January 19, 2022
CHICAGO, Jan. 19, 2022 /PRNewswire/ -- United Airlines (UAL) today announced fourth quarter and full year 2021 financial results and reiterated confidence in its longer term United Next financial targets. The company achieved every major financial guidance target for the fourth quarter – and set a new Net Promoter Score (NPS) record in 2021 – despite the sharp spike in COVID-19 cases caused by the Omicron variant. Despite near term volatility, bookings for spring travel and beyond remain strong, which is why the Omicron spike has not altered the airline's confidence in the 2023 and 2026 CASM-ex1 United Next targets announced last year.
The airline starts 2022 with a scaled-back schedule, reflecting the impact of the Omicron spike on demand. However, as the year progresses, United expects to nimbly ramp up capacity by ungrounding 52 Pratt & Whitney-powered Boeing 777s, as demand returns, which will yield improvements in the airline's gauge and aircraft utilization. The airline expects this approach, which continues to prioritize matching capacity to demand, means: 1) the airline will fly fewer available seat miles (ASMs) in 2022 than 2019 and 2) CASM-ex1 will decline significantly over the course of 2022. Most importantly, these 2022 trends will lay the groundwork for successful execution of the multi-year United Next strategy and achievement of the financial targets set for 2023 and beyond.
"The United team has been fighting through unprecedented obstacles to, once again, overcome the new and daunting challenges that COVID-19 is bringing to aviation, and I am grateful to each one of them for their commitment to taking care of our customers," said United Airlines CEO Scott Kirby. "While Omicron is impacting near term demand, we remain optimistic about the spring and excited about the summer and beyond. We look forward to beginning to return the Pratt & Whitney 777s to service this quarter and getting the full airline back to normal utilization — as we ramp up along with demand this year. By investing in innovative technology, focusing on process improvements and implementing a transformative United Next strategy, we're poised to emerge as an aviation leader that's more efficient than before and serves our customers better than ever."
Fourth Quarter and Full Year Financial Results
Outlook4
2021 Key Highlights
Taking Care of Our Customers
Network
Customer-First Enhancements
Environmental, Social and Governance (ESG)
Earnings Call
UAL will hold a conference call to discuss fourth quarter and full year 2021 financial results as well as its financial and operational outlook for first-quarter 2022 and beyond, on Thursday, January 20, at 9:30 a.m. CT/10:30 a.m. ET. A live, listen-only webcast of the conference call will be available at ir.united.com.
The webcast will be available for replay within 24 hours of the conference call and then archived on the website for three months.
About United
United's shared purpose is "Connecting People. Uniting the World." In 2019, United and United Express® carriers operated more than 1.7 million flights carrying more than 162 million customers. United has the most comprehensive route network among North American carriers, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C. For more about how to join the United team, please visit united.com/careers and more information about the company is at ir.united.com. United Airlines Holdings, Inc. is traded on Nasdaq under the symbol "UAL".
Website Information
We routinely post important news and information regarding United on our corporate website, united.com, and our investor relations website, ir.united.com. We use our investor relations website as a primary channel for disclosing key information to our investors, including the timing of future investor conferences and earnings calls, press releases and other information about financial performance, reports filed or furnished with the U.S. Securities and Exchange Commission, information on corporate governance and details related to its annual meeting of shareholders. We may use our investor relations website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. We may also use social media channels to communicate with our investors and the public about our company and other matters, and those communications could be deemed to be material information. The information contained on, or that may be accessed through, our website or social media channels are not incorporated by reference into, and are not a part of, this document.
Cautionary Statement Regarding Forward-Looking Statements:
This earnings release and the related attachments (as well as the oral statements made with respect to information contained in this release and the attachments) contain certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including under "Outlook" in this release and elsewhere, relating to, among other things, the potential impacts of the COVID-19 pandemic and steps the company plans to take in response thereto and goals, plans and projections regarding the company's financial position, results of operations, market position, capacity, fleet, product development, ESG targets and business strategy. All statements, other than those that relate solely to historical facts, are forward-looking statements.
Such forward-looking statements are based on historical performance and current expectations, estimates, forecasts and projections about the company's future financial results, goals, plans and objectives and involve inherent risks, assumptions and uncertainties, known or unknown, including internal or external factors that could delay, divert or change any of them, that are difficult to predict, may be beyond the company's control and could cause the company's future financial results, goals, plans and objectives to differ materially from those expressed in, or implied by, the statements. Words such as "should," "could," "would," "will," "may," "expects," "plans," "intends," "anticipates," "indicates," "remains," "believes," "estimates," "projects," "forecast," "guidance," "outlook," "goals," "targets," "poised" and other words and terms of similar meaning and expression are intended to identify forward-looking statements, although not all forward-looking statements contain such terms. Additionally, forward-looking statements include conditional statements and statements that identify uncertainties or trends, discuss the possible future effects of known trends or uncertainties, or that indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All such forward-looking statements are based upon information available to us on the date they are made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law or regulation.
Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: the adverse impacts of the ongoing COVID-19 global pandemic on our business, operating results, financial condition, liquidity and near-term and long-term strategic operating plan, including possible additional adverse impacts resulting from the duration and spread of the pandemic; adverse publicity, harm to our brand, reduced travel demand, potential tort liability and voluntary or mandatory operational restrictions as a result of an accident, catastrophe or incident involving us, our regional carriers, our codeshare partners or another airline; the highly competitive nature of the global airline industry and susceptibility of the industry to price discounting and changes in capacity, including as a result of alliances, joint business arrangements or other consolidations; disruptions to our regional network and United Express flights provided by third-party regional carriers; changes in our network strategy or other factors outside our control resulting in less economic aircraft orders, costs related to modification or termination of aircraft orders or entry into less favorable aircraft orders, as well as any inability to accept or integrate new aircraft into our fleet as planned; our reliance on single suppliers to source a majority of our aircraft and certain parts, and the impact of any failure to obtain timely deliveries, additional equipment or support from any of these suppliers; extended interruptions or disruptions in service at major airports where we operate; any damage to our reputation or brand image; our reliance on technology and automated systems to operate our business and the impact of any significant failure or disruption of, or failure to effectively integrate and implement, the technology or systems; reliance on third-party service providers and the impact of any significant failure of these parties to perform as expected, or interruptions in our relationships with these providers or their provision of services; increasing privacy and data security obligations or a significant data breach; increased use of social media platforms by us, our employees and others; any failure to effectively manage, and receive anticipated benefits and returns from, acquisitions, divestitures, investments, joint ventures and other portfolio actions; the impacts of union disputes, employee strikes or slowdowns, and other labor-related disruptions on our operations; changes in, or failure to retain, our senior management team or other key employees; the monetary and operational costs of compliance with extensive government regulation of the airline industry; limitations on our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income for U.S. federal income tax purposes; current or future litigation and regulatory actions, or failure to comply with the terms of any settlement, order or arrangement relating to these actions; costs, liabilities and risks associated with environmental regulation and climate change, including our climate goals; unfavorable economic and political conditions in the United States and globally, including terrorist attacks, international hostilities or other security events and uncertainty around the phase out of London interbank offered rates; high and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel; the impacts of our significant amount of financial leverage from fixed obligations, the possibility we may seek material amounts of additional financial liquidity in the short-term and the impacts of insufficient liquidity on our financial condition and business; failure to comply with financial and other covenants governing our debt, including our MileagePlus® financing agreements; our failure to realize the full value of our intangible assets or our long-lived assets, causing us to record impairments; fluctuations in the price of our common stock; the impacts of seasonality and other factors associated with the airline industry; increases in insurance costs or inadequate insurance coverage; and other risks and uncertainties set forth under Part II, Item 1A., "Risk Factors," of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission.
The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties. In addition, certain forward-looking outlook provided in this release relies on assumptions about the duration and severity of the COVID-19 pandemic, the timing of the return to a more stable business environment, the volatility of aircraft fuel prices, customer behavior changes and return in demand for air travel, among other things (together, the "Recovery Process"). The COVID-19 pandemic and the measures taken in response may continue to impact many aspects of our business, operating results, financial condition and liquidity in a number of ways, including labor shortages (including reductions in available staffing and related impacts to the Company's flight schedules and reputation), facility closures and related costs and disruptions to the Company's and its business partners' operations, reduced travel demand and consumer spending, increased operating costs, supply chain disruptions, logistics constraints, volatility in the price of our securities, our ability to access capital markets and volatility in the global economy and financial markets generally. If the actual Recovery Process differs materially from our assumptions, the impact of the COVID-19 pandemic on our business could be worse than expected, and our actual results may be negatively impacted and may vary materially from our expectations and projections. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections, beliefs and assumptions upon which we base our expectations may change. For instance, we regularly monitor future demand and booking trends and adjust capacity, as needed. As such, our actual flown capacity may differ materially from currently published flight schedules or current estimations.
Please refer to the tables accompanying this release for reconciliations of the non-GAAP financial measures used to the most comparable GAAP financial measure and related disclosures.
-tables attached-
UNITED AIRLINES HOLDINGS, INC STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED) | ||||||||||||||||||
Three Months Ended December 31, | % Increase/ (Decrease) | Year Ended December 31, | % Increase/ (Decrease) | |||||||||||||||
(In millions, except per share data) | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | ||||||||||||
Operating revenue: | ||||||||||||||||||
Passenger revenue | $ 6,878 | $ 2,410 | $ 9,933 | (30.8) | $ 20,197 | $ 11,805 | $ 39,625 | (49.0) | ||||||||||
Cargo | 727 | 560 | 316 | 130.1 | 2,349 | 1,648 | 1,179 | 99.2 | ||||||||||
Other operating revenue | 587 | 442 | 639 | (8.1) | 2,088 | 1,902 | 2,455 | (14.9) | ||||||||||
Total operating revenue | 8,192 | 3,412 | 10,888 | (24.8) | 24,634 | 15,355 | 43,259 | (43.1) | ||||||||||
Operating expense: | ||||||||||||||||||
Salaries and related costs | 2,579 | 2,168 | 3,078 | (16.2) | 9,566 | 9,522 | 12,071 | (20.8) | ||||||||||
Aircraft fuel | 1,962 | 679 | 2,249 | (12.8) | 5,755 | 3,153 | 8,953 | (35.7) | ||||||||||
Landing fees and other rent | 681 | 575 | 650 | 4.8 | 2,416 | 2,127 | 2,543 | (5.0) | ||||||||||
Depreciation and amortization | 619 | 629 | 606 | 2.1 | 2,485 | 2,488 | 2,288 | 8.6 | ||||||||||
Regional capacity purchase | 601 | 489 | 725 | (17.1) | 2,147 | 2,039 | 2,849 | (24.6) | ||||||||||
Aircraft maintenance materials and outside repairs | 399 | 199 | 475 | (16.0) | 1,316 | 858 | 1,794 | (26.6) | ||||||||||
Distribution expenses | 235 | 80 | 417 | (43.6) | 677 | 459 | 1,651 | (59.0) | ||||||||||
Aircraft rent | 63 | 51 | 67 | (6.0) | 228 | 198 | 288 | (20.8) | ||||||||||
Special charges (credits) | 56 | (149) | 130 | NM | (3,367) | (2,616) | 246 | NM | ||||||||||
Other operating expenses | 1,405 | 826 | 1,630 | (13.8) | 4,433 | 3,486 | 6,275 | (29.4) | ||||||||||
Total operating expense | 8,600 | 5,547 | 10,027 | (14.2) | 25,656 | 21,714 | 38,958 | (34.1) | ||||||||||
Operating income (loss) | (408) | (2,135) | 861 | NM | (1,022) | (6,359) | 4,301 | NM | ||||||||||
Nonoperating income (expense): | ||||||||||||||||||
Interest expense | (429) | (351) | (161) | 166.5 | (1,657) | (1,063) | (731) | 126.7 | ||||||||||
Interest capitalized | 23 | 17 | 20 | 15.0 | 80 | 71 | 85 | (5.9) | ||||||||||
Interest income | 6 | 5 | 30 | (80.0) | 36 | 50 | 133 | (72.9) | ||||||||||
Unrealized gains (losses) on investments, net | (125) | 101 | 81 | NM | (34) | (194) | 153 | NM | ||||||||||
Miscellaneous, net | 88 | (10) | 13 | NM | 40 | (1,327) | (27) | NM | ||||||||||
Total nonoperating expense, net | (437) | (238) | (17) | NM | (1,535) | (2,463) | (387) | 296.6 | ||||||||||
Income (loss) before income taxes | (845) | (2,373) | 844 | NM | (2,557) | (8,822) | 3,914 | NM | ||||||||||
Income tax expense (benefit) | (199) | (476) | 203 | NM | (593) | (1,753) | 905 | NM | ||||||||||
Net income (loss) | $ (646) | $ (1,897) | $ 641 | NM | $ (1,964) | $ (7,069) | $ 3,009 | NM | ||||||||||
Diluted earnings (loss) per share | $ (1.99) | $ (6.39) | $ 2.53 | NM | $ (6.10) | $ (25.30) | $ 11.58 | NM | ||||||||||
Diluted weighted average shares | 323.8 | 297.0 | 253.4 | 27.8 | 321.9 | 279.4 | 259.9 | 23.9 | ||||||||||
NM Not meaningful | ||||||||||||||||||
UNITED AIRLINES HOLDINGS, INC. PASSENGER REVENUE INFORMATION AND STATISTICS | |||||||||||||||||
Passenger revenue information is as follows (in millions, except for percentage changes): | |||||||||||||||||
4Q 2021 Passenger Revenue | Passenger Revenue vs. 4Q 2020 | PRASM vs. | PRASM vs. | Yield vs. | Available Seat Miles vs. 4Q 2020 | Available Seat Miles vs. 4Q 2019 | 4Q 2021 | 4Q 2021 | |||||||||
Domestic | $ 4,971 | 176.6% | 51.5% | (9.0%) | 18.4% | 82.5% | (13.9%) | 34,976 | 29,025 | ||||||||
Atlantic | 937 | 370.9% | 166.2% | (24.2%) | 34.2% | 76.9% | (23.6%) | 9,670 | 6,583 | ||||||||
Pacific | 182 | 82.0% | 21.5% | (35.9%) | (20.4)% | 49.7% | (73.9%) | 2,896 | 1,020 | ||||||||
Latin America | 788 | 151.0% | 42.1% | (18.8%) | 5.3% | 76.4% | 8.9% | 7,273 | 5,558 | ||||||||
International | 1,907 | 211.1% | 80.6% | (18.7%) | 10.0% | 72.1% | (34.8%) | 19,839 | 13,161 | ||||||||
Consolidated | $ 6,878 | 185.4% | 59.9% | (10.2%) | 15.4% | 78.6% | (22.8%) | 54,815 | 42,186 | ||||||||
Select operating statistics are as follows: | ||||||||||||||||||
Three Months Ended December 31, | % Increase/ (Decrease) | Year Ended December 31, | % Increase/ (Decrease) | |||||||||||||||
2021 | 2020 | 2019 | 2021 | 2020 | 2019 | |||||||||||||
Passengers (thousands) | 33,354 | 14,850 | 40,306 | (17.2) | 104,082 | 57,761 | 162,443 | (35.9) | ||||||||||
Revenue passenger miles (millions) | 42,186 | 17,071 | 58,633 | (28.1) | 128,979 | 73,883 | 239,360 | (46.1) | ||||||||||
Available seat miles (millions) | 54,815 | 30,691 | 71,038 | (22.8) | 178,684 | 122,804 | 284,999 | (37.3) | ||||||||||
Passenger load factor: | ||||||||||||||||||
Consolidated | 77.0% | 55.6% | 82.5% | (5.5) | pts. | 72.2% | 60.2% | 84.0% | (11.8) | pts. | ||||||||
Domestic | 83.0% | 64.8% | 83.8% | (0.8) | pts. | 79.9% | 63.2% | 85.2% | (5.3) | pts. | ||||||||
International | 66.3% | 40.4% | 80.8% | (14.5) | pts. | 59.0% | 55.1% | 82.4% | (23.4) | pts. | ||||||||
Passenger revenue per available seat mile (cents) | 12.55 | 7.85 | 13.98 | (10.2) | 11.30 | 9.61 | 13.90 | (18.7) | ||||||||||
Total revenue per available seat mile (cents) | 14.94 | 11.12 | 15.33 | (2.5) | 13.79 | 12.50 | 15.18 | (9.2) | ||||||||||
Average yield per revenue passenger mile (cents) | 16.30 | 14.12 | 16.94 | (3.8) | 15.66 | 15.98 | 16.55 | (5.4) | ||||||||||
Cargo revenue ton miles (millions) | 870 | 835 | 889 | (2.1) | 3,285 | 2,711 | 3,329 | (1.3) | ||||||||||
Aircraft in fleet at end of period | 1,344 | 1,287 | 1,372 | (2.0) | 1,344 | 1,287 | 1,372 | (2.0) | ||||||||||
Average stage length (miles) | 1,320 | 1,292 | 1,446 | (8.7) | 1,315 | 1,307 | 1,460 | (9.9) | ||||||||||
Employee headcount, as of December 31 (in thousands) (a) | 84.1 | 74.4 | 95.9 | (12.3) | 84.1 | 74.4 | 95.9 | (12.3) | ||||||||||
Average aircraft fuel price per gallon | $ 2.41 | $ 1.35 | $ 2.10 | 14.8 | $ 2.11 | $ 1.57 | $ 2.09 | 1.0 | ||||||||||
Fuel gallons consumed (millions) | 814 | 503 | 1,071 | (24.0) | 2,729 | 2,004 | 4,292 | (36.4) | ||||||||||
(a) The 2021 employee headcount includes employees who participated in the company's voluntary leave programs. | ||||||||||||||||||
Note: See Part II, Item 6, Selected Financial Data, of UAL's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, for definitions of these statistics.
UNITED AIRLINES HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION
UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (GAAP) and non-GAAP financial measures, including adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), adjusted operating income (loss), adjusted operating margin, adjusted pre-tax income (loss), adjusted pre-tax margin, adjusted net income (loss), adjusted diluted earnings (loss) per share, CASM, excluding special charges, third-party business expenses, fuel, and profit sharing (CASM-ex), operating expenses excluding special charges, and adjusted capital expenditures, among others. The non-GAAP financial measures are provided as supplemental information to the financial measures presented in this press release that are calculated and presented in accordance with GAAP and are presented because management believes that they supplement or enhance management's, analysts' and investors' overall understanding of the company's underlying financial performance and trends and facilitate comparisons among current, past and future periods.
Because the non-GAAP financial measures are not calculated in accordance with GAAP, they should not be considered superior to and are not intended to be considered in isolation or as a substitute for the related GAAP financial measures presented in the press release and may not be the same as or comparable to similarly titled measures presented by other companies due to possible differences in method and in the items being adjusted. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
The company does not provide a reconciliation of forward-looking measures on a forward-looking basis where the company believes such a reconciliation would imply a degree of precision and certainty that could be confusing to investors and is unable to reasonably predict certain items contained in the GAAP measures without unreasonable efforts. This is due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred and are out of the company's control or cannot be reasonably predicted. For the same reasons, the company is unable to address the probable significance of the unavailable information. Forward-looking measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures. See "Cautionary Statement Regarding Forward-Looking Statements" above.
The information below provides an explanation of certain adjustments reflected in the non-GAAP financial measures and shows a reconciliation of non-GAAP financial measures reported in this press release to the most directly comparable GAAP financial measures. Within the financial tables presented, certain columns and rows may not add due to the use of rounded numbers. Percentages and earnings per share amounts presented are calculated from the underlying amounts.
UNITED AIRLINES HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION (Continued)
UAL believes that adjusting for special charges (credits), nonoperating debt extinguishment and modification fees, nonoperating special termination benefits and settlement losses, nonoperating unrealized (gains) losses on investments, net, and nonoperating credit losses is useful to investors because these items are not indicative of UAL's ongoing performance. UAL believes that adjusting for interest expense related to finance leases of Embraer ERJ 145 aircraft is useful to investors because of the accelerated recognition of interest expense.
CASM is a common metric used in the airline industry to measure an airline's cost structure and efficiency. UAL reports CASM excluding special charges (credits), third-party business expenses, fuel and profit sharing. UAL believes that adjusting for special charges (credits) is useful to investors because special charges (credits) are not indicative of UAL's ongoing performance. UAL also believes that excluding third-party business expenses, such as maintenance, ground handling and catering services for third parties, provides more meaningful disclosure because these expenses are not directly related to UAL's core business. UAL also believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management's performance excluding the effects of a significant cost item over which management has limited influence. UAL excludes profit sharing because it believes that this exclusion allows investors to better understand and analyze UAL's operating cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | 2021 | 2020 | 2019 | ||||||||
CASM (cents) | |||||||||||||
Cost per available seat mile (CASM) (GAAP) | 15.69 | 18.07 | 14.11 | 14.36 | 17.68 | 13.67 | |||||||
Special charges (credits) | 0.10 | (0.49) | 0.18 | (1.88) | (2.13) | 0.09 | |||||||
Third-party business expenses | 0.06 | 0.07 | 0.07 | 0.06 | 0.11 | 0.06 | |||||||
Fuel expense | 3.58 | 2.21 | 3.16 | 3.22 | 2.57 | 3.14 | |||||||
Profit sharing | — | — | 0.17 | — | — | 0.17 | |||||||
CASM-ex (Non-GAAP) | 11.95 | 16.28 | 10.53 | 12.96 | 17.13 | 10.21 | |||||||
Adjusted EBITDA | Three Months Ended December 31, | Year Ended December 31, | |||||||||||
2021 | 2020 | 2019 | 2021 | 2020 | 2019 | ||||||||
Net income (loss) | $ (646) | $ (1,897) | $ 641 | $ (1,964) | $ (7,069) | $ 3,009 | |||||||
Adjusted for: | |||||||||||||
Depreciation and amortization | 619 | 629 | 606 | 2,485 | 2,488 | 2,288 | |||||||
Interest expense, net of capitalized interest and interest income | 400 | 329 | 111 | 1,541 | 942 | 513 | |||||||
Income tax expense (benefit) | (199) | (476) | 203 | (593) | (1,753) | 905 | |||||||
Special charges (credits) | 56 | (149) | 130 | (3,367) | (2,616) | 246 | |||||||
Nonoperating unrealized (gains) losses on investments, net | 125 | (101) | (81) | 34 | 194 | (153) | |||||||
Nonoperating debt extinguishment and modification fees | — | — | — | 50 | — | — | |||||||
Nonoperating special termination benefits and settlement losses | (15) | 41 | — | 31 | 687 | — | |||||||
Nonoperating credit loss on BRW term loan and guarantee | — | — | — | — | 697 | — | |||||||
Adjusted EBITDA | $ 340 | $ (1,624) | $ 1,610 | $ (1,783) | $ (6,430) | $ 6,808 | |||||||
Adjusted EBITDA margin | 4.2% | (47.6)% | 14.8% | (7.2)% | (41.9)% | 15.7% | |||||||
UNITED AIRLINES HOLDINGS, INC.
NON-GAAP FINANCIAL RECONCILIATION (Continued)
UAL believes that adjusting capital expenditures for assets acquired through the issuance of debt, finance leases and other financial liabilities is useful to investors in order to appropriately reflect the total amounts spent on capital expenditures. UAL also believes that adjusting net cash provided by (used in) operating activities for capital expenditures, adjusted capital expenditures, and aircraft operating lease additions is useful to allow investors to evaluate the company's ability to generate cash that is available for debt service or general corporate initiatives.
Three Months Ended December 31, | Year Ended December 31, | ||||||
Capital Expenditures (in millions) | 2021 | 2020 | 2021 | 2020 | |||
Capital expenditures, net of flight equipment purchase deposit returns (GAAP) | $ 536 | $ 97 | $ 2,107 | $ 1,727 | |||
Property and equipment acquired through the issuance of debt, finance leases, and other financial liabilities | 13 | 455 | 814 | 1,968 | |||
Adjustment to property and equipment acquired through other financial liabilities (a) | — | (61) | (14) | (246) | |||
Adjusted capital expenditures (Non-GAAP) | $ 549 | $ 491 | $ 2,907 | $ 3,449 | |||
Free Cash Flow (in millions) | |||||||
Net cash provided by (used in) operating activities (GAAP) | $ (269) | $ (2,177) | $ 2,067 | $ (4,133) | |||
Less capital expenditures, net of flight equipment purchase deposit returns | 536 | 97 | 2,107 | 1,727 | |||
Free cash flow, net of financings (Non-GAAP) | $ (805) | $ (2,274) | $ (40) | $ (5,860) | |||
Net cash provided by (used in) operating activities (GAAP) | $ (269) | $ (2,177) | $ 2,067 | $ (4,133) | |||
Less adjusted capital expenditures (Non-GAAP) | 549 | 491 | 2,907 | 3,449 | |||
Less aircraft operating lease additions | 127 | 131 | 668 | 171 | |||
Free cash flow (Non-GAAP) | $ (945) | $ (2,799) | $ (1,508) | $ (7,753) | |||
(a) United entered into agreements with third parties to finance through sale and leaseback transactions new Boeing model 787 aircraft and Boeing model 737 MAX aircraft subject to purchase agreements between United and Boeing. In connection with the delivery of each aircraft from Boeing, United assigned its right to purchase such aircraft to the buyer, and simultaneous with the buyer's purchase from Boeing, United entered into a long-term lease for such aircraft with the buyer as lessor. Twenty-four Boeing model aircraft were delivered in 2021 under these transactions (and each is presently subject to a long-term lease to United). Upon delivery, the company accounted for the aircraft, which have a repurchase option at a price other than fair value, as part of Flight equipment on the company's balance sheet and the related obligation as Current maturities of sale-leasebacks and Other financial liabilities from sale-leasebacks (noncurrent) since they do not qualify for sale recognition. If the repurchase option is not exercised, these aircraft will be accounted for as leased assets at the time of the option expiration and the related assets and liabilities will be adjusted to the present value of the remaining lease payments at that time. This adjustment reflects the difference between the recorded amounts and the present value of future lease payments at inception. | |||||||
UNITED AIRLINES HOLDINGS, INC. | |||||||||||||||
Three Months Ended December 31, | % Increase/ (Decrease) | Year Ended December 31, | % Increase/ (Decrease) | ||||||||||||
(in millions) | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | |||||||||
Operating expenses (GAAP) | $ 8,600 | $ 5,547 | $ 10,027 | (14.2) | $ 25,656 | $ 21,714 | $ 38,958 | (34.1) | |||||||
Special charges (credits) | 56 | (149) | 130 | NM | (3,367) | (2,616) | 246 | NM | |||||||
Operating expenses, excluding special charges (credits) | 8,544 | 5,696 | 9,897 | (13.7) | 29,023 | 24,330 | 38,712 | (25.0) | |||||||
Adjusted to exclude: | |||||||||||||||
Third-party business expenses | 30 | 22 | 48 | (37.5) | 119 | 137 | 168 | (29.2) | |||||||
Fuel expense | 1,962 | 679 | 2,249 | (12.8) | 5,755 | 3,153 | 8,953 | (35.7) | |||||||
Profit sharing | — | — | 123 | (100.0) | — | — | 491 | (100.0) | |||||||
Adjusted operating expenses (Non-GAAP) | $ 6,552 | $ 4,995 | $ 7,477 | (12.4) | $ 23,149 | $ 21,040 | $ 29,100 | (20.5) | |||||||
Operating income (loss) (GAAP) | $ (408) | $ (2,135) | $ 861 | NM | $ (1,022) | $ (6,359) | $ 4,301 | NM | |||||||
Adjusted to exclude: | |||||||||||||||
Special charges (credits) | 56 | (149) | 130 | NM | (3,367) | (2,616) | 246 | NM | |||||||
Adjusted operating income (loss) (Non-GAAP) | $ (352) | $ (2,284) | $ 991 | NM | $ (4,389) | $ (8,975) | $ 4,547 | NM | |||||||
Operating margin | (5.0)% | (62.6)% | 7.9% | (12.9) pts. | (4.1)% | (41.4)% | 9.9% | (14.0) pts. | |||||||
Adjusted operating margin (Non-GAAP) | (4.3)% | (66.9)% | 9.1% | (13.4) pts. | (17.8)% | (58.5)% | 10.5% | (28.3) pts. | |||||||
Pre-tax income (loss) (GAAP) | $ (845) | $ (2,373) | $ 844 | NM | $ (2,557) | $ (8,822) | $ 3,914 | NM | |||||||
Adjusted to exclude: | |||||||||||||||
Special charges (credits) | 56 | (149) | 130 | NM | (3,367) | (2,616) | 246 | NM | |||||||
Unrealized (gains) losses on investments, net | 125 | (101) | (81) | NM | 34 | 194 | (153) | NM | |||||||
Debt extinguishment and modification fees | — | — | — | NM | 50 | — | — | NM | |||||||
Special termination benefits and settlement losses | (15) | 41 | — | NM | 31 | 687 | — | NM | |||||||
Credit loss on BRW term loan and guarantee | — | — | — | NM | — | 697 | — | NM | |||||||
Interest expense on ERJ 145 finance leases | — | — | (4) | NM | — | — | 64 | NM | |||||||
Adjusted pre-tax income (loss) (Non-GAAP) | $ (679) | $ (2,582) | $ 889 | NM | $ (5,809) | $ (9,860) | $ 4,071 | NM | |||||||
Pre-tax margin | (10.3)% | (69.5)% | 7.8% | (18.1) pts. | (10.4)% | (57.5)% | 9.0% | (19.4) pts. | |||||||
Adjusted pre-tax margin (Non-GAAP) | (8.3)% | (75.7)% | 8.2% | (16.5) pts. | (23.6)% | (64.2)% | 9.4% | (33.0) pts. | |||||||
Net income (loss) (GAAP) | $ (646) | $ (1,897) | $ 641 | NM | $ (1,964) | $ (7,069) | $ 3,009 | NM | |||||||
Adjusted to exclude: | |||||||||||||||
Special charges (credits) | 56 | (149) | 130 | NM | (3,367) | (2,616) | 246 | NM | |||||||
Unrealized (gains) losses on investments, net | 125 | (101) | (81) | NM | 34 | 194 | (153) | NM | |||||||
Debt extinguishment and modification fees | — | — | — | NM | 50 | — | — | NM | |||||||
Special termination benefits and settlement losses | (15) | 41 | — | NM | 31 | 687 | — | NM | |||||||
Credit loss on BRW term loan and guarantee | — | — | — | NM | — | 697 | — | NM | |||||||
Interest expense on ERJ 145 finance leases | — | — | (4) | NM | — | — | 64 | NM | |||||||
Income tax expense (benefit) on adjustments, net | (40) | 29 | (10) | NM | 728 | 404 | (35) | NM | |||||||
Adjusted net income (loss) (Non-GAAP) | $ (520) | $ (2,077) | $ 676 | NM | $ (4,488) | $ (7,703) | $ 3,131 | NM | |||||||
Diluted earnings (loss) per share (GAAP) | $ (1.99) | $ (6.39) | $ 2.53 | NM | $ (6.10) | $ (25.30) | $ 11.58 | NM | |||||||
Adjusted to exclude: | |||||||||||||||
Special charges (credits) | 0.17 | (0.50) | 0.52 | NM | (10.46) | (9.36) | 0.95 | NM | |||||||
Unrealized (gains) losses on investments, net | 0.38 | (0.34) | (0.32) | NM | 0.11 | 0.69 | (0.59) | NM | |||||||
Debt extinguishment and modification fees | — | — | — | NM | 0.15 | — | — | NM | |||||||
Special termination benefits and settlement losses | (0.04) | 0.13 | — | NM | 0.10 | 2.46 | — | NM | |||||||
Credit loss on BRW term loan and guarantee | — | — | — | NM | — | 2.49 | — | NM | |||||||
Interest expense on ERJ 145 finance leases | — | — | (0.02) | NM | — | — | 0.25 | NM | |||||||
Income tax expense (benefit) on adjustments, net | (0.12) | 0.10 | (0.04) | NM | 2.26 | 1.45 | (0.14) | NM | |||||||
Adjusted diluted income (loss) per share (Non-GAAP) | $ (1.60) | $ (7.00) | $ 2.67 | NM | $ (13.94) | $ (27.57) | $ 12.05 | NM | |||||||
NM Not Meaningful | |||||||||||||||
UNITED AIRLINES HOLDINGS, INC CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | |||
(In millions) | December 31, 2021 | December 31, 2020 | |
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 18,283 | $ 11,269 | |
Short-term investments | 123 | 414 | |
Restricted cash | 37 | 255 | |
Receivables, less allowance for credit losses (2021—$28; 2020—$78) | 1,663 | 1,295 | |
Aircraft fuel, spare parts and supplies, less obsolescence allowance (2021—$546; 2020—$478) | 983 | 932 | |
Prepaid expenses and other | 745 | 635 | |
Total current assets | 21,834 | 14,800 | |
Total operating property and equipment, net | 32,074 | 31,466 | |
Operating lease right-of-use assets | 4,645 | 4,537 | |
Other assets: | |||
Goodwill | 4,527 | 4,527 | |
Intangibles, less accumulated amortization (2021—$1,544; 2020—$1,495) | 2,803 | 2,838 | |
Restricted cash | 213 | 218 | |
Deferred income taxes | 659 | 131 | |
Notes receivable, less allowance for credit losses (2021—$622; 2020—$522) | 76 | 31 | |
Investments in affiliates and other, net | 1,344 | 1,000 | |
Total other assets | 9,622 | 8,745 | |
Total assets | $ 68,175 | $ 59,548 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current liabilities: | |||
Accounts payable | $ 2,562 | $ 1,595 | |
Accrued salaries and benefits | 2,121 | 1,960 | |
Advance ticket sales | 6,354 | 4,833 | |
Frequent flyer deferred revenue | 2,239 | 908 | |
Current maturities of long-term debt | 3,002 | 1,911 | |
Current maturities of sale-leasebacks | 834 | — | |
Current maturities of operating leases | 556 | 612 | |
Current maturities of finance leases | 76 | 182 | |
Other | 560 | 724 | |
Total current liabilities | 18,304 | 12,725 | |
Long-term liabilities and deferred credits: | |||
Long-term debt | 30,361 | 24,836 | |
Long-term obligations under operating leases | 5,152 | 4,986 | |
Long-term obligations under finance leases | 219 | 224 | |
Frequent flyer deferred revenue | 4,043 | 5,067 | |
Pension liability | 1,920 | 2,460 | |
Postretirement benefit liability | 1,000 | 994 | |
Other financial liabilities from sale-leasebacks | 863 | 1,140 | |
Other | 1,284 | 1,156 | |
Total long-term liabilities and deferred credits | 44,842 | 40,863 | |
Total stockholders' equity | 5,029 | 5,960 | |
Total liabilities and stockholders' equity | $ 68,175 | $ 59,548 | |
UNITED AIRLINES HOLDINGS, INC. CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) | |||
(In millions) | Year Ended December 31, | ||
2021 | 2020 | ||
Cash Flows from Operating Activities: | |||
Net cash provided by (used in) operating activities | $ 2,067 | $ (4,133) | |
Cash Flows from Investing Activities: | |||
Capital expenditures, net of flight equipment purchase deposit returns | (2,107) | (1,727) | |
Purchases of short-term and other investments | (68) | (552) | |
Proceeds from sale of short-term and other investments | 397 | 2,319 | |
Proceeds from sale of property and equipment | 107 | 6 | |
Other, net | (1) | 4 | |
Net cash provided by (used in) investing activities | (1,672) | 50 | |
Cash Flows from Financing Activities: | |||
Repurchases of common stock | — | (353) | |
Proceeds from issuance of debt, net of discounts and fees | 11,096 | 15,676 | |
Proceeds from equity issuance | 532 | 2,103 | |
Payments of long-term debt, finance leases and other financing liabilities | (5,205) | (4,449) | |
Other, net | (27) | (20) | |
Net cash provided by financing activities | 6,396 | 12,957 | |
Net increase in cash, cash equivalents and restricted cash | 6,791 | 8,874 | |
Cash, cash equivalents and restricted cash at beginning of year | 11,742 | 2,868 | |
Cash, cash equivalents and restricted cash at end of the period | $ 18,533 | $ 11,742 | |
Investing and Financing Activities Not Affecting Cash: | |||
Property and equipment acquired through the issuance of debt, finance leases and other | $ 814 | $ 1,968 | |
Right-of-use assets acquired through operating leases | 771 | 198 | |
Equity interest in Avianca Group International Limited received in consideration for a debtor-in-possession loan | 164 | — | |
Notes receivable and warrants received for entering into aircraft and other ancillary business agreements | 131 | — | |
Lease modifications and lease conversions | 123 | 527 | |
Capacity purchase agreement liability converted to debt | 14 | 33 | |
UNITED AIRLINES HOLDINGS, INC. NOTES (UNAUDITED) | ||||||||||||
Special charges (credits) and unrealized (gains) and losses on investments, net include the following: | ||||||||||||
Three Months Ended December 31, | Year Ended December 31, | |||||||||||
(In millions) | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | ||||||
Operating: | ||||||||||||
Severance and benefit costs | $ 5 | $ 162 | $ 2 | $ 438 | $ 575 | $ 16 | ||||||
Impairment of assets | (8) | 137 | 102 | 97 | 318 | 171 | ||||||
CARES Act grant | — | (453) | — | (4,021) | (3,536) | — | ||||||
(Gains) losses on sale of assets and other special charges | 59 | 5 | 26 | 119 | 27 | 59 | ||||||
Total operating special charges (credits) | 56 | (149) | 130 | (3,367) | (2,616) | 246 | ||||||
Nonoperating: | ||||||||||||
Nonoperating unrealized (gains) losses on investments, net | 125 | (101) | (81) | 34 | 194 | (153) | ||||||
Nonoperating special termination benefits and settlement losses | (15) | 41 | — | 31 | 687 | — | ||||||
Nonoperating debt extinguishment and modification fees | — | — | — | 50 | — | — | ||||||
Nonoperating credit loss on BRW Aviation Holding LLC and BRW Aviation LLC ("BRW") term loan and related guarantee | — | — | — | — | 697 | — | ||||||
Total nonoperating special charges and unrealized (gains) losses on investments, net | 110 | (60) | (81) | 115 | 1,578 | (153) | ||||||
Total operating and nonoperating special charges (credits) and unrealized (gains) losses on investments, net | 166 | (209) | 49 | (3,252) | (1,038) | 93 | ||||||
Income tax expense (benefit), net of valuation allowance | (40) | 29 | (11) | 728 | 404 | (21) | ||||||
Total operating and non-operating special charges (credits) and unrealized (gains) losses on investments, net of income taxes | $ 126 | $ (180) | $ 38 | $ (2,524) | $ (634) | $ 72 | ||||||
CARES Act grant: During the year ended December 31, 2021, the company received approximately $5.8 billion in funding pursuant to Payroll Support Program agreements under the CARES Act (the "PSP2 Agreement" and the "PSP3 Agreement"), which included an approximately $1.7 billion unsecured loan. The company recorded $4.0 billion as grant income in Special charges (credits). The company also recorded $99 million for warrants issued to the U.S. Treasury Department, as part of the PSP2 Agreement and PSP3 Agreement, within stockholders' equity, as an offset to the grant income.
During the year ended December 31, 2020, the company received approximately $5.1 billion in funding pursuant to the Payroll Support Program under the CARES Act, which included an approximately $1.5 billion unsecured loan. The company recorded $3.5 billion as grant income in Special charges (credits). The company also recorded $66 million for warrants issued to the U.S. Treasury Department, within stockholders' equity, as an offset to the grant income.
Severance and benefit costs: During the three and twelve months ended December 31, 2021, the company recorded charges of $5 million and $438 million, respectively, related to pay continuation and benefits-related costs provided to employees who chose to voluntarily separate from the company. The company offered, based on employee group, age and completed years of service, pay continuation, health care coverage, and travel benefits. Approximately 4,500 employees elected to voluntarily separate from the company.
In 2020, the company enacted a workforce reduction as part of the company's strategic realignment of its business and new organizational structure as a result of the impacts of the COVID-19 pandemic on the company's operations and cost structure. The company recorded $162 million and $575 million during the three and twelve months ended December 31, 2020, respectively, related to the workforce reduction and voluntary plans for employee severance, pay continuance from voluntary retirements, and benefits-related costs.
During the three and twelve months ended December 31, 2019, the company recorded $2 million and $14 million, respectively, of management severance. During the twelve months ended December 31, 2019, the company recorded $2 million of severance and benefit costs related to a voluntary early-out program for its technicians and related employees represented by the International Brotherhood of Teamsters.
Impairment of assets:
During 2021, the company recorded the following impairment charges:
In addition, in February 2021, the company voluntarily and temporarily removed all 52 Boeing 777-200/200ER aircraft powered by Pratt & Whitney 4000 series engines from its schedule due to an engine failure incident with one of its aircraft. The company viewed this incident as an indicator of potential impairment. Accordingly, as required under relevant accounting standards, United performed forecasted cash flow analyses and determined that the carrying value of the Boeing 777-200/200ER fleet is expected to be recoverable from future cash flows expected to be generated by that fleet and, consequently, no impairment was recorded.
During 2020, the company recorded the following impairment charges:
During 2019, the company recorded the following impairment charges:
(Gains) losses on sale of assets and other special charges: During the three months ended December 31, 2021, the company recorded net charges of $59 million primarily related to a one-time bonus paid to employees for their continued efforts during the COVID-19 pandemic, partially offset by gains primarily related to the sale of its former headquarters in suburban Chicago. During the year ended December 31, 2021, in addition to the fourth quarter items, the company recorded net charges of $60 million, primarily related to incentives for its employees to receive a COVID-19 vaccination and the termination of the lease associated with three floors of its headquarters at the Willis Tower in Chicago, partially offset by net gains primarily related to aircraft sale-leaseback transactions and aircraft component manufacturer credits.
During 2020, the company recorded losses on certain asset sales and charges for legal reserves, partially offset by gains on aircraft sale-leaseback transactions.
During the three months ended December 31, 2019, the company recorded charges of $14 million for costs related to the transition of fleet types within a regional carrier contract, $10 million for contract terminations and $2 million in other charges. During the twelve months ended December 31, 2019, in addition to the amounts described above, the company recorded charges of $18 million for the settlement of certain legal matters and $15 million related to contract terminations.
Nonoperating unrealized gains and losses on investments, net: During the three and twelve months ended December 31, 2021, the company recorded losses of $125 million and $34 million, respectively, primarily for the change in the market value of its investment in equity securities.
During the three and twelve months ended December 31, 2020, the company recorded gains of $101 million and losses of $194 million, respectively, primarily for the change in the market value of its investment in equity securities.
During the three and twelve months ended December 31, 2019, the company recorded gains of $81 million and $153 million, respectively, primarily for the change in the market value of its investment in equity securities.
Nonoperating debt extinguishment and modification fees: During the year ended December 31, 2021, the company recorded $50 million of charges for fees and discounts related to the issuance of new debt and the prepayment of certain debt agreements.
Nonoperating special termination benefits and settlement losses: During the year ended December 31, 2021, as part of the first quarter voluntary separation programs, the company recorded $31 million of special termination benefits in the form of additional subsidies for retiree medical costs for certain U.S.-based front-line employees. The subsidies were in the form of a one-time contribution to a notional Retiree Health Account of $125,000 for full-time employees and $75,000 for part-time employees.
During the three and twelve months ended December 31, 2020, the company recorded $41 million and $687 million, respectively, of settlement losses related to the company's primary defined benefit pension plan covering certain U.S. non-pilot employees, and special termination benefits offered, under furlough and voluntary separation programs.
Nonoperating credit loss on BRW term loan and related guarantee: During the year ended December 31, 2020, the company recorded a $697 million expected credit loss allowance for the company's Term Loan Agreement (the "BRW Term Loan"), with, among others, BRW Aviation Holding LLC and BRW Aviation LLC, and the related guarantee. BRW's equity and BRW's holdings of Avianca Holdings S.A. equity are secured as a pledge under the BRW Term Loan, which is currently in default.
Interest expense related to finance leases of Embraer ERJ 145 aircraft:
During the third quarter of 2018, United entered into an agreement with the lessor of 54 Embraer ERJ 145 aircraft to purchase those aircraft in 2019. The provisions of the new lease agreement resulted in a change in accounting classification of these new leases from operating leases to finance leases up until the purchase date. As a result of the change, the company recognized a $4 million reduction in interest expense, and $64 million of additional interest expense, respectively, in the three and twelve months ended December 31, 2019.
Effective tax rate:
The company's effective tax rates for the three and twelve months ended December 31, 2021 were 23.6% and 23.2%, respectively. The effective tax rates for the three and twelve months ended December 31, 2020 were 20.1% and 19.9%, respectively. The effective tax rates for the three and twelve months ended December 31, 2019 were 24.1% and 23.1%, respectively. The annual effective tax rate represents a blend of federal, state and foreign taxes and includes the impact of certain nondeductible items. The effective tax rate was impacted by an $11 million valuation allowance release related to net capital gains and state attributes for the three months ended December 31, 2021, and by $38 million valuation allowance release related to net capital gains and state attributes for the twelve months ended December 31, 2021. The effective tax rates for the three and twelve months ended December 31, 2020 were impacted by $28 million and $185 million, respectively, of changes in valuation allowance related to net capital losses.
1 CASM-ex (adjusted cost or operating expense per available seat mile) is a non-GAAP measure that excludes fuel, profit sharing, third-party business expense and special charges. Please see the tables accompanying this release for more detailed information regarding non-GAAP financial measures used. We are not providing a target for or a reconciliation for CASM-ex projections to CASM, the most directly comparable GAAP measure, because we are unable to predict certain items contained in the GAAP measure without unreasonable efforts.
2 Please see the tables accompanying this release for more detailed information regarding non-GAAP financial measures used.
3 Includes cash, cash equivalents, short-term investments and undrawn credit facilities.
4 The forward-looking measures listed below are subject to risks and uncertainties applicable to all forward-looking statements as described elsewhere in this press release.
5 Forward capacity is matched with current observed bookings trends.
6 Fuel guidance is based on the Jet A forward curve as of January 12, 2022.
7 Please refer to our Current Report on Form 8-K filed on June 29, 2021 with the U.S. Securities and Exchange Commission, which contains the United Next financial targets.
SOURCE United Airlines
