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WIKI ANALYSIS
| Table of Contents |
| Intro and Overview |
| Introduction |
| Business Overview |
| Analysis and Trends |
| Financial Analysis |
| Business Segments |
| Key Trends and Forces |
| Competition |
United Airlines (Nasdaq:UAUA) is the second largest passenger airline in the world by Available seat miles (ASM)[1] With hubs in Los Angeles, San Francisco, Denver, Chicago and Washington D.C., United operates more than 3,000 flights per day to over 200 destinations domestically and internationally.[2]
As with all airlines, oil prices are a significant factor in the company's performance. Since 2003, United's fuel costs have increased by 247% as its average cost per gallon has jumped from $.94 to $3.26 during the same period.[3] 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.
Because of its high fuel costs and other operating expenses, United has a Cost per Available Seat Mile of 16.7 cents, which was 3% and 12% greater than the network airline average and industry average, respectively.[9] 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 [2], with additional capacity and fleet size reductions planned in 2009.[10]
Business Overview
United Airlines operates more than 3,000 flights daily to more than 200 destinations worldwide on its Mainline United and United Express services.[2] UAUA is the second largest domestic airline by Available Seat Miles (ASM), with 63 million revenue passengers in 2008[4] using its combined fleet of 689 aircraft.[11] In 2009, United plans to permanently remove 100 aircraft from its fleet in order to improve liquidity.[2] In addition to its airline travel services, United also earns revenue through its United Cargo and airline services businesses.
Financial Analysis
Some of United's key operating metics are shown below:
| Year | Revenue Passenger Miles (Millions)[1] | Available Seat Miles (ASM) (Seat Capacity x Miles Flown) (Millions)[1] | Load Factor (% of aircraft capacity that is utilized)[1] | Revenue per Available Seat Mile (Cents)[1] | Cost per Available Seat Mile (CASM) (Cents)[1] |
| 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 |
(Read more on analysis and trends...)
References
- ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 UAUA 2007 10-K, Item 6, pg. 30
- ↑ 2.0 2.1 2.2 2.3 UAUA 2008 10-K, Item 1, pg. 3
- ↑ UAUA 2008 10-K, pg. 7
- ↑ 4.0 4.1 4.2 UAUA 2008 10-K, Item 6, pg. 36
- ↑ BNET Travel. Details on United's Fuel Hedges
- ↑ New York Times. Crude Oil Prices Fall Below $37 a Barrel
- ↑ UAUA 2008 10-K, pg. 43
- ↑ UAUA 1Q09 10-Q, pg. 21
- ↑ Bureau of Transportation Statistics. Fourth-Quarter 2008 System Airline Financial Data: Network Airlines Report Fifth Consecutive Quarterly Loss Margin
- ↑ UAUA 2008 10-K, pg. 38
- ↑ UAUA 2008 10-K, Item 2, pg. 28
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