UA shows strong improvement

[WorldTraveler]

Press Release Source: UAL Corporation


UAL Corporation Reports Third Quarter After-Tax Profit of $190 Million
Tuesday October 31, 8:00 am ET


CHICAGO, Oct. 31 /PRNewswire-FirstCall/ -- UAL Corporation (Nasdaq: UAUA - News), the holding company whose primary subsidiary is United Airlines, today reported financial results for the third quarter ended September 30, 2006.

* UAL reported after-tax net income of $190 million. Excluding
reorganization and special items, this constituted a year-over-year
improvement of $95 million.

* Basic earnings per share was $1.62 and diluted earnings per share was
$1.30. The company began recording income tax expense which reduced the
quarter's diluted earnings per share by $0.43.

* Third quarter operating profit of $335 million was an improvement of
$170 million over the comparable quarter in 2005. Excluding special
items, the year-over-year improvement was $140 million.

* Continuing revenue and productivity improvements more than offset a $293
million increase in consolidated fuel expense.

* Operating cash flow totaled $131 million. The company's cash position
was $4.9 billion at September 30, 2006, including $860 million of
restricted cash.

Operating Margin Increases

I just have 2 questions:
Why does Tilton think he still has to keep shopping for a merger partner with UA when these numbers surely indicate UA can make it on its own in this environment? Is the restructuring of the debt in 5 years or so the biggest concern?

Did UA offer its employees any kind of profit sharing as part of its restructuring? UA people will want something back for their sacrifices and efforts.

 

[donttouchthebeauty]

Well things are defintely looking better... by no means excellent but better, and we will take that.. I actually think it is excellent considering the fact that AMR only scored 15 million and SWA around 43 million.. Especially due to the fact that UAL operates bases in LHR and they had the same if not worse effects of the "scare" than AMR or SWA, who blamed the "scare" for narrow profits.. Well I think UAL still has alot of work in their future, but maybe not as much as some of the others...

 

[UALDC767]

Well things are defintely looking better... by no means excellent but better, and we will take that.. I actually think it is excellent considering the fact that AMR only scored 15 million and SWA around 43 million.. Especially due to the fact that UAL operates bases in LHR and they had the same if not worse effects of the "scare" than AMR or SWA, who blamed the "scare" for narrow profits.. Well I think UAL still has alot of work in their future, but maybe not as much as some of the others...

Just a slight quibble with your post. While UAL does operate a Flight Attendant base in LHR, to think we were more affected than AMR by the LHR security stuff is wrong. They are larger, much larger, there than we are in terms of flights and passengers. I agree with you on SWA though.

DC

Very happy were are able to show some improvement. Baby steps works for me for now.

 

[UALDC767]

I just have 2 questions:
Why does Tilton think he still has to keep shopping for a merger partner with UA when these numbers surely indicate UA can make it on its own in this environment? Is the restructuring of the debt in 5 years or so the biggest concern?

Did UA offer its employees any kind of profit sharing as part of its restructuring? UA people will want something back for their sacrifices and efforts.

WT,

Who knows what Glenn is thinking. I still think he would like to do something with Lufthansa, ala AF/KLM, as precursor to Star Alliance Airlines where all the members are subsidieries of it. Maybe his focus is not on the relative short term but the long term view of global consolidation. (like the POR view on oil)

And yes the employees have profit sharing. Never having had it before it will be interesting to see how it pays out.

DC
and kudos for at least one post without dumping on UAL or trumpeting DAL.

 

[TechBoy]

Looks like a fairly good Q for UA. The next 2 quarters will show just how good the UA turnaround is.

As for pursuing a merger, while these results are relatively good, they are hardly worldbeating. US has demonstrated that there are considerable savings that can be achieved through a merger (and rock bottom labor costs) and I think that Tilton recognizes that. I would imagine that a successful merger with either CO or DL would provide substantial efficiencies.

 

[ualdriver]

I was shocked to see that kind of net profit frankly, especially after what happened in August. Granted, it's not great for a 20B/year company, but I was expecting a small operating profit and a small net loss for the quarter. Kudos to all.

I just have 2 questions:
Why does Tilton think he still has to keep shopping for a merger partner with UA when these numbers surely indicate UA can make it on its own in this environment? Is the restructuring of the debt in 5 years or so the biggest concern?

Did UA offer its employees any kind of profit sharing as part of its restructuring? UA people will want something back for their sacrifices and efforts.

I don't think that these quarterly results necessarily mean that UAL will make it own its own long term, although I suspect it will. It's encouraging, but we probably need a few more quarters of at least mediocre peformance. It would certainly be nice to see a net profit for the '06 4th quarter and 1st quarter of '07. Further, I think Glenn has it in his mind that there are too many legacy type hub and spoke carriers out there, and that he wants leave UAL as a large network carrier with a significant presence everywhere in the country. Maybe he's right and the long term gains of a merger with another carrier will outweigh the certain short term pains. Maybe a merger would be a catastrophe of epic proportions. Who knows?


We all did have some sort of profit sharing built in, but I think many of the employee groups, including the pilots, "traded away" most of the profit sharing for a lesser paycut the second time around. We all had "buckets" to fill for that second round of cost cutting, and I'm pretty sure most of the employee groups traded the future profit sharing for lesser paycuts the second time around.

 

[FWAAA]

I'm somewhat impressed. A quarter billion profit is nothing to sneeze at. As others have mentioned - if UA can keep it up in the next couple of quarters, that would show that the reorganization was indeed successful.

I don't understand why the accountants are accruing taxes against these earnings, given the massive tax carryforwards from the multi-billion losses 2000-2005, but then again, I'm not a CPA. Other legacies aren't reducing their recent earnings for non-existent taxes, but all of a sudden, UA is. Anybody know why?

 

[WorldTraveler]

WT,


DC
and kudos for at least one post without dumping on UAL or trumpeting DAL.

UA posted industry average results in multiple categories which is what I've wanted them to do.

The past few years have been painful but the people of UA deserve commendation for what they have accomplishment.

The long term for all of the industry is still cloudy and UA has alot of balloon type financial transactions. But if UA can maintain industry average finances, they should be able to finance any transaction that any other network airline needs to finance.

There have been a number of indications that the former low fare carriers are the ones that are being impacted by the return of the network carriers' financial heatlh. Customers have consistently shown a preference for network carriers as long as price is comparable and service is acceptable. Right now, the network carriers are for the msot part very price competitive with low fare carriers and are providing better service levels than they have for most of their history.

 

[whatkindoffreshhell]

Remember these numbers were endorsed by Jake Brace.

When can Jake & Tilton collect their millions and leave?

There is the simple truth.

 

[UnitedChicago]

UA posted industry average results in multiple categories which is what I've wanted them to do.

The past few years have been painful but the people of UA deserve commendation for what they have accomplishment.

The long term for all of the industry is still cloudy and UA has alot of balloon type financial transactions. But if UA can maintain industry average finances, they should be able to finance any transaction that any other network airline needs to finance.

There have been a number of indications that the former low fare carriers are the ones that are being impacted by the return of the network carriers' financial heatlh. Customers have consistently shown a preference for network carriers as long as price is comparable and service is acceptable. Right now, the network carriers are for the msot part very price competitive with low fare carriers and are providing better service levels than they have for most of their history.

WT - you love to make "preemptive" posts so that you can attempt to control the dialogue. You did the same thing when UA got approval to exit BK and it was obvious DL couldn't avoid BK.

I love how you start this off positive and then get your digs in with the "industry average" comment. You're so passive aggressive. You should just come clean say you still hate UA and DL is the best thing since sliced bread. Consistency would be appreciated.

Your new signature file made me chuckle - i almost spit up my coffee.

 

[ualdriver]

United Chicago-

I'm still trying to figure out the "balloon" financing he's talking about. I know we have some aircraft leases of that type that step up in the late 2000's (I think 2009 but I forgot), but those would be such a small % of our total costs to be almost insignificant. Further, there's already talk afoot of refinancing our post bankruptcy debt next year after hopefully improving financials.

 

[UnitedChicago]

Now that i got the former post of my chest -

GREAT JOB UA! I must say how excited I am to say I reached 1k this year. My coveted black card just arrived.

I'm being completely honest when i say that the level of service from all employee groups has been outstanding.

The employees of UA made a decision long ago to make this work and through everything, all of the sacrifices, you all are why UA is now thriving.

Now we just need to kick out Tilton and crew and bring in some solid management .

Take care

 

[UnitedChicago]

United Chicago-

I'm still trying to figure out the "balloon" financing he's talking about. I know we have some aircraft leases of that type that step up in the late 2000's (I think 2009 but I forgot), but those would be such a small % of our total costs to be almost insignificant. Further, there's already talk afoot of refinancing our post bankruptcy debt next year after hopefully improving financials.

Hahaha. I hear ya. I did read that they may refinance early 07. I can't wait to see what financing DL lines up and how WT will point out that it's much better than UA's "average" or maybe he'll use "financing of duress".

I think we've all learned that the airline industry is a big glass house so I'd be careful what you say as it will come back in your face.

Let me predict how WT will respond to all this - think it will go something like we just can't take the facts and so we're obviously lashing out at such a well versed airline scholar.

 

[WorldTraveler]

here's how I'll respond:

if you are prone to spitting up coffee, drink water. It does far less damage and is much easier to clean up.

There's nothing passive aggressive about saying UA posted "average" results. They have yet to post anything better than average.

Yes, the threat of extinction is a powerful motivator. All of the network carriers are doing a very good job of running an airline. Combined with finances, it is the reason why more and more articles are appearing saying that the low fare carriers are the ones whose day of reckoning has come.

Yes, the airline industry is pretty cyclical. How many times have we heard that the legacy airlines would die and be replaced by slick upstarts. We'll see who is laughing when the next industry downturn happens and the LFCs are still accepting dozens of new aircraft per year.

and yes, UA's exit financing debt is due to be refinanced in the early 2010s. They could indeed refinance it now - US was able to recently refinance some of its debt. The point is not the rate they pay but that so much of it comes due at one time.