EYE-ON-UA
May 19, 2008 - How We Stack Up Competitively
We are reducing domestic capacity substantially-with mainline domestic capacity expected to be down by 9% in the fourth quarter of this year, and that is on top of a 5% reduction we took in the fourth quarter of 2007. We are using the pricing power we enable through capacity discipline to support fare initiatives, seeking to pass along the higher commodity costs to customers. And we are accelerating our efforts to unbundle products and services to provide more choice for our customers and to generate more revenue as they pay for the products that they use and value. Second bag fee is an example of this strategy, as is charging for Economy Plus, the increased ticket change fee we implemented a few weeks ago, and the host of other service fees we increased just this past Thursday. All told, we expect these initiatives to generate $600 million in revenue by next year.
We are also retiring aircraft, reducing our non-fuel costs and cutting our planned capital spending this year by $200 million.
The work we have done to strengthen the airline and improve our balance sheet puts us in a better position to address the current industry challenges that we face. We ended last quarter with $2.9 billion in unrestricted cash, on par with our network peers. Importantly, we have more than $3 billion in unencumbered assets allowing us to raise capital if needed, in stark contrast to some of our peers that have already leveraged most of their assets. This fiscal responsibility extends to our position relative to new aircraft. Because we have no new aircraft on order, unlike many of our peers, our capital requirements are relatively modest over the next few years. As part of our balance sheet restructuring, we smoothed out our required debt payments, and since our exit, we have reduced debt by some $2.8 billion. Two weeks ago, we renegotiated the financial covenants required by our $1.5 billion credit facility, making it easier for us to maintain compliance, and giving us the flexibility we need to execute against our plan. All of this means that we have a strong liquidity position and more modest demands on our cash over the next few years versus most of our peers-better positioning United, our company, to withstand the difficult environment we now face.
So just to wrap up, we are well positioned to manage through this tough environment:
Our financial performance is competitive Our cash balance is comparable and we have more unencumbered assets than most, giving us more flexibility to raise money if we need it Finally, we are not sitting still, our action plan is aggressive and it's well under way Back to you, Glenn.
Glenn: Thanks, Kathy.
As Kathy noted, we stack up well competitively, and we also benefit from the work we have done to improve our balance sheet, giving us some flexibility in an environment that will continue to be extremely challenging for this industry.
As we discussed on the last call, we are all focused on aggressively executing against the five-point plan to drive the changes that are required to get our business back to profitability and have every reason to be confident that we can navigate our way through these challenging times. We will continue to keep you informed, as always, giving you the straight facts.
That's all for now. I'll be talking to you again soon. Until then, stay focused on our customers and, of course, on one another... and stay united.
May 19, 2008 - How We Stack Up Competitively
We are reducing domestic capacity substantially-with mainline domestic capacity expected to be down by 9% in the fourth quarter of this year, and that is on top of a 5% reduction we took in the fourth quarter of 2007. We are using the pricing power we enable through capacity discipline to support fare initiatives, seeking to pass along the higher commodity costs to customers. And we are accelerating our efforts to unbundle products and services to provide more choice for our customers and to generate more revenue as they pay for the products that they use and value. Second bag fee is an example of this strategy, as is charging for Economy Plus, the increased ticket change fee we implemented a few weeks ago, and the host of other service fees we increased just this past Thursday. All told, we expect these initiatives to generate $600 million in revenue by next year.
We are also retiring aircraft, reducing our non-fuel costs and cutting our planned capital spending this year by $200 million.
The work we have done to strengthen the airline and improve our balance sheet puts us in a better position to address the current industry challenges that we face. We ended last quarter with $2.9 billion in unrestricted cash, on par with our network peers. Importantly, we have more than $3 billion in unencumbered assets allowing us to raise capital if needed, in stark contrast to some of our peers that have already leveraged most of their assets. This fiscal responsibility extends to our position relative to new aircraft. Because we have no new aircraft on order, unlike many of our peers, our capital requirements are relatively modest over the next few years. As part of our balance sheet restructuring, we smoothed out our required debt payments, and since our exit, we have reduced debt by some $2.8 billion. Two weeks ago, we renegotiated the financial covenants required by our $1.5 billion credit facility, making it easier for us to maintain compliance, and giving us the flexibility we need to execute against our plan. All of this means that we have a strong liquidity position and more modest demands on our cash over the next few years versus most of our peers-better positioning United, our company, to withstand the difficult environment we now face.
So just to wrap up, we are well positioned to manage through this tough environment:
Our financial performance is competitive Our cash balance is comparable and we have more unencumbered assets than most, giving us more flexibility to raise money if we need it Finally, we are not sitting still, our action plan is aggressive and it's well under way Back to you, Glenn.
Glenn: Thanks, Kathy.
As Kathy noted, we stack up well competitively, and we also benefit from the work we have done to improve our balance sheet, giving us some flexibility in an environment that will continue to be extremely challenging for this industry.
As we discussed on the last call, we are all focused on aggressively executing against the five-point plan to drive the changes that are required to get our business back to profitability and have every reason to be confident that we can navigate our way through these challenging times. We will continue to keep you informed, as always, giving you the straight facts.
That's all for now. I'll be talking to you again soon. Until then, stay focused on our customers and, of course, on one another... and stay united.
