UAUA » Topics » Overview

This excerpt taken from the UAUA 10-Q filed Jul 24, 2008.

Overview

        UAL Corporation (together with its consolidated subsidiaries, "UAL"), is a holding company and its principal, wholly-owned subsidiary is United Air Lines, Inc. (together with its consolidated subsidiaries, "United"). We sometimes use the words "we," "our," "us" and the "Company" in this Form 10-Q for disclosures that relate to both UAL and United. United's operations consist primarily of the transportation of persons, property, and mail throughout the U.S. and abroad. United provides these services through full-sized jet aircraft (which we refer to as its "Mainline" operations), as well as smaller aircraft in its regional operations conducted under contract by "United Express®" carriers.

        United is one of the largest passenger airlines in the world. The Company offers over 3,000 flights a day to more than 200 destinations through its Mainline and United Express services, based on its flight schedule from July 2008 to July 2009. United offers nearly 1,400 average daily Mainline (including Ted(SM)) departures to more than 120 destinations in 27 countries and two U.S. territories. United provides regional service, connecting primarily via United's domestic hubs, through marketing relationships with United Express carriers, which provide more than 1,700 average daily departures to more than 150 destinations. United serves virtually every major market around the world, either directly or through its participation in the Star Alliance®, the world's largest airline network.

         Bankruptcy Matters.    On December 9, 2002 (the "Petition Date"), UAL, United and 26 direct and indirect wholly-owned subsidiaries (collectively, the "Debtors") filed voluntary petitions to reorganize their businesses under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (the "Bankruptcy Court"). On January 20, 2006, the Bankruptcy Court confirmed the Debtors' Second Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the United States Bankruptcy Code (the "Plan of Reorganization"). The Plan of Reorganization became effective and the Debtors emerged from bankruptcy protection on February 1, 2006 (the "Effective Date"). As of the Effective Date, UAL and United adopted fresh-start reporting in accordance with American Institute of Certified Public Accountants' Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code ("SOP 90-7") resulting in significant changes to their historical financial statements. See Note 4, "Voluntary Reorganization Under Chapter 11 of the United States Bankruptcy Code" in Combined Notes to Condensed Consolidated Financial Statements (Unaudited) for further information regarding bankruptcy matters.

         Company Operational Plans.    Crude oil spot prices significantly escalated in the second quarter of 2008 and reached new peak prices, at approximately $140 per barrel. As described further below, the unprecedented increase in jet fuel prices has had a significant negative impact on our results of operations. The Company has begun implementing plans to address the increased cost of fuel. Highlights of these plans include the following:

    The Company is significantly reducing mainline domestic and consolidated capacity. By the fourth quarter of 2008, the Company expects mainline domestic and consolidated capacity to be down approximately 16% and 11% year-over-year, respectively. For the full year of 2009, mainline domestic and consolidated capacity are expected to be approximately 20% and 12% lower than 2007, respectively.

    The capacity reductions will be made through reductions in frequencies of routes and the elimination of unprofitable routes. These actions will result in the closure of certain stations where United cannot operate profitably at current fuel prices.

    The Company has announced plans to permanently remove 100 aircraft from its mainline fleet, including its entire B737 fleet, and six B747 aircraft. The B737 aircraft being retired are some of

39


      the oldest and least fuel efficient in the Company's fleet. This planned reduction reflects the Company's efforts to eliminate unprofitable capacity and divest the Company of assets that currently do not provide an acceptable return.

    United is eliminating its Ted product and reconfiguring that fleet's 56 A320s to include United First class seats. The reconfiguration of the Ted aircraft will begin in spring 2009 and be completed by year-end 2009. We will continue to review the deployment of all of our aircraft in various markets and the overall composition of our fleet to ensure that we are using our assets appropriately to provide the best available return.

    In connection with the capacity reductions discussed above, the Company is further streamlining its operations and corporate functions in order to match the size of its workforce to the size of its operations. The Company anticipates these efforts will result in a reduction in workforce of approximately 7,000 by the end of 2009. The workforce reduction is expected to occur through a combination of furloughs and furlough-mitigation programs, such as early-out options.

    The Company has increased its 2008 cost reduction target by $100 million to $500 million and is also reducing previously planned 2008 capital expenditures of $650 million by approximately $200 million.

        The Company is taking additional actions beyond the plans discussed above, including generating new revenue sources and taking certain other actions, as described below. However, the Company cannot provide assurance that these strategies will successfully mitigate the ongoing adverse impact of high jet fuel prices on its financial position, results of operations and liquidity.

         Recent Developments.    The increase in fuel prices and a weakening economy have created an extremely challenging environment for the industry. In addition, potential industry consolidation, such as the planned Delta Airlines and Northwest Airlines merger, may increase the competitiveness of the industry. In addition to the actions described above, the Company is taking a number of actions, described below, to respond to these challenges.

    The Company continues to pass rising commodity costs to customers. The Company is creating new revenue streams through unbundling products, offering new a la carte services and expanding choices for customers. The Company's existing merchandising programs, such as Economy Plus and Premium Cabin up sell have been extremely successful and the Company continues to implement new revenue initiatives such as the $15 fee for the first checked bag announced in June 2008. In addition, various ticket change fees have increased, including Mileage Plus close-in fees.

    The Company is taking action with the objective to maintain adequate liquidity and minimize its financing costs during this challenging economic environment. In June and July 2008, the Company entered into approximately $325 million of new financing agreements, as described in Liquidity and Capital Resources—Financing Activities, below.

    On July 22, 2008, the Company announced that it had reached a non-binding agreement in principle with its Mileage Plus co-branded bankcard partner and its largest credit card processor to amend the terms of their existing agreements to, among other things, extend the terms of the agreements. If finalized in a definitive agreement, the Company would expect its cash position to increase by approximately $1.0 billion in 2008, which would include the release of approximately $350 million in previously restricted cash under the credit card processing agreement, and an additional $200 million over the next two years. The Company has agreed that certain of its obligations under the agreements would be secured by certain non-cash collateral, and the parties have agreed to use their best efforts to reach definitive agreements and complete the transactions contemplated by the agreement in principle.

40


This excerpt taken from the UAUA DEF 14A filed Mar 26, 2007.

Overview

This Compensation Discussion and Analysis will explain the material elements of the compensation of our named executive officers and describe the objectives and principles underlying the Company’s executive compensation programs.

This excerpt taken from the UAUA 10-Q filed Aug 2, 2006.

Overview

UAL Corporation is a holding company and its principal, wholly owned subsidiary is United Air Lines, Inc., a Delaware corporation (“United”). We sometimes collectively refer to UAL Corporation, together with its consolidated subsidiaries, as “we,” “our,” “us,” “UAL” or the “Company.” United’s operations, which consist primarily of the transportation of persons, property, and mail, accounts for most of UAL’s revenues and expenses. United provides these services through full-sized jet aircraft (which we refer to as our “mainline” operations), as well as smaller aircraft in its regional operations conducted under contract by “United Express®” carriers.

United is one of the largest passenger airlines in the world with more than 3,700 flights a day to more than 210 destinations through its mainline and United Express services. United offers 1,600 average daily mainline (including Ted(SM)) departures to more than 120 destinations in 28 countries and two U.S. territories. United provides regional service connecting primarily with United’s domestic hubs through marketing relationships with United Express carriers, which provide more than 2,000 average daily departures to more than 150 destinations. United serves virtually every major market around the world, either directly or through its participation in the Star Alliance®, the world’s largest airline network.

On December 9, 2002 (the “Petition Date”), UAL, United and 26 direct and indirect wholly-owned subsidiaries (collectively, the “Debtors”) filed voluntary petitions to reorganize their businesses under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (the “Bankruptcy Court”). On January 20, 2006, the Bankruptcy Court confirmed the Debtors’ Second Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the United States Bankruptcy Code (the “Plan of Reorganization”). The Plan of Reorganization became effective and the Debtors emerged from bankruptcy protection on February 1, 2006 (the “Effective Date”).

In connection with emergence from Chapter 11 bankruptcy protection, the Company adopted fresh-start reporting in accordance with American Institute of Certified Public Accountants’ Statement of Position 90-7 “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (“SOP 90-7”). Thus, the consolidated financial statements prior to February 1, 2006 reflect results based upon the historical cost basis of the Company while the post-emergence consolidated financial statements reflect the new basis of accounting incorporating the fair value adjustments made in recording the effects of fresh-start reporting. Therefore, the post-emergence periods are not comparable to the pre-emergence periods. However, for year-over-year discussions on the results of operations, the Company has compared the Successor Company’s results for the three months ending June 30, 2006 to the Predecessor Company’s results for the three months ending June 30, 2005 as well as combined the results for the one month ended January 31, 2006 and five months ended June 30, 2006. The combined periods have been compared to the Predecessor Company’s six months ended June 30, 2005. The Company believes that these year-over-year discussions on the results of operations provide management and investors a better perspective of the Company’s core business and ongoing operational financial performance and trends for comparative purposes. References to “Successor Company” refer to UAL on or after February 1, 2006, after giving the effect to the application of fresh-start reporting. References to “Predecessor Company” refer to UAL prior to February 1, 2006.

The Company believes its restructuring has made United competitive with network airline peers. In every year of the restructuring, beginning in 2003, the Company has improved its financial performance. The Company’s financial results clearly demonstrate this progress—despite continued increases in fuel price. While the cost of mainline fuel has increased more than $2.0 billion since 2002, the Company has reduced operating losses by approximately $2.6 billion through year-end 2005 and current year results reflect a continuation of this positive trend.

46




During the second quarter of 2006, the Company announced a program to reduce projected 2007 expenses by $400 million. The Company has identified some specific programs to realize a portion of these savings, while it continues to identify and evaluate other savings opportunities. For example, the Company expects to reduce purchased services costs by approximately $200 million through savings in such areas as telecommunications, airport services, catering, maintenance materials, and aircraft ground handling. The Company also expects to reduce advertising and marketing costs by as much as $60 million. The implementation of a new flight planning system, and block time opportunities, are expected to generate approximately $40 million in savings.

Also during the second quarter of 2006, and as part of the $400 million cost reduction program, the Company announced its intention to reduce general and administrative expense by $100 million. As part of this initiative, the Company also announced its plans to reduce its workforce by approximately 1,000 salaried and management positions by the end of 2006.

For the second quarter of 2006, the Company reported operating earnings of $260 million, an improvement of $212 million, as compared to the same period in 2005. In addition, for the six month period ending June 30, 2006, the Company reported operating earnings of $89 million, an increase of $291 million, as compared to the same period in 2005.

Consolidated revenues for the second quarter were $5.1 billion, an increase of $690 million, or 16%, between the three month periods ending June 30, 2006 and 2005. Strong revenue improvement was experienced by both mainline and regional affiliate passenger operations between quarters. The Company also reported significant improvements in year-to-date revenue performance, generating $9.6 billion in operating revenues for the six months ending June 30, 2006, an increase of $1.2 billion as compared to the same period of 2005.

During the second quarter of 2006, the General Services Administration (“GSA”) awarded its annual U.S. government employee travel contracts for its upcoming fiscal year beginning October 1, 2006. The GSA selected United for certain contracts and estimated the associated revenue at approximately $540 million, or 27.4% of the total estimated GSA employee travel award. This award level represents a 6.7 point increase over the prior fiscal year.

Consolidated operating expenses were $4.9 billion, an increase of $478 million, or 11%, between the three month periods ending June 30, 2006 and 2005. For the first six months of 2006, operating expenses amounted to $9.5 billion, an increase of $949 million, or 11%, compared to the same period of 2005. Fuel expense (mainline and regional affiliates) accounted for $344 million and $658 million of total operating expense growth between the three and six month periods ending June 30, 2006 and 2005, respectively. Jet fuel expense growth was primarily due to fuel price increases between periods.

United announced that, effective September 2006, the Company will begin charging travel agents within North America a $3.50 per passenger segment fee if low cost booking channels are not used. Over the last few months, the Company has renegotiated agreements with the four major global distributions system (“GDS”) providers to allow access to low cost booking options for travel agencies. The Company expects that most travel agencies will elect to use these low cost options rather than pay the unit charge, and if they do, this would result in reduced GDS fees.

Non-operating expenses increased by $48 million, from $96 million in the second quarter of 2005 to $144 million in the second quarter of 2006. In addition, non-operating expenses for the six month period ended June 30, 2006 compared to the same period in 2005 increased by $136 million to $284 million. The increase in non-operating expense resulted primarily from higher interest expense, which was partially offset by higher interest income. Interest expense accounted for $100 million and $174 million of non-operating expense increases over the quarterly and six month periods, respectively. Interest income

47




increased by $61 million and $91 million in the quarter and six month periods ending June 30, 2006, respectively, as compared to the same periods of 2005.

The Company completed its bankruptcy reorganization during the first quarter of 2006. Non-operating reorganization gains (charges) for the second quarter of 2005 and for the six months ended June 30, 2006 and 2005 were $(1.4) billion, $22.9 billion and $(2.2) billion, respectively.

Net income for the second quarter of 2006 was $119 million, or $1.01 per basic share and $0.93 per diluted share, compared with a loss of $1.4 billion, or $12.33 per basic and diluted share, in the comparable 2005 quarter. For the six months ending June 30, 2006, the Company reported net income of $22.7 billion versus a net loss of $2.5 billion, or $(21.56) per basic and diluted share, in the comparable 2005 period.

The Company ended the second quarter of 2006 with total cash, including restricted cash and short-term investments, of $5.1 billion. Operating cash flows during the combined six month period of 2006 were $1.1 billion, and total available cash was significantly increased by the replacement of the DIP Financing with the Credit Facility on February 2, 2006.

The Company believes that it is important to evaluate its cash flow by understanding non-cash charges which reduced reported earnings for the 2006 second quarter and year-to-date results. The Company recorded non-cash stock compensation expense of $40 million for the second quarter of 2006 and $109 million for the six months ended June 30, 2006, as well as non-cash exit-related and fresh-start reporting charges of $42 million and $72 million for the quarter and six month ended June 30, 2006, respectively.

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