Ual Reports February Results

[Fly]

UAL Reports February Results

 

[USFlyer]

Cash balance looks good at least. The losses are still quite high, though.

 

[FWAAA]

Oh, man - over $300 million of operating losses for the first two months of the year. Something's gotta change, and quick. 😱

 

[TJoe]

Those numbers are ugly. 🙁 Until oil prices change, I think were are going to see ugly numbers from everyone. (except Southwest)

 

[767jetz]

Call me an optimist, but I don't see those numbers as all so bad considering the circumstances. Of course it's never good to lose money. But look at all the positives.

- Postive cash flow of $7 Million per day
- Cash postition increased by $205 M to $2.5 Billion (about $1.9 Billion unrestricted)
- UA met DIP rquirements for the 13th month in a row.
- YOY unit revenue up 12% (ahead of industry average)
- YOY unit cost down 14%


There is plenty to be optimistic about. We are a far cry from being in a position of selling assets and liquidating. There is still work to do and loose ends to tie up, but everyone at UA should be proud of the job we've done so far. Many people predicted our doom last year, yet we are still on track to emerge and prosper.

For all the nay-sayers, look what has happened and is continuing to happen at USAir. If things were so dire at UA, and ATSB approval was doomed, wouldn't the company have approached the employees for a second and third and even fourth round of concessions by now? Instead they are pressing forward with incentive plans and success sharing.

 

[ACrazy8]

Optimist! 🙄

 

[767jetz]

Optimist! 🙄

😀 I guess I asked for that, huh? 😀

Hey, I've been called worse. 😛

 

[avek00]

Call me an optimist, but I don't see those numbers as all so bad considering the circumstances.

I won't call you an optimist - how does "reality escapist" sound? 😛

Seriously though, while UAL is to be commended for continuing to meet its DIP requirements, the numbers don't suggest that UAL could reasonably consider obtaining an ATSB guarantee or emerging from bankruptcy anytime soon. As a previous poster mentioned, the company has accrued an operational loss of over $300 million in just TWO MONTHS! To make matters worse, UAL is not servicing many of its debt obligations due to the BK, meaning that the company would be losing even more money if it did not have the protection of the Court.

Indeed, the latest figures only further back my assertion that while United has done a commendable job of stabilizing itself while in bankruptcy, the company has done little to prepare for bankruptcy emergence.

 

[Ukridge]

avekoo wrote: "As a previous poster mentioned, the company has accrued an operational loss of over $300 million in just TWO MONTHS"

Would there perhaps be another reader who could comment on this? I would have thought that an operational cash flow positive situation would indicate that any loss was for another reason . In other words, does not a cash flow postive bespeak operational profit? Are the losses not elsewhere i.e. depreciation, attendant BK costs, etc.?

 

[mweiss]

Unfortunately, cash flow can be a bit more complex than that. Uk, you're absolutely correct that it can be an indicator of operational profit that would be offset by depreciation loss. Or it might indicate a writeoff of capital value in order to bring the books in line with reality.

Or, it might mean that UA managed to get a larger number of tickets sold in that quarter for travel in the following. The cash doesn't flow out for a 30-day advance purchase until 30 days later.

Or, it might mean that there was a particulary large set of payments timed to occur at the begininning of the following quarter, so the cash didn't flow until after the end of the period.

Too many unknowns to draw either your inference or avek00's.

 

[avek00]

Unfortunately, cash flow can be a bit more complex than that. Uk, you're absolutely correct that it can be an indicator of operational profit that would be offset by depreciation loss. Or it might indicate a writeoff of capital value in order to bring the books in line with reality.

Or, it might mean that UA managed to get a larger number of tickets sold in that quarter for travel in the following. The cash doesn't flow out for a 30-day advance purchase until 30 days later.

Or, it might mean that there was a particulary large set of payments timed to occur at the begininning of the following quarter, so the cash didn't flow until after the end of the period.

Too many unknowns to draw either your inference or avek00's.

Given the uncertainties that accompany the cash flow figures, I decided to stick with the operatonal figures, which are more clearly defined. And operationally, UA is bleeding like a stuck pig.

 

[mweiss]

That's not my takeaway. What I see in that release is $119M in reorganization expenses (i.e., an investment in a lower cost infrastructure that isn't likely to produce immediate results), and $140M loss, which may be operational, but certainly could just as easily be depreciation or any number of other things.

There's still not enough information to back up your claim, even when you say it twice.

 

[FWAAA]

avekoo wrote: "As a previous poster mentioned, the company has accrued an operational loss of over $300 million in just TWO MONTHS"

Would there perhaps be another reader who could comment on this? I would have thought that an operational cash flow positive situation would indicate that any loss was for another reason . In other words, does not a cash flow postive bespeak operational profit? Are the losses not elsewhere i.e. depreciation, attendant BK costs, etc.?

As others have said, UAL had operating losses of over $300 million for January and February of this year. January's operating loss was $191 million:

http://www.united.com/press/detail/0,6862,...2,51703,00.html

and the operating loss for February was $112 million:

http://www.united.com/press/detail/0,6862,...2,51793,00.html

Those are losses that don't count the reorganization expenses, but they do of course include non-cash expenses like depreciation and amortization.

As to the growing cash figure - well, February is when airlines sell lots of Spring Break tickets for March and April travel, as well as early Summer Holiday tickets, so of course the cash balance should grow. Cash doesn't flow into an airline on a regular, equal basis like a utility. Fare sales and upcoming holidays cause cash to bulge. It will also wane in other months as ticket sales decline and flights must be paid for. And fuel is more costly than ever. Plus, as others mentioned, perhaps some large cash payments were due on 3/01 and weren't counted in the February report.

Sure, the numbers have improved. The $64k question is whether they have improved enough. Anybody's guess is as good as mine.

 

[WorldTraveler]

Depreciation is fairly constant for airlines so volatile changes in operating losses point to cash costs of running the business and not accounting-related items. Given that UA's rent and sales costs have been reduced, decreased profitability is being driven by cost increases in fuel. The ATSB could easily argue that ability to control fuel expenses is not impossible given that carriers like WN are buying most of their fuel at hedged prices that are 2/3 of what is available on the spot market.

Given that Delta is the only airline that is likely to come close to having operating losses the size of United's, these numbers are not good news at all. Since Delta is not in bankruptcy and has enough cash to pay its immediate foreseeable expenses, United is in a particularly unique and comfortable position.

 

[funguy2]

avekoo wrote: "As a previous poster mentioned, the company has accrued an operational loss of over $300 million in just TWO MONTHS"

Avek has a point here, that these types of losses are unsustainable.

BUT, January and February are typically weak travel months. March and April, tend to be strong months. While I won't be the person to predict profits, I would say the the large monthly losses should subside during the peak season.