OREANDA-NEWS. United Airlines (UAL) today reported second-quarter 2015 net income of $1.3 billion, or $3.31 per diluted share, excluding $67 million of special items. Including special items, UAL reported second-quarter net income of $1.2 billion, or $3.14 per diluted share. These results are a record quarterly profit for the company.
  • The company's Board of Directors authorized an additional $3 billion share repurchase program, which the company expects to complete by the end of 2017.
  • In the quarter, UAL prepaid approximately $800 million of debt, contributed approximately $620 million to its pension plans and returned approximately $250 million to shareholders as part of its existing $1 billion share buyback program.
  • UAL earned an 18.2 percent return on invested capital for the 12 months ended June 30, 2015.

"This quarter's record results reflect the progress we're making on our long-term plan, and I'd like to thank the United team for their great work," said Jeff Smisek, UAL's chairman, president and chief executive officer. "The $3 billion share repurchase program we announced today demonstrates the confidence we have in our future. We will continue to invest in our customers, assets and our people, and remain committed to improving our balance sheet, expanding our margins and improving our return on invested capital, and expect our third quarter pre-tax margin to be between 13.5 and 15.5 percent, excluding special items."

Second-Quarter Revenue and Capacity

For the second quarter of 2015, total revenue was $9.9 billion, a decrease of 4 percent year-over-year. Second-quarter consolidated passenger revenue decreased 3.4 percent to $8.7 billion, compared to the same period in 2014. Ancillary revenue per passenger in the second quarter increased 6.7 percent year-over-year. Second-quarter cargo revenue decreased 1.3 percent year-over-year to $229 million. Other revenue in the second quarter decreased 9.6 percent year-over-year, mostly due to the reduction in sales of fuel to a third party. The corresponding expense decline from this reduction appears in third-party business expense.

Consolidated revenue passenger miles increased 0.7 percent and consolidated available seat miles increased 2.3 percent year-over-year for the second quarter, resulting in a second-quarter consolidated load factor of 83.9 percent.

Second-quarter 2015 consolidated PRASM decreased 5.6 percent and consolidated yield decreased 4.1 percent compared to the second quarter of 2014.

"This quarter, we continued to build and refine our route network, including announcing the move of p.s. transcontinental service to our global gateway hub at Newark Liberty Airport and forming a long-term partnership with Azul Brazilian Airlines. These decisions will enhance our network and provide our customers with more choice and convenience," said Jim Compton, UAL's vice chairman and chief revenue officer. "We will continue to improve our leading network by focusing on our strengths, while investing in our people, fleet and products to increase revenue and deliver a flyer-friendly customer experience."

Passenger revenue for the second quarter of 2015 and period-to-period comparisons of related statistics for UAL's mainline and regional operations are as follows:

   

2Q 2015
Passenger
Revenue
(millions)

  

Passenger
Revenue vs.
2Q 2014

PRASM vs.
2Q 2014

Yield vs.
2Q 2014

Available
Seat Miles
vs. 2Q 2014
               

Domestic

  

$3,523

  

0.2%

(3.4%)

(2.3%)

3.7%
               

Atlantic

  

1,635

  

(4.4%)

(6.4%)

(1.7%)

2.1%

Pacific

  

1,108

  

(6.9%)

(8.8%)

(9.6%)

2.2%

Latin America

  

695

  

(4.9%)

(10.9%)

(8.8%)

6.7%

International

  

3,438

  

(5.3%)

(8.1%)

(6.0%)

3.1%
               

Mainline

  

6,961

  

(2.6%)

(5.8%)

(4.2%)

3.4%

Regional

 

1,715

  

(6.4%)

(1.7%)

(1.1%)

(4.8%)
 

Consolidated

  

$8,676

  

(3.4%)

(5.6%)

(4.1%)

2.3%
     

Second-Quarter Costs

Second-quarter consolidated CASM, excluding special charges, third-party business expense, fuel and profit sharing, increased 0.3 percent compared to the second quarter of 2014, primarily due to the company's Project Quality efficiency and quality initiative. Second-quarter consolidated CASM including those items decreased 12.2 percent, largely due to reduced fuel costs.

Second-quarter total operating expenses, excluding special charges, decreased $840 million, or 9.1 percent, year-over-year. Including special charges, total operating expenses decreased $954 million, or 10.1 percent, in the second quarter versus the same period in 2014.

Liquidity and Cash Flow

In the second quarter, UAL generated $1.8 billion in operating cash flow, $474 million in free cash flow, and ended the quarter with $6.3 billion in unrestricted liquidity, including $1.35 billion of undrawn commitments under its revolving credit facility. During the second quarter, the company had gross capital expenditures of approximately $1.26 billion, excluding fully reimbursable projects. The company contributed approximately $620 million to its pension plans and made debt and capital lease principal payments of approximately $1 billion in the second quarter, including approximately $800 million of debt prepayments.

In the second quarter, the company invested $100 million, through a wholly owned subsidiary, to acquire an approximate 5 percent stake in Azul Brazilian Airlines, and invested $30 million to acquire an equity stake in Fulcrum BioEnergy, an alternative fuels company. 

For the 12 months ended June 30, 2015, the company's return on invested capital was 18.2 percent.

As part of UAL's $1 billion share buyback program, the company spent approximately $250 million in share repurchases in the second quarter. Through the second quarter, UAL has returned a total of approximately $770 million to shareholders under the program, and expects to complete the program in the third quarter of this year.

UAL's Board of Directors authorized an additional $3 billion share repurchase program which the company expects to complete by 2017. This amount represents approximately 14 percent of the company's market capitalization as of the closing stock price on July 22, 2015.

"Our record profit in the quarter is the result of the great work of all of our employees, as demonstrated by our seventh consecutive quarter of good cost performance," said John Rainey, UAL's executive vice president and chief financial officer. "We are pleased to announce an additional $3 billion share repurchase program which supports our goals of returning cash to shareholders while investing in our business and improving our capital structure."

UAL may repurchase shares through the open market, privately negotiated transactions, block trades, or accelerated share repurchase transactions from time to time in accordance with applicable securities laws. UAL will repurchase shares of common stock subject to prevailing market conditions and may discontinue such repurchases at any time.