UAUA » Topics » Controlling Operating Expenses

This excerpt taken from the UAUA 8-K filed Jan 23, 2007.

Controlling Operating Expenses

Mainline CASM decreased by 1.7 percent from the year-ago quarter, with fuel prices declining from fourth quarter 2005 levels. Excluding fuel and special operating items, mainline CASM was 7.58 cents, an increase of 1.7 percent compared with the fourth quarter of 2005. The company estimates that the capacity reduction and the additional non-fuel expenses resulting from the snowstorms in Denver and Chicago increased fourth quarter CASM excluding fuel and special items by 0.6 point.

 

     Fourth Quarter Increase / (Decrease)  
     Mainline     Consolidated  
     2006    2005    % Chg.     2006    2005    % Chg.  

CASM (cents)

   10.94    11.13    (1.7 )   11.61    11.93    (2.7 )

CASM ex fuel and special items (cents)2

   7.58    7.45    1.7     8.10    8.06    0.5  

CASM ex fuel, special items and major non-cash fresh start and exit related charges (cents)3

   7.40    7.45    (0.7 )   7.94    8.06    (1.5 )
                

2 For Mainline and Consolidated, also excludes UAFC
3 See Note 8 for detail of these charges

The company continues to focus on implementing continuous improvement programs to control costs and mitigate inflationary pressures. It achieved $300 million in benefits from 2006 initiatives and has pulled forward $135 million from 2007 initiatives, including exceeding the previously announced goal to reduce 1,000 management and administrative positions by the end of 2006. The company is also on-track to achieve an additional $265 million of cost savings to fulfill the $400 million cost program announced in the second quarter of 2006.

World Headquarters 1200 East Algonquin Road Elk Grove Township, Illinois 60007 Mailing Address: Box 66100, Chicago, Illinois 60666

 


LOGO

Excluding fuel, special items and major non-cash fresh-start and exit-related items, mainline CASM decreased by 0.7 percent from the comparable quarter in 2005 (Note 7). The company believes that excluding these items is useful to investors in understanding year-over-year performance and depicting the results of the company’s cost reduction efforts.

The company has entered into various fuel hedging positions and has designated them as economic hedges. At the end of the fourth quarter, the company recorded a net loss of $13 million on hedge contracts settling in the quarter. The company also recognized an unrealized mark-to-market loss of $2 million related to hedge positions in place at the end of the fourth quarter but which will settle in future quarters. These costs are recorded in the fourth quarter’s aircraft fuel expense.

This excerpt taken from the UAUA 8-K filed Oct 31, 2006.

Controlling Operating Expenses

Mainline CASM increased by 7 percent from the year-ago quarter, primarily driven by a 21 percent increase in mainline fuel prices. Excluding fuel and special operating items, mainline CASM was 7.29 cents, an increase of 2.5 percent compared with the third quarter of 2005.

 

     Third Quarter  
     Mainline     Consolidated  
     2006    2005    % Chg.     2006    2005    % Chg.  

CASM (cents)

   11.13    10.43    6.7     11.74    11.23    4.5 %

CASM ex fuel and special items (cents)3

   7.29    7.11    2.5     7.74    7.74    —    

CASM ex fuel, special items and major non-cash fresh start and exit related charges (cents)4

   7.08    7.11    (0.4 %)   7.56    7.74    (2.3 %)

 

3 For Mainline and Consolidated, also excludes UAFC

 

4 See Note 10 for detail of these charges

The company is on track to capture $300 million in benefits targeted for 2006 as well as the additional $400 million in 2007 initiatives.

Cost savings and the recognition of a rent credit previously expected in the fourth quarter helped to mitigate unanticipated expenses. The company estimates the London terrorism plot increased the quarter’s expenses by $4 million, and it also recorded a $19 million accrual for year-end incentive programs for improved earnings expectations. Additionally, the company is experiencing increasing maintenance expenses driven by increasing materials expense, work content changes on airframes, and engine aging. The company continues to focus on the implementation of its continuous improvement programs to mitigate inflationary pressures.

Excluding fuel, special items and major non-cash fresh-start and exit-related items, mainline CASM decreased by 0.4 percent from the comparable quarter in 2005 (Note 9).

World Headquarters 1200 East Algonquin Road Elk Grove Township, Illinois 60007 Mailing Address: Box 66100, Chicago, Illinois 60666


LOGO

 

The company believes that excluding these items is useful to investors in understanding year-over-year performance and depicting the results of the company’s cost reduction efforts.

The company has entered into various fuel hedging positions and has designated them as economic hedges. In the third quarter, the company recognized a realized gain of $8 million related to hedges. The company also recognized an unrealized mark-to-market loss of $26 million related to hedge positions in place at the end of the third quarter which will settle in future quarters. These transactions are more fully described in the “Outlook” section of this release. United’s mainline fuel procurement process generally sets the price for fuel approximately three to four weeks prior to consumption. Fuel expense is incurred during the period of consumption and reflects the lag described above. Accordingly, at any point of time there is a delay between prevailing spot prices for jet fuel and the price paid by the company.

This excerpt taken from the UAUA 8-K filed Jul 31, 2006.

Controlling Operating Expenses

CASM increased by 9 percent from the year-ago quarter, primarily driven by a 27 percent increase in mainline fuel prices. Excluding fuel, a $22 million one-time severance charge related to the company’s previously announced manpower reductions and a special item recorded in the second quarter of 2005, mainline CASM was 7.64 cents, an increase of 1.5% compared with the second quarter of 2005.

 

 

Mainline

 

Consolidated

 

 

 

2006

 

2005

 

% Chg.

 

2006

 

2005

 

% Chg.

 

CASM (cents)

 

11.43

 

10.50

 

8.9

 

12.11

 

11.26

 

7.5

 

CASM ex fuel (cents)(3)

 

7.64

 

7.53

 

1.5

 

8.14

 

8.14

 

 


(3)             For Mainline and Consolidated, also excludes UAFC, a one-time severance expense and special items

As previously announced, the company is engaged in a multi-year cost reduction program. For 2006, United’s business plan includes $300 million in benefits over 2005, and the

5




 

company has committed to an additional $400 million in cost savings starting in 2007 on top of those already included in the business plan. To generate these additional cost savings, the company is focused on fundamental improvements to its core business. United has cut advertising and marketing costs by $60 million, is reducing purchased services costs by $200 million, and will reduce general and administrative costs by $100 million and will secure $40 million from operational efficiency improvements.

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki