Yahoo  Sep 4  Comment 
"These changes allow us to continue investing in the overall customer experience in today’s marketplace," United Airlines said in a statement to Business Insider. United Airlines became the second major US carrier to hike its fee for checked...
Yahoo  Aug 31  Comment 
An attempt by United Airlines to duck the sticky issue of Taiwan has invited rebuke from China’s foreign ministry. After China told global carriers earlier this year to tweak their websites and list the separately ruled island as part of China...
Channel News Asia  Aug 30  Comment 
United Airlines on Thursday will announce three new daily routes to Europe as the third largest U.S. carrier eyes higher-paying business travelers on transatlantic flights.
Yahoo  Aug 29  Comment 
Embraer could have a realistic shot at snagging United Airlines as the first marquee customer for its E2-series jets, but only if United's management is forced to give up on its "Plan A" for fleet expansion.
Flightglobal  Aug 23  Comment 
Delta Air Lines and United Airlines are both eager to land more flights at Tokyo Haneda airport when the Japanese government opens the airport to more international service in 2020.
Flightglobal  Aug 23  Comment 
United Airlines and the operator of Washington Dulles are looking at ways to improve the some of the aging facilities at the hub airport.
Clusterstock  Aug 22  Comment 
A federal air marshal was removed from a United Airlines subsidiary flight on Monday night after a flight attendant saw the gun he was carrying and issued an emergency alert, the Star Tribune reported. The air marshal and another man were taken...
Yahoo  Aug 21  Comment 
United Airlines to Budget Travelers: Stay in the Back of the Plane


NOTE: This article is no longer updated. Continental Airlines (CAL) and United Airlines (UAUA) have merged under the ticker symbol and name United Continental Holdings (UAL). Please check that article for updates to the merged company.

United Airlines (Nasdaq:UAUA) is an international airline service. With hubs in Los Angeles, San Francisco, Denver, Chicago and Washington D.C., United operates approximately 3,300 flights per day to over 230 destinations domestically and internationally.[1] In 2009, United Airlines was the first in on-time performance for scheduled domestic flights, with 81% of all domestic flights arriving approximately on time.[2] As of December 31, 2009, United Airlines has a 13.7% market share[3]

As with all airlines, oil prices are a significant factor in the company's performance. United was hit particularly hard by the sharp increases in fuel costs in 2008, as higher fuel prices led to a 38.2% increase in United's Cost per Available Seat Mile (CASM), from 11.39¢ to 15.74¢.[4] Furthermore, United entered into hedging agreements at about $104/barrel in 2008 to protect itself from increasing fuel prices.[5] However, in the second half of 2008 fuel prices plummeted dramatically, reaching about $37/barrel in December 2008.[6] As a result, United posted losses of $568 million in 2008[7] and $51 million in 1Q09 [8] because of devalued hedging contracts. By the end of 2009, however, dramatic decreases in fuel costs accounted for a 55.9% decrease in total fuel expenses from $7,772 billion to $3,405 billion.[9]

Because of its high fuel costs and other operating expenses, United has a 2009 Cost per Available Seat Mile of 11.05 cents.[10] As a result of high operating expenses and declining consumer demand for travel, United has significantly reduced its capacity or Available Seat Miles (ASM). In 2007, UAUA cut its ASMs by about 1%[1] and by 4.3% in 2008 [1], and by 7.4% in 2009.[11][12]

Business Overview

United Airlines operates approximately 3,300 flights daily to more than 230 destinations worldwide on its Mainline United and United Express services.[1] United Airlines operated 642 airlines as of 2010, a 6.8% decrease from its combined fleet of 689 aircraft.[1][13][12] In 2010, United planned to buy 25 next-generation Airbus and 25 next-generation Boeing aircraft to improve efficiency in fuel costs.[14] In addition to its airline travel services, United also earns revenue through its United Cargo and airline services businesses.

Merger with Continental Airlines

Continental said that 98% of votes cast and 75% of shares outstanding favored the $3.15 billion merger with United Airlines.[15] United Airlines (UAUA) stockholders also approved of the transaction. The merger is closed on October 1st, and the combined company currently trades in NYSE under the stock ticker "UAL."[15] The merger leaves just three other major network carriers: American Airlines (AMR), US Airways Group (LCC) and Delta Air Lines Inc. (DAL).[15] This improves UAUA's competitive landscape substantially. American Airlines has the highest cost structure and has been unable to acquire a lower-cost company due to Delta acquiring Northwest and UAUA acquiring CAL. Though not as high as AMR, US Airways also has a high cost structure, reducing its ability to attract both customers and suitors for acquisition. [15]

Financial Analysis

Some of United's key operating metics are shown below:

Year Revenue Passenger Miles (Millions)[16] Available Seat Miles (ASM) (Seat Capacity x Miles Flown) (Millions)[16] Load Factor (% of aircraft capacity that is utilized)[16] Revenue per Available Seat Mile (Cents)[16] Cost per Available Seat Mile (CASM) (Cents)[16]
2005 114,272 140,300 81.4% 10.66 12.5
2006 117,470 143,095 82.1% 11.49 13.2
2007 117,399 141,890 82.7% 12.03 13.5
2008 [4] 110,061 135,861 81.0% 12.58 15.74
2009[12] 114,245 140,716 81.2% 11.34 12.69

(Read more on analysis and trends...)

Financial Analysis

2010 Third Quarter Overview

United Airlines and Continental Airlines (CAL) completed their merger at the end of the third quarter of 2010 on October 1st 2010. All accountable measures of company health for the fourth quarter will be updated to include both Continental and United Airlines under the merged company named United Continental Group.Cite error 3; Invalid <ref> tag; invalid names, e.g. too many However, the third quarter data released by UAL is exclusive to United Airlines and reports data before the merger.[17]

United Airlines reported third quarter 2010 net income of $473 million excluding special items, which is an increase of $533 million since year ago third quarter.[17] The special item included the merger costs, and along with miscellaneous costs, amounted to $87 million in costs.[17] United passenger revenue increased 21.4 percent in the third quarter 2010 compared to the same period in 2009.[17] For the third quarter of 2010, United's total revenue was $5.4 billion, an increase of 21.7 percent compared to the same period in 2009.[17] United's total consolidated expenses for the third quarter 2010, excluding certain special items, increased $463 million or 10.7 percent compared to the third quarter of 2009, of which $211 million was due to higher fuel costs.[17] The large increase in revenue compared to the smaller increase in costs highlights United's abilities to improve cost efficiency.

Continental reported third quarter 2010 net income of $367 million or $2.24 diluted earnings per share excluding certain special items, an improvement of $365 million year-over-year.[17] Including special items, Continental reported third quarter net income of $354 million.[17] Continental passenger revenue increased 20.6 percent in the third quarter 2010 compared to the same period in 2009.[17] Continental's total revenue for the third quarter of 2010 was $4.0 billion, an increase of 19.2 percent compared to the same period in 2009.[17] Continental's total expenses increased $256 million or 7.9 percent compared to the third quarter of 2009. Expenses for the third quarter 2010, excluding fuel, profit-sharing programs and certain special items, increased $102 million or 4.3 percent.[17]

For both CAL and UAUA, the companies have streamlined and improved their cost efficiency. However, some of that improvement was diminished due to unexpected increases in fuel costs.[17]

2010 Second Quarter Overview

For the second quarter of 2010, the company reported its first quarterly operating profit since 2007 of $430 million, an improvement of $751 million since year ago 2nd quarter.[18] Most of the profit was due to a 26.9% increase in PRASM since year ago 2nd quarter.[18] The 57% increase in cargo revenue also played a part in the increase in profits.[18] Net income was $273 million in the 2nd quarter, the largest improvement since 2007.[18] $65 million of the operating income were distributed as dividends to their employees for their profit sharing program, while tax accounted for much of the remaining difference between net and operating incomes.[18]

Once again, United Airlines is ranked first in on-time arrivals in the six months of 2010.[18] United Airlines also had other milestones such as completing the first flight using natural gas synthetic fuel and is working towards reducing fuel costs and improving usage of fuel alternatives. The company initated a merger with Continental Airlines (CAL) and expects to begin the integration process and finish the transaction by the end of the year.[18]

2010 First Quarter Overview

For the first quarter of 2010, the company:

  • Reported an operating profit of $69 million.[19]
  • Reported a first quarter net loss of $92 million, narrowing its net loss by $479 million compared to the first quarter of 2009.[19]
  • Reported a 19.0% year-over-year increase in consolidated passenger revenue per available seat mile (PRASM) for the first quarter.[19]
  • Reported a 4.8% year-over-year increase in consolidated unit cost per available seat mile (CASM) for the quarter, against a reduction in consolidated capacity of 3.3% year-over-year in the previous year's 1st quarter.[19]
  • Ranked No. 1 in on-time arrivals among the five largest U.S. global carriers for the first quarter based on preliminary industry results based on U.S. Department of Transportation releases.[19]
  • Finalized agreements for 25 Boeing 787 Dreamliner and 25 Airbus A350 aircraft orders planned in 4th quarter of 2009.[19]

2009 Overview

In 2009, revenues for both mainline and other segments were negatively impacted by yield decreases of 15% and 13%, respectively, as compared to 2008. The yield decreases were a result of the weak economic environment in 2009 In order to mitigate the losses from reduced recessionary-level demands, UAUA took action to reduce capacity. The company reduced its mainline domestic and international capacity by 5% and 8%, respectively, during the fourth quarter of 2009, as compared to the prior year. Mainline domestic capacity decreased 10% while international capacity decreased 9% for the full year of 2009, as compared to 2008. [16] United Airlines ended the year with a net loss of 651 million, which is a 87.9% improvement since 2008's net loss of $5.4 billion. On the revenue side, UAUA had a 19.1% decrease in revenues from $20.194 billion in 2008 to $16.335 in 2009.[16]

United has hedged about 25% of its fuel for 2009 at an average of $101/barrel which will lead to more losses unless oil spikes in 2009.[5]. After a $2.740 billion net loss in 2Q08, UAUA posted a modest profit of $28 million in 2Q09. Still, operating revenue fell by 25.2%, and more specifically, passenger revenue from the United Airlines segment fell by 28.2%.[20] However, operating expense declined by 51.5% between 2Q09 and 2Q08, led by a 61.7% drop in fuel expense through the company's operations, as average price per gallon fell from $3.31 to $1.41.[20] Nonetheless, the reduced demand from the recessionary environment is reflected in a 9% and 17.2% decline in ASMs and Passenger Revenue per ASM (PRASM), respectively.[20]

UAUA posted a $57 million loss in 3Q09, though this reflects a $735 million improvement as compared to 3Q08.[21] While revenue fell by over 20% to $4.433 billion in 3Q09, UAUA was nonetheless able to decrease its operating expenses by over 28%, resulting in operating income of $88 million.[21] In particular, the company benefited from falling oil prices, as airline fuel expense decreased by 57.8% between 3Q08 and 3Q09 to $1.06 billion.[21] UAUA's current ratio of 0.68 and debt to asset ratio of 1.14 illustrate the company's large debt load. Further, despite decreasing ASM by 5.7% in 3Q09 in response to lower demand, the company's PRASM fell by 14.7%.[21]

By the end of the 2009, UAUA's PRASM decreased 12.3% since 2008[12] matched with a 27.7% decrease in CASM. 4th Quarter 2009 resulted in a $240 million net loss, though a 1.1 billion improvement from 4th quarter of 2008. To improve liquidity, United Airlines increased current unrestricted cash balance by $1 billion in 2009. United Airlines ended the year with a net loss of 651 million, which is a 87.9% improvement since 2008's net loss of $5.4 billion.

2008 Highlights

United earned $20.194 billion in revenue in 2008, a 0.3% increase from 2007.[22] This increase was attributed mainly to slight fare increases as well as 6.9% increase in yield, or mainline passenger revenue excluding industry and employee discounted fares per RPM, to 13.89¢.[22] However, United, much like other airlines, reduced its capacity, or Available Seat Miles (ASM), by 4.2% to 135,861 million during 2008 because of slumping consumer demand for travel and increases in operating expenses, most significantly fuel.

  • United had a $5.348 billion net loss in 2008, compared to net income of $403 million in 2007.[22] However, United posted a $22.7 billion gain in 2006 because of benefits associated with its restructuring, and the company otherwise would have operated at a small loss during the year.[22] UAUA's net income in 2007 appeared to be a first step in the positive direction following an average $8.5 billion annual loss from 2003-2005[22]; however, by 2008, the airline was once again plagued by factors that led to consistent losses, such as a 4Q08 Cost per Available Seat Mile of 16.7 cents, which is 12.1% higher than the industry average.[23]
  • UAUA's operating expenses increased 28.9% in 2008, driven by a 60.9% increase per ASM in mainline fuel costs.[16] Fuel costs have been a driving factor to United's increasing operating expenses, as its average price per gallon of fuel has risen from $1.79 in 2005 to $3.54 in 2008.[22]
  • Overall, this increase led to a 38.2% increase in the company's Cost per Available Seat Mile (CASM) in 2008.[22]

To combat increases in fuel prices, UAUA enters into fuel hedge agreements, hedging about 50% of their fuel needs in 2008.[5] However, United secured its fuel at $104/barrel and as a result, posted losses of $779 million and $370 million in Q3 and Q4 2008 as oil prices plummeted.[5][24]

Business Segments

Mainline Services (80.6% of Revenue[25])

United's mainline services operated 409 aircraft in 2008, serving destinations within the U.S. and Canada (domestic) as well as in Europe, Asia and Latin America (international).[26] In 2008 mainline services provided $17.1 billion in operating revenue for UAUA[27], a slight increase from $17.0 billion in 2007[28] United earned 57% of its revenue from its domestic operations in 2008, with the remaining revenue coming from its international operations which are broken down into the Pacific, Atlantic, and Latin American regions.[28] Overall, the mainline services produced about 135.8 million Available Seat Miles (ASM) in 2008, a 4.2% decrease from its 141.9 million ASMs in 2007, as the company reduced its capacity because of higher operating costs and decreased demand.[28] On June 4, 2008, United announced its cancellation of its "Ted Airlines", which was the company's attempt to enter into the budget airline sector.[29]


United generates revenue through agreements with other airlines, primarily under its Star Alliance program, the largest airline network in the world serving 900 destinations worldwide in 159 countries with over 16,500 daily flights.[30] Some features of United's alliance agreements include shared frequent flier programs, code sharing of flight operations, coordination of reservations, ticketing and baggage handling. Under code sharing agreements some seats of one carrier's flight can be marketed and sold under the brand name of another carrier. Some key partner airlines include Air Canada, Air China, Lufthansa, and US Airways Group (LCC).[30]

United Express (14.6% of Revenue[25])

The United Express segment earns revenue through flights operated by third party carriers under contract. These carriers include SkyWest Airlines, Mesa Airlines, Colgan Airlines, Chautuaqua Airlines, Shuttle America, Trans State Airlines, GoJet Airlines and ExpressJet Airlines. In 2008, UAUA earned $3.1 billion in revenue from its United Express operations, the same as in 2007, with a fleet of 280 aircraft.[28] Under their contracts with these carriers United pays contractually agreed fees for operating the flights; in return United determines the pricing, revenues, inventory and schedules for flights operated by these carriers. United Express is typically operated by smaller aircraft between smaller airports and United's hub airports. In 2007, United Express produced about 16.2 million Available Seat Miles (ASM), unchanged from a year earlier.[28]

United Cargo (4% of Revenue[25])

United also offers cargo services for both domestic and international shipping. Freight shipments accounted for 85% of the cargo segment's volume in 2008 with mail shipments accounting for the remaining 15%.[31] In 2008 Cargo generated $854 million in revenue, an 11% increase from 2007.[32]

Key Trends and Forces

Airline industries are more sensitive to the economy than other industries

Typically, airline companies and aircraft manufacturers are more prone to swings in revenue and equity market prices due to the release of economic indicators.[33] Consumers tend to reduce travel if personal economic conditions are suboptimal, forcing airlines to cut capacity and production. Indicators such as unemployment indices, personal income, and even home sales affect airline industries in exaggerated fashion.

Since early July, the airline index has gained 13% as carriers reported monthly double-digit unit revenue after last year's slump.[33] But now the industry is facing a slower travel season while economic data seem to indicate a general slowdown in the recovery. For the last two weeks of August 2010, many economic indicators revealed that the U.S economy has erased all of its employment recovery since one year ago. Unemployment increased unexpectedly to November 2009 levels, and existing homesales decreased by more than 27%.[33] Even though such recessionary indications typically reduce fuel futures prices, this does not fully offset the reduction in travel demand that follows a recession, and will affect the bottom line of airline companies.

Fuel Costs

Like other airlines, fuel costs are United's largest operating expense, accounting for 26.2% of the company's total operating expenses in 2007.[22] Furthermore, United's fuel prices have steadily increased, with its average cost per gallon climbing from 94 cents in 2003 to $2.18 in 2007.[22] Additionally, as oil has inched up past $120 a barrel in early 2008, fuel costs accounted for over 57% of United's operating expenses in Q1 2008.[34] Although United routinely hedges its oil, rising oil prices still caused United's fuel costs to skyrocket in 2008- United is paying $2.81 per gallon of fuel in Q4 2008.[35] Additionally, higher fuel costs led to a 31% increase in United's Cost per Available Seat Mile (CASM) in Q3 2008.[36]

Because of increasing oil prices, United entered into hedging agreements for its fuel at an average $104/barrel in 2008 and $101/barrel in 2009.[5] However, oil prices have dropped significantly since its peak in Q2 2008, reaching about $37/barrel in December 2008.[6] As a result of declining oil prices, United now faces the other harm of volatile oil prices- overvalued hedging contracts. In Q3 2008, for example, United posted a $779 million loss because of devalued hedging contracts.[35] Moreover, United has already secured about 25% of its 2009 fuel needs in hedges at around $101/barrel.[5] Unless oil prices climb back up, United will face more losses into 2009 as its hedging contracts lock the company into fuel prices much greater than market value.

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  1. 1.0 1.1 1.2 1.3 1.4 Wikinvest SEC Files: UAUA 2009 10-K, Item 1
  2. United Airlines - Business Wire News - United Jumps to No. 1 in On-time Performance in 2009, February 12, 2009
  3. S&P Net Advantage: Airline Industry Survey, December 31, 2009
  4. 4.0 4.1 UAUA 2008 10-K, Item 6, pg. 36
  5. 5.0 5.1 5.2 5.3 5.4 5.5 BNET Travel. Details on United's Fuel Hedges
  6. 6.0 6.1 New York Times. Crude Oil Prices Fall Below $37 a Barrel
  7. UAUA 2008 10-K, pg. 43
  8. UAUA 1Q09 10-Q, pg. 21
  9. United Airlines Investor Relations: 4th Quarter 2009 Report, Page 12
  10. Wikinvest SEC Files: UAUA 2009 10-K, Item 6
  11. UAUA 2008 10-K, pg. 38
  12. 12.0 12.1 12.2 12.3 United Airlines Investor Relations: 4th Quarter 2009 Report, Page 17
  13. UAUA 2008 10-K, Item 2, pg. 28
  14. United Airlines Investor Relations: 4th Quarter 2009 Report, Page 9
  15. 15.0 15.1 15.2 15.3 MarketWatch: Continental, UAL shareholders approve deal
  16. 16.0 16.1 16.2 16.3 16.4 16.5 16.6 16.7 Wikinvest SEC Files: UAUA 2009 10-K, Item 7
  17. 17.00 17.01 17.02 17.03 17.04 17.05 17.06 17.07 17.08 17.09 17.10 17.11
  18. 18.0 18.1 18.2 18.3 18.4 18.5 18.6 UAL Corporation - Investor Relations Second Quarter 2010 Results
  19. 19.0 19.1 19.2 19.3 19.4 19.5 UAL Corporation Investor Relations: UAUA First Quarter 2010 Release
  20. 20.0 20.1 20.2 UAUA 2Q09 10-Q
  21. 21.0 21.1 21.2 21.3 UAUA 2009 3Q09 10-Q
  22. 22.0 22.1 22.2 22.3 22.4 22.5 22.6 22.7 22.8 UAUA 2008 10-K, Item 6, pg. 36
  23. Bureau of Transportation Statistics. Fourth-Quarter 2008 System Airline Financial Data
  24. "Hit by Downside of Low Fuel Prices, United Looks for Cash" WashingtonPost.com 11/26/2008
  25. 25.0 25.1 25.2 UAUA 2008 10-K, pg. 121
  26. UAUA 2008 10-K, Item 2, pg. 28
  27. UAUA 2008 10-K, pg. 46
  28. 28.0 28.1 28.2 28.3 28.4 UAUA 2008 10-K, Item 1, pg. 6
  29. "United Airlines to shut down Ted, cut jobs" LATimes.com 6/4/2008
  30. 30.0 30.1 UAUA 2008 10-K, Item 1, pg. 8
  31. UAUA 2008 10-K, Item 1, pg. 6
  32. UAUA 2008 10-K, pg. 46
  33. 33.0 33.1 33.2 MarketWatch: Airline Stocks Hammered by Latest Economic Data, 08-19-2010
  34. UAL Press Release
  35. 35.0 35.1 "Hit by Downside of Low Fuel Prices, United Looks for Cash" WashingtonPost.com 11/26/2008
  36. UAUA Q3 Earnings Press Release 10/21/2008
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