOT) for U.S. domestic scheduled flights of 85.2 percent and a systemwide mainline segment completion factor of 98.5 percent. Continental recorded an on-time arrival rate as measured by DOT of 81.4 percent for U.S. domestic scheduled flights and a systemwide mainline segment completion factor of 99.0 percent for the year.    
  • United expanded its worldwide network by launching service to Africa with daily nonstop flights between Washington Dulles and Accra, Ghana, with continuing service to Lagos, Nigeria.  Continental inaugurated service between New York/Newark and Munich and between Orange County and Hawaii, and announced new flights to Auckland, New Zealand and Lagos, Nigeria, from its Houston hub and service between New York/Newark and Cairo, Egypt.  
  • The airlines continued to reconfigure their international aircraft with new lie-flat seats in first and business class. United has now reconfigured 53 of 91 aircraft (21 767s, eight 777s and 24 747s) in its international widebody fleet. Continental installed new BusinessFirst seats on its Boeing 777 and 757 aircraft, with 56 of 63 international aircraft (22 777s and 34 757s) now complete.  Continental also continued its DIRECTV® installation, with the service now offered on 165 narrowbody aircraft.
  • The company bolstered its industry leading aircraft order book.  United executed definitive agreements with Airbus for 25 Airbus A350 XWBs and with Boeing for 25 Boeing 787s. Continental placed into service 13 new fuel-efficient Boeing aircraft, leased three used Boeing 757-300s and removed from service three older, less efficient Boeing 737-300s.
  • The airlines introduced new products that offer travelers the option of customizing their travel experience with services they value, including Continental's extra legroom seating and FareLock and United's premium meal offerings on certain flights.
  • Continental concluded agreements on four new labor contracts including two with the International Brotherhood of Teamsters representing Continental's aircraft maintenance technicians and fleet service employees and two with the Transport Workers Union representing Continental's dispatchers and simulator engineers. In addition, in January 2011, the company reached a tentative agreement with the International Association of Machinists representing Continental's flight attendants.
  • Employees of the combined company earned cash incentive payments for operational performance totaling $67 million during 2010.
  • United demonstrated continued commitment to the advancement of alternative fuels by completing the first flight by a U.S. commercial airline using natural gas synthetic jet fuel, and became the first airline to conduct two trans-Atlantic flights using state-of-the-art flight planning to demonstrate the potential for fuel savings and carbon emission reductions.

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 a total of approximately 5,675 flights a day to 372 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 21,000 daily flights to 1,160 airports in 181 countries worldwide through its 27 member airlines. 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, and follow each company on Twitter and Facebook.

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 which 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; 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 aviation fuel and energy refining capacity in relevant markets); our ability to cost-effectively hedge against increases in the price of aviation 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; the costs associated with security measures and practices; 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); 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; the possibility that expected merger synergies will not be realized or will not be realized within the expected time period; and other risks and uncertainties set forth under Item 1A., Risk Factors of Annual Report on Form 10-K, as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC. Consequently, forward-looking statements should not be regarded as representations or warranties by us that such matters will be realized.

-tables attached-




UNITED CONTINENTAL HOLDINGS, INC. AND SUBSIDIARIES (Formerly UAL Corporation)

STATEMENT OF CONSOLIDATED OPERATIONS (UNAUDITED)

REFLECTS PRO-FORMA CONSOLIDATED RESULTS FOR UAL AND CONTINENTAL AIRLINES FOR PERIODS PRIOR TO MERGER CLOSE


















Three Months



Twelve Months





Ended December 31,


%

Ended December 31,


%




2010

2009


Increase/

2010

2009


Increase/

(In millions, except per share data)

Actual

Pro Forma


(Decrease)

Pro Forma

Pro Forma


(Decrease)

Operating Revenue:








Passenger:













Mainline

$5,939

$5,107


16.3%


$23,928

$20,223


18.3%




Regional

1,471

1,292


13.9%


5,973

4,874


22.5%




Total Passenger Revenue

7,410

6,399


15.8%


29,901

25,097


19.1%



Cargo

310

273


13.6%


1,160

902


28.6%



Other

713

660


8.0%


2,952

2,609


13.1%




Total Operating Revenue

8,433

7,332


15.0%


34,013

28,608


18.9%















Operating Expenses:












Aircraft fuel

2,459

1,942


26.6%


9,558

7,201


32.7%



Salaries and related costs

1,822

1,743


4.5%


7,489

6,944


7.8%



Regional capacity purchase

602

589


2.2%


2,420

2,349


3.0%



Landing fees and other rentals

511

456


12.1%


1,978

1,872


5.7%



Depreciation and amortization

403

422


(4.5%)


1,544

1,545


(0.1%)



Aircraft maintenance materials and outside repairs

386

380


1.6%


1,496

1,540


(2.9%)



Distribution costs

338

300


12.7%


1,387

1,207


14.9%



Aircraft rentals

256

254


0.8%


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