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UAL Corporation Reports Fourth Quarter and Full-Year Results
UAL Corporation (NYSE: UAL), the holding company whose primary subsidiary is United Airlines, reported its fourth-quarter financial results today. The company incurred a fourth-quarter net loss of $308 million, or a loss per basic share of $5.68 (see Note: EPS Calculation), both after special items described in the notes to the financial statements. Excluding special items, the company's fourth quarter loss was $640 million, or a loss per basic share of $11.74. United's performance compares to a fourth-quarter 2000 net loss of $124 million, or a loss per basic share of $2.41, excluding special items explained in the notes. United's fourth quarter loss per share of $11.74 before special items is better than the First Call consensus estimate of a $14.96 loss per basic share. The special items recorded in the fourth quarter total $332 million, net of tax, and include the second grant payment from the U.S. government and gains related to Cendant's acquisition of Galileo. Full Year 2001 United's loss for the full year, including special items explained in the notes, total $2.1 billion, or a loss of $40.04 per basic share. The company's losses excluding special items total $1.8 billion, or a loss per basic share of $33.23, which is better than the First Call consensus of a loss per basic share of $36.33. "United, along with the rest of the airline industry, continues to struggle with a weak economy and the aftermath of the Sept. 11 terrorist attacks," said John W. Creighton, chief executive officer. "While our financial results this quarter reflect a decline in both business and leisure travel, during the fourth quarter we saw signs that air travel is slowly beginning to recover. As a result we plan to add 127 daily departures in our April schedule over current levels. "Additionally, United's cash flow performance during the quarter exceeded our expectations, due in large part to the success of our cost-cutting efforts. Last quarter we took a number of aggressive actions to bolster our financial condition, including the largest furlough in our company's history and the reduction of billions of dollars of capital spending. While we recognize that there clearly is more work to be done, our actions have produced encouraging results. "Labor still accounts for 38 percent of our total expenses, and we are working with our unions to get contracts settled and to further reduce wage costs," Creighton said. "I am confident they will respond constructively. United is a great company and we are at our best when confronted with tough problems. All of us here are facing the same challenges and will do what is necessary to steer through it successfully and create an even better and stronger United." Operating Results United's passenger revenues for the quarter were down 39 percent year-over-year. Expenses were down 23 percent year-over-year as a result of the airline's cost-cutting initiatives, and operating expenses per available seat mile in the fourth quarter, decreased 3 percent over the same period last year. Liquidity Given the current difficult revenue environment, the company is focusing its near-term efforts on eliminating the negative cash flow it has experienced and on improving its liquidity position. Daily cash burn during the fourth quarter, which is seasonally weak, averaged $10 million and UAL ended the quarter with a cash balance of $2.6 billion. Additionally, United today is announcing that it has completed a $775 million private debt financing. The proceeds are largely being used to refinance lease debt on 21 B737 and B757 aircraft in United's fleet. The term of the new financing is ten years. "We are delighted to announce this important financing transaction to start the new year," said Jake Brace, senior vice president and chief financial officer. "In so doing, we put in place long-term financing at attractive terms to refinance a large obligation on existing aircraft that had come due and to raise additional cash for the company." Capital Spending United reduced its planned capital spending for 2002 by 50 percent to $1.2 billion as a result of the aircraft deferrals the company announced in November and reduction of non-essential capital projects. Since the airline's planned aircraft capital spending next year has been reduced to zero, total capital spending in 2003 is expected to be well below 2002 levels. As a result of the company's aggressive aircraft retirement program, United ended the year with a fleet of 543 aircraft. The airline now has one of the youngest fleets in the industry with an average age of eight years. Additionally, the retirement program reduced the number of United’s fleet types to only five, significantly improving United's efficiency with regard to maintenance, crew training and scheduling. Operations Despite its current challenges, United has dramatically improved its operating performance. United's 2001 Christmas holiday performance was the best it has been in years in terms of scheduled flight completion. In fact, the company experienced nearly 75 percent fewer cancellations than in its previous best holiday period in 1997, and the company's U.S. domestic completion rate of 99.6 percent was among the best in the industry. "All of our employees, including those on the front line and those behind the scenes, did a tremendous job during the holiday season and their hard work continues in 2002," Creighton said. "Despite many new challenges including new security procedures at the airports, United's employees continue to persevere and provide outstanding service to our customers." Labor United on Jan. 22 announced it would accept the recommendations of the Presidential Emergency Board (PEB) for contract settlement with the International Association of Machinists (IAM) District 141M. The IAM has announced that the membership ratification vote is scheduled for Feb. 12. "An IAM contract settlement will be an important step in implementing the company's financial recovery plan," Creighton said. "We are committed to implementing a plan that meets the needs of our customers, preserves jobs for our valued employees and positions United on the road to financial stability." Outlook for First Quarter 2002 The company expects January passenger unit revenue to be 15 to 17 percent below last year. United’s booked load factor for February is ahead of last year, while March is about the same as last year. However, the company is seeing some softness around February 20. Although the company has seen positive revenue trends, it expects to report a significant loss in the first quarter.
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