Please excuse this late response. I have been in Brazil since middle July and did not have time to analyze UA’s submission to the SEC. Hence, this late submission.

“CHICAGO, July 25, 2013 /PRNewswire/ -- United Airlines (UAL) today reported second-quarter 2013 net income of $521 million, or $1.35 per diluted share, excluding $52 million of special charges. Including special charges, UAL reported second-quarter 2013 net income of $469 million, an increase of 38 percent year-over-year, or $1.21 per diluted share.”

First of all, the use of the term “net income” as used in UA’s press announcement is contrary to Generally Accepted Accounting Principles. The word “net” should be the last number on a company’s income or loss statement. The announcement has been presented backwards.

To correct the erroneous press announcement, the above quoted sentence should read - “United Airlines (UAL) today reported second-quarter 2013 net income of $469 million” (NOT the reported 521 million shown in the quote).

As shown in the press release, there is an amount of $52 million that supposedly belongs to “special” charges. Analysis of this $52 million is questionable in that $45 million of the $52 million is allocated to merger expenses, even though the merger happened in late 2010.

The other $7 million is “Additional costs associated with the temporarily grounded Boeing 787 aircraft.” This $7 million is suspect because one immediately should ask the question, why is this an expense rather than a reimbursable receivable from Boeing, since the problems with the aircraft related to Boeing’s responsibility.

Another concern I see is the fact that the income statement is not an audited income statement. Only the annual financial statements are audited. Unaudited statements leave room for “error” and later restatement. One major concern with unaudited statements is that some of the reported revenue could actually belong to the first quarter of the year but “inadvertently” be included in the second quarter income statement. This, of course, would give the illusion that the second quarter revenue was higher than it actually was. I have not made any adjustment for this possibility.

Speaking of revenue, an analysis of the balance sheet shows that of the above-mentioned net income of $469 million, $112 million was based on UA’s recognition of customers redeeming frequent flier awards. This reduces the $469 million to $357 million. Oops, the net income is getting smaller.

Although the income statement shows that the passengers’ revenue dropped, it did not drop as much as I thought it would, but it did drop by one hundred million dollars, which is significant. A drop of this magnitude is not reflective of an airline in its third year, post merger nor is it a sign that the airline is “doing well.”

As mentioned by others, the fuel cost for UA during the period dropped by $340 million dollars. Oops, there goes more of the supposed “great income” for the quarter.

I could go through the remainder of the unaudited statements submitted to the SEC but the above data confirms that although there was a profit, it was mainly a profit of illusion rather than of substance of a going concern. In other words, it was a poor quarter, as I predicted it would be.

For those who did not or could not understand my post made prior to UA’s issuance of their financial statements, all I can say is “oops to you” for not understanding. Hopefully, this small analysis will alert you when you see UA’s next grandiose announcement of how well UA is doing.
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