1q04 $211 Million Operating Loss

[Imagolfer]

Press Release Source: United Airlines


UAL Corporation Reports Restructuring Progress
Thursday April 29, 1:46 pm ET
First Quarter Operating Loss of $211 Million Reflects Strong Improvement of $602 Million Year-Over-Year
Passenger Unit Revenue Up 14%, Outperforming the Industry
Unit Costs Down 11%; Excluding Fuel, Unit Costs Dip 14%
UAL Clears Major Issues On the Path to Exit from Bankruptcy


CHICAGO, April 29 /PRNewswire-FirstCall/ -- UAL Corporation (OTC Bulletin Board: UALAQ - News), the holding company whose primary subsidiary is United Airlines, today reported its first-quarter 2004 financial results, which continue to demonstrate significant progress in the company's restructuring.
UAL's first-quarter operating loss was $211 million, a strong improvement of $602 million over first-quarter results last year. This reflects the company's continuing efforts to restructure its business by lowering costs, increasing productivity and improving revenue performance. UAL reported a net loss of $459 million, or a loss per basic share of $4.17, which includes $143 million in special and reorganization items described in the notes to the financial tables. The majority of reorganization charges resulted from non- cash items caused by the rejection of aircraft. Excluding the special and reorganization items, UAL's net loss for the first quarter totaled $316 million, or a loss per basic share of $2.89.

"We are doing exactly what we said we would do to be able to succeed in the new revenue environment -- maintaining a relentless focus on reducing costs and improving efficiency," said Glenn Tilton, chairman, president and chief executive officer. "But, there is still a lot of work ahead of us. Like the rest of the industry, we are impacted by fuel prices. Unlike our peers, though, we have landmark, consensual six-year labor agreements that will differentiate us competitively in the years ahead."

Read entire article here:

http://biz.yahoo.com/prnews/040429/cgth056_1.html

 

[Cosmo]

Some other interesting highlights from the press release:

First Quarter 2004 Cash Flow

The company recorded positive operating cash flow of over $4 million per day in the quarter. UAL ended the quarter with a strong cash balance of $2.6 billion, including $683 million in restricted cash.

This means United recorded a positive cash flow of over $360 million for the quarter despite an IAM retro payment of $63 million in January and a repayment of $60 million in March to DIP financier Bank One (see below). Without those two payments during the quarter, United's operating cash flow would have been positive to the tune of roughly $500 million (that's right, half a billion dollars)!

Unit Revenues

Passenger unit revenue [RASM] was 14% higher on a 9% yield increase. Although year-over-year unit revenue improvement was aided by last year's weakness, our route and capacity adjustments, aggressive marketing and sales activities helped United outperform the industry by a wide margin.

And United's Pacific yields were likely even higher as that region has been seeing very strong yield growth lately (11.1% year-over-year in March according to the Air Transport Association's most recent monthly yield report).

March 2004 Results

UAL today also filed with the United States Bankruptcy Court its Monthly Operating Report for March. The company posted a small operating profit for March. The cash balance increased $77 million during the month. In addition to meeting its DIP covenants for March 2004, the company made the first two of its five scheduled payments (of $60 million), to repay its DIP loan from Bank One in March and April.

ACA Replacement

On April 2, 2004, United and ACA agreed to end the UAX relationship and entered into a formal transition agreement providing for an orderly transition of UAX flying and ground handling. United is planning to replace the ACA flying with a combination of six regional airlines (and some United mainline service) including some new UAX carriers ...

This additional mainline flying is especially good news, and hopefully it will occur in markets that really should be served with mainline equipment, like IAD-ATL and DEN-ATL (to mention only two).

 

[Fly]

* First Quarter Operating Loss of 211 Million Dollars Reflects Strong Improvement of 602 Million Dollars Year-Over-Year

* Passenger Unit Revenue up 14 Percent, Outperforming the Industry

* Unit Costs Down 11 Percent; Excluding Fuel, Unit Costs Dip 14 Percent

* UAL Clears Major Issues on the Path to Exit from Bankruptcy

 

[FWAAA]

This means United recorded a positive cash flow of over $360 million for the quarter despite an IAM retro payment of $63 million in January and a repayment of $60 million in March to DIP financier Bank One (see below). Without those two payments during the quarter, United's operating cash flow would have been positive to the tune of roughly $500 million (that's right, half a billion dollars)!

Excellent results for UAL.

I'm not sure that I agree that the $60 million of debt repayment has any effect on operating cash flow, since it will be reflected on the cash flows from financing activity on the financials, not cash flows from operations. B)

But still very impressive results.

 

[blueskies4ever]

Today's Special News:



UAL Corporation Reports Restructuring Progress



* First Quarter Operating Loss of 211 Million Dollars Reflects Strong
Improvement of 602 Million Dollars Year-Over-Year

* Passenger Unit Revenue up 14 Percent, Outperforming the Industry

* Unit Costs Down 11 Percent; Excluding Fuel, Unit Costs Dip 14
Percent

* UAL Clears Major Issues on the Path to Exit from Bankruptcy

----------------------------------------------------

UAL Corporation Reports Restructuring Progress

----------------------------------------------------

UAL Corporation today reported its first-quarter 2004 financial
results, which continue to demonstrate significant progress in the company's
restructuring.



UAL's first-quarter operating loss was 211 million dollars, a strong
improvement of 602 million dollars over first-quarter results last year.
This reflects the company's continuing efforts to restructure its
business by lowering costs, increasing productivity and improving revenue
performance.



UAL reported a net loss of 459 million dollars, or a loss per basic
share of 4 dollars and 17 cents, which includes 143 million dollars in
special and reorganization items described in the notes to the financial
tables. The majority of reorganization charges resulted from non-cash
items caused by the rejection of aircraft. Excluding the special and
reorganization items, UAL's net loss for the first quarter totaled 316
million dollars, or a loss per basic share of 2 dollars and 89 cents.



"We are doing exactly what we said we would do to be able to succeed in
the new revenue environment -- maintaining a relentless focus on
reducing costs and improving efficiency," says Glenn Tilton, chairman,
president and chief executive officer. "But, there is still a lot of work
ahead of us. Like the rest of the industry, we are impacted by fuel
prices. Unlike our peers, though, we have landmark, consensual six-year
labor agreements that will differentiate us competitively in the years
ahead."



Tilton cited several of United's achievements in the first quarter:



* Cleared major issues on path to exit, including pension legislation
that defers a portion of our 2004 and 2005 pension funding obligations
to future years; a court ruling that our municipal bonds in Los Angeles,
New York and San Francisco were pre-petition debt; and a recently
approved transition agreement that ensures seamless service for United
Express customers formerly served by Atlantic Coast Airlines;



* Increased passenger unit revenue 14 percent compared to last year, an
improvement that outperformed the industry;



* Reduced mainline unit costs by 11 percent. Excluding fuel, unit costs
dropped by 14 percent, an improvement that also outperformed the
industry;



* Improved earnings from operations by 602 million dollars over the
same quarter a year ago;



* Introduced Ted's lower-fare service to leisure travel destinations
across the country with a current daily total of about 120 flights to a
number of leisure destinations from United's hubs in Denver, Washington
Dulles, San Francisco and Los Angeles. For the month of March, Ted had
89 percent load factor and on-time arrivals :14 were at 88 percent.
Booking growth on Ted flights continues to match or exceed capacity
additions;



* Announced new international routes -- United will begin Beijing-San
Francisco and Chicago-Osaka service in June. United also announced this
week that it will be the first U.S. commercial carrier to provide
service to Vietnam, implementing daily San Francisco-Ho Chi Minh City
service via Hong Kong as soon as the necessary regulatory procedures have
been completed by the relevant Vietnamese and U.S. government agencies;
and



* Introduced dynamic new aircraft livery and launched the "It's Time to
Fly" print and TV advertising and brand campaign to further re-engage
customers.



Jake Brace, United's executive vice president and chief financial
officer, said, "In the first quarter, United's financial performance was
right on plan with the exception of fuel costs. Our revenue performance
met our expectations in the seasonally weak first quarter, but, like the
rest of the industry, United has been adversely impacted by
historically high fuel prices. Looking ahead, we are encouraged by strong
bookings as we move into the second and third quarters -- our high demand
season."



Financial Results Continue Improvement



The company recorded positive operating cash flow of over 4 million
dollars per day in the quarter. UAL ended the quarter with a strong cash
balance of 2.6 billion dollars, including 683 million dollars in
restricted cash. UAL's first-quarter 2004 operating revenues were 3.7
billion dollars, up 17 percent compared to first quarter 2003. Load factor
increased 3.6 points to 75.3 percent as traffic increased 5.8 percent on
a 0.8 percent increase in capacity. In March, load factor reached a
record 80.1 percent, up 6.4 points over March 2003. Passenger unit
revenue was 14 percent higher on a 9 percent yield increase. Although
year-over-year unit revenue improvement was aided by last year's weakness,
our route and capacity adjustments, aggressive marketing and sales
activities helped United outperform the industry by a wide margin.



Total operating expenses for the quarter were 3.9 billion dollars, down
1 percent from the year-ago quarter.



Salaries and related costs decreased 287 million dollars or 19 percent
for the quarter. Productivity (available seat miles divided by
manpower) was up 13 percent for the quarter year-over-year.



Aircraft rent decreased 64 million dollars or 32 percent compared to
first quarter 2003. UAL is on track to achieve average annual cash
savings of 900 million dollars from the Section 1110 process.



Average fuel price for the quarter was 107.4 cents per gallon, up 4
percent year-over-year.



Aircraft maintenance, which includes primarily maintenance outsourcing
and maintenance materials, increased 67 million dollars or 57 percent
year-over-year.



The company had an effective tax rate of zero for the first quarter,
which makes UAL's pre-tax loss the same as its net loss.



Operational Performance Among the Best in UAL History



The company continued to deliver outstanding operational performance
for the first quarter 2004. Sixty-nine percent of United flights
departed exactly on time during the quarter, nine percentage points better
than the goal set by the company for its new employee incentive program.
Customer satisfaction ratings were among the highest the company has
received. Customer definite intent to repurchase and passenger ratings
of reservations, check-in and comfort were at all-time highs for the
quarter.



Glenn Tilton said, "As we restructure our finances we are also changing
the way we do business, shifting our company culture to concentrate on
performance and accountability. United employees this week received
their first payments as part of the company's Success Sharing program,
which rewards employees for meeting the company's business objectives,
including on-time performance and customer intent to repurchase. I want
to congratulate all our employees on delivering a record for the
quarter that we can be proud of and that demonstrates the kind of hard work
and shared focus on our customers we need to compete effectively."



Outlook



Booked load factors for May and June are above last year. Domestic
load factors are strong while international bookings and capacity are up
significantly versus last year's depressed base. Capacity for 2004 is
expected to be up about 5 percent compared to 2003.



March Monthly Operating Report Includes Operating Profit



UAL today also filed with the United States Bankruptcy Court its
Monthly Operating Report for March. The company posted a small operating
profit for March. The cash balance increased 77 million dollars during
the month. In addition to meeting its DIP covenants for March 2004, the
company made the first two of its five scheduled payments (of 60
million dollars), to repay its DIP loan from Bank One in March and April.



The Notes attached to the Statement of Consolidated Operations show a
reconciliation of the reported net income to the net loss excluding
special charges, as well as a reconciliation of other financial measures,
including and excluding special charges.

 

[Cosmo]

I'm not sure that I agree that the $60 million of debt repayment has any effect on operating cash flow, since it will be reflected on the cash flows from financing activity on the financials, not cash flows from operations. B)

Well, you might be right -- and I'm certainly no accountant. Unfortunately, the press release didn't include a cash flow statement which would clear up this question. I guess we'll have to await United's SEC Form 10-Q filing in a few weeks.

And even though positive operating cash flow of $430-$440 million during the quarter is still a terrific result, I really liked the sound of a half billion dollars!

 

[bwipilot]

Accounting question: if UAL posted a loss, where did the increase in cash available come from? The only three things I can think of is increased future ticket sales, sales of assets, and increases in loans. Ticket sales=good, less assets and/or more debt = bad. I'd like to see the cash flow report as well.

 

[Busdrvr]

Accounting question: if UAL posted a loss, where did the increase in cash available come from? The only three things I can think of is increased future ticket sales, sales of assets, and increases in loans. Ticket sales=good, less assets and/or more debt = bad. I'd like to see the cash flow report as well.

Just a "quick and dirty"...

UAL ownes loads of jets. Each year, those jets lose value (straight line amortization model ...). That decrease in value shows up as a "charge" to the balance sheet. Typically, that amounts to one BILLION a year. IOW, UAL could lose 1 BILLION and STILL be cash neutral for a year. In addition, you may be "ahead" on lease payments, or better yet, not paying them . In that case, the scheduled lease charge is on the sheet as a charge, while the fact you didn't pay that bill helps Cash flow.

 

[iflyjetz]

Busdrvr, nice call on 1Q results on the ALPA board. What do you see for 2Q?

 

[Busdrvr]

Jetz,
Thanks!! My "gut" for April is slightly north of break even. This is COMPLETELY subjective however. I'll get specific as the traffic numbers come out. . A good deal is dependant on the effeective date of the resolution of the final 100 or so leases. That will add considerably to profitablity. Another factor will be how the company treats pension costs (ie the discount rate) and the resultant effect on labor costs. I think 16 mill in accelerated depreciation for the 76-2's was slid right into normal depreciation for the Q. BTW, your "old" address is in "global". I had been wondering why your initials were absent... I'm in global, fire me some mail

 

[Borescope]

It appears TED is a big contributor to the loss. There are hints that it is doing great, but what is great? During the conference call on earnings, the question was asked if TED was profitable. The answer from Brace was "we are unable to comment on that". Seems to me if TED was making money they would want to flaunt it. Here goes more money down the toilet in some cock and bull venture. Let's see how long it lasts this time around.

 

[Busdrvr]

"It appears TED is a big contributor to the loss. Seems to me if TED was making money they would want to flaunt it."


From USA Today


"In February, United launched a low-fare unit called Ted, which Tilton said was profitable in March. Ted's results aren't separately reported. He said United's revenue projections now assume that airfares won't return to the high levels of the late '90s."