Financial News


Nov 19, 2002
* Third-quarter operating profit of 19 million dollars, 665 million
dollar improvement over last year excluding special charges, operating
profit of 90 million dollars.
* Mainline passenger unit revenue improves 12 percent year-over-year.
* 9 percent improvement in unit costs year-over-year; excluding
special charges and fuel, unit costs improve 14 percent.
* Maintains strong cash position and positive operating cash flow.

UAL Corporation today reported its third-quarter financial results and
released its Monthly Operating Report for September.

UAL's third-quarter operating profit was 19 million dollars, an
improvement of 665 million dollars over last year. Excluding 71 million
dollars in special charges, the company reported an operating profit of 90
million dollars.

UAL's third-quarter net loss was 367 million dollars, or a loss per
basic share of 3.47 dollars, which includes 330 million dollars in special
charges and reorganization expenses. Excluding those charges, UAL's
loss for the third quarter totaled 37 million dollars, or a loss per
basic share of 36 cents. The special charges include 96 million dollars in
non-cash, aircraft-related charges and 234 million dollars in
reorganization items. The majority of reorganization expenses were non-cash
items resulting from the rejection of aircraft.

"As these results make clear, our restructuring is on track," says
Glenn Tilton. "We are making tremendous progress in reducing costs,
improving revenue and building a strong, sustainable business for the future.
Although there is still much work to be done, our year-over-year
improvement reflects the hard work of all United's employees and their
singular focus on serving our customers and running a great airline."

Tilton said that in the third quarter United:

* Increased passenger unit revenue 12 percent compared to last year, an
improvement that out-performed the industry;
* Reduced unit costs, excluding special charges and fuel, by 14
percent; and
* Improved earnings from operations by 665 million dollars over the
same quarter a year ago.

The company also delivered positive operating cash flow of 286 million
dollars during the quarter, or approximately 3 million dollars per day.
UAL ended the quarter with a cash balance of 2.4 billion dollars,
including 646 million dollars in restricted cash.

** Improving Financial Results

UAL's third-quarter 2003 operating revenues were 3.8 billion dollars,
up 2 percent compared to third-quarter 2002. Passenger unit revenue was
12 percent higher on a 5 percent yield increase. Traffic decreased 6
percent on a 12 percent decrease in capacity, leading to a 4.8 point
increase in load factor to 80.2 percent. The unit revenue improvement was
among the best in the industry. The improvement was driven by United's
aggressive marketing and sales activities, restructured business fares,
enhanced inventory management, and route and capacity adjustments.

Operating expenses for the quarter were 3.8 billion dollars, down 13
percent from the same quarter last year. United's unit cost decreased 9
percent. Excluding special charges and fuel, unit cost decreased 14
percent year-over-year, among the best cost improvements in the industry.

Salaries and related costs decreased 630 million dollars or 34 percent
for the quarter. This amount reflects the reduction in wages, changes
in benefits and work rules, and productivity improvement associated
with United's new collective bargaining agreements (CBAs). While capacity
was down for the quarter, productivity was up 13 percent for the
quarter year-over-year.

Aircraft rent decreased 61 million dollars or 29 percent compared to
third-quarter 2002. United negotiated reduced-lease amounts on some of
its aircraft and is still in negotiations with respect to a large number
of aircraft in its fleet.

Aircraft maintenance, which includes primarily maintenance outsourcing
and maintenance materials, increased 36 million dollars or 28 percent
year-over-year. However, overall maintenance costs were down
significantly from third quarter last year due to the company's ability to
outsource maintenance.

The company had an effective tax rate of zero for the third quarter,
which makes UAL's pre-tax loss the same as its net loss. In the third
quarter of 2002, UAL recorded a non-cash tax expense to establish a
valuation allowance against its deferred tax asset.

** Solid Progress on Cost-Reduction Initiatives

In addition to substantial cost reductions achieved in salaries and
related expenses and aircraft ownership costs, United continues to make
substantial progress improving its competitive cost structure across all
categories. Disciplined project management and best practices programs
in purchasing, operations, maintenance and all other functions are on
plan to achieve 2003 goals of 450 million dollars in cost reduction, as
part of 1 billion dollars in expense and revenue improvements for 2003.
For example:

* United is targeting procurement efficiencies, including telecom rate
improvements and gaining economies of scale in purchasing for multiple
* The company expects to achieve significant savings from a number of
renegotiated and new contracts with its United Express carrier partners.

The groundwork has been laid for 2004 projects, which are expected to
result in 650 million dollars in cost reduction in 2004, part of the
planned 1.4 billion dollars in profit improvement next year.

** Operational Performance Remains Strong

United employees continue to deliver strong operational performance,
* On-time zero departure performance in the quarter was 73 percent, the
best third-quarter performance in United's history;
* Arrivals within 14 minutes of schedule was 83 percent for the
quarter, only one percentage point behind last year's record third-quarter
* September 2003 was the best on-time month in United's history with
80.4 percent of flight departures exactly on-time; and
* For year-to-date 2003, United remained No. 1 in arrivals within 14
minutes of schedule among the six major network carriers, according to
the U.S. Department of Transportation.

During the quarter, United made significant progress in re-engaging our
customers with improved customer service and marketing and sales
campaigns targeted to meet both their business and leisure travel needs.
These efforts included:

* Introduction in July of United's "Fly the World for Free" promotion
with advertising in 22 countries in 11 languages, offering business and
first-class customers a free ticket to any of the 650 destinations
worldwide served by United and its Star Alliance partners;
* "Go. Go. Stay." promotion launched in August and enthusiastically
received by leisure customers, combining air travel and stays at Hilton
* Significant enhancement of elite frequent flyer programs, including a
new, exclusive community web site for 1K frequent flyers, visited by 20
percent of 1K flyers within five days of its launch;
* Installation of more EasyCheck-in kiosk units is on track to have 900
units at 81 airports, giving customers access to EasyCheck-in at every
United U.S. domestic mainline airport by early 2004, as well as the
introduction of EasyCheck-in Online and new EasyCheck-in features to help
speed travelers on their way;
* Implementation of code-share agreements with US Airways that open
more U.S. flights and destinations, and the announcement of a code-share
agreement with Air China that will expand our customers' access to major
destinations in China;
* Announcement of United flights to new markets, including San Juan,
Puerto Rico; San Jose, Costa Rica; Cancun, Mexico; and Grand Cayman;
* Announcement of plans to launch United's low-cost operation from
Denver International Airport with ticket sales beginning in November for
affordable leisure fares to Las Vegas, Reno, Phoenix, Los Angeles
(Ontario), Tampa, Orlando and New Orleans; and
* U.S. and international sales blitzes targeting corporate clients and
travel agencies in Denver, Los Angeles, Hong Kong and cities in
Australia, Mexico, Argentina and Thailand, among others.

** Fourth-Quarter Outlook

Booked load factor and yield for the balance of the year are running
ahead of last year. Capacity is expected to be down 8 percent compared
to the fourth quarter of 2002. Fuel costs are expected to be 92 cents
per gallon for the fourth quarter, up 6 percent over last year.

** September Monthly Operating Report

UAL today also filed with the U.S. Bankruptcy Court its Monthly
Operating Report for September. The company maintained a strong cash balance
in September. And, for the eighth straight month, it met requirements
of its debtor-in-possession (DIP) financing agreements. The company
said it also expects to meet the EBITDAR requirements for its DIP
agreements in October.
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Dow Jones Business News
UAL/Orbitz: Airline Needs Cash, Judge Says
Thursday October 30, 5:19 pm ET

CHICAGO (Dow Jones)--UAL Corp. , parent of United Airlines, on Thursday received bankruptcy-court approval to sell part of its stake in Orbitz Inc. after the online travel agent's initial public offering slated for later this year.

UAL, of Chicago, though a subsidiary owns 26% of the combined equity interest in Orbitz, along with other fractional owners Continental Airlines , Delta Air Lines , Northwest Airlines Corp. (NasdaqNM:NWAC - News) and AMR Corp. (NYSE:AMR - News)'s American Airlines.

Orbitz has experienced substantial success since the launch of its Web site in June 2001, becoming the third largest online travel company in the U.S.

UAL plans to sell an as yet undetermined number of Orbitz shares, the proceeds of which will be used to pay down the airline's debtor-in-possession loan. UAL said in court documents that its ownership position after the IPO will not drop below 17%.

UAL expects gross profits of between $26 million to $52 million from the sale and IPO, with the resulting value of UAL's residual Orbitz stock ranging from about $176 million to $258 million.

Judge Eugene R. Wedoff of the U.S. Bankruptcy Court for the Northern District of Illinois overruled the objection OurHouse Inc., a creditor of the UAL subsidiary that holds the ownership stake. OurHouse said the company shouldn't be allowed to shift ownership to the parent company, among other assertions.

"This IPO will undoubtedly be of assistance to the debtor," Wedoff said. UAL needs liquidity and is constrained by its ability to raise cash by other means, he said.

UAL filed for federal bankruptcy protection in December.

Orbitz filed for an IPO of up to $125 million in Class A common shares in May 2002. The company in October estimated the offering price at $22 each but didn't indicate the number of shares it expects to offer.
ualflynhi said:
Aircraft maintenance, which includes primarily maintenance outsourcing
and maintenance materials, increased 36 million dollars or 28 percent
year-over-year. However, overall maintenance costs were down
significantly from third quarter last year due to the company's ability to
outsource maintenance.
This is such typical UAL bullsh*t. I'm not an accountant but how do you increase year over year by 28% but then say" but my third quarter is significantly down compared to last years quater?" NO SH*T Einstein, half the people are gone!!! The planes are gone, the work is gone but it cost you 28% more in your yearly budget to send it somewhere else? Where is the cost savings UAL. It cost you 36 million dollars more than it did last year to farm out the work and this is with LESS airplanes in the fleet, minus 2 maint bases, and the cut of over 6000 mechanics so corn fed jed could wrench on them in Alabama!!! You're a bunch of lying, thieving SOB's and you better hope I don't make it to your funeral, because that ain't rain falling on your grave!!!

Let's not forget about increased costs from ramp doing pushbacks. Like torqued nosegear, broken towbars from trying to push with the brakes set, etc. :shock:
Everyone is trumpeting UA numbers in different threads. Dizzying. Questionable.
At least UA seems to be progressing and if not just moving.

But almost a year into BK and UA is not nearly progressing fast enough.

How long have they been screwing around with the 'airline-within-airline' concept?
When might the Starfish planes start flying out of DEN? Not just maybe selling tickets in November -- but actually flying??

New service to Puerto Rico and the Carribbean? Yeah, those are high density/premium revenue routes! Definitely underserved/overpriced markets ripe for entry (aka WN in Philly!)

"Telecom rate improvements and economies of scale in purchasing" -- aren't you supposed to be doing that kinda stuff every day, not just when you're in BK and need to fill space in a press release.

The 28% maintenance increase is understandable, as I'm sure in the year-ago period UA was deferring any cost prior to filing BK in December. But not exactly confidence-inspiring either way. And market confidence is what UA needs most now. This item should never have been in a press release.

Every time someone at UA opens their mouth they tout the US codeshare as the greatest thing since sliced bread. What will they talk about when US is gone?

UA has a tremendous franchise. Why can't they be bold and use it?
I think the dif is in that when UAL 'outsources' MX, they send a check to that fly by night outfit. When we do our own MX (with the best d@mn MX around), part of the cost is reflected in MX while other costs are reflected in "salary". So the short answer is they paid more for MX, but by outsourcing, they saved even more on labor costs at UAL.
One other thought -- although direct maintenance cost may be higher, a significant amount of United's former maintenance overhead costs (for the facilities at IND and OAK) are no longer being paid, thus potentially making total maintenance cost lower.