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UAUA Q3 results/news/Mileage Plus/conference call discussion
I will be monitoring UA's Q3 conf call in this thread on Tuesday... or you can listen here: http://ir.united.com/phoenix.zhtml?p...ventID=1997812
Also, some preliminary results here: http://biz.yahoo.com/ap/081020/ual_e...view.html?.v=2 United Airlines parent UAL Corp. expected to post 3Q loss MINNEAPOLIS (AP) -- UAL Corp., the parent of United Airlines, is expected to post a loss when it reports third-quarter results on Tuesday. The following is a summary of key developments and analyst opinion related to the period. OVERVIEW: The airline industry saw some big ups and downs during the third quarter, and United Airlines parent UAL Corp. was no exception. The July-through-September quarter brought the highest oil prices ever -- over $147 per barrel on July 11 -- but oil retreated significantly by the end of September. And after Labor Day, airlines began shrinking their schedules more dramatically than usual for the slower fall travel season. United has been raising cash. It said it got $60 million from borrowing against its planes on Sept. 30, the last day of the quarter, and expected to receive another $65 million on the same transaction by the middle of this month. It also said it had agreements in place to sell $140 million worth of other assets, with the money coming in by the end of the year. The carrier still has more than $3 billion in assets that it could borrow against if necessary. BY THE NUMBERS: Analysts, on average, expect a third-quarter loss of $2.48 per share on revenue of $5.54 billion, according to a survey by Thomson Reuters. United Airlines Names Dennis Cary Chief Marketing and Customer Officer; Appoints Graham Atkinson President of Mileage Plus CHICAGO, Oct. 20 /PRNewswire-FirstCall/ the holding company whose primary subsidiary is United Airlines, today named Dennis Cary senior vice president and chief marketing and customer officer, and Graham Atkinson president of Mileage Plus, the company's loyalty program. |
Might be the first time we've read why the $125MM was raised... in some part due to borrowing against planes.
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Originally Posted by bmvaughn
(Post 10549489)
Might be the first time we've read why the $125MM was raised.
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Originally Posted by mahasamatman
(Post 10549613)
That says how, not why.
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Originally Posted by bmvaughn
(Post 10549617)
the why was to raise cash
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Originally Posted by mahasamatman
(Post 10549662)
The real question is why they want/need to raise (so much) cash.
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Changes at WHQ - first sign of M+ spin off?
Looks like UA is making first steps towards selling M+ by assigning new FFP boss with task of " ... developing Mileage Plus into a standalone business ... ".
Also, customer experience and marketing will come under one umbrella with responsibility " ... for brand strategy, customer communications, merchandising, united.com, and the overall design of the customer experience ... ". Full story: http://www.marketwatch.com/news/stor...E%7D&dist=hppr |
I am not sure if this is a good thing or a bad thing. I think it could be positive and it forces M+ to run itself as a true business. I know SPG is like that. Not sure if there are any examples of airline programs however, and I would imagine none quite as large. Though still, I'm not going to hold my breath until the changes occur.
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Is there any estimate as to how much fuel UA hedged at now very high prices?
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Originally Posted by adambadam
(Post 10550466)
Is there any estimate as to how much fuel UA hedged at now very high prices?
http://biz.yahoo.com/ap/080917/airlines_fuel.html?.v=3 United Airlines said on Wednesday it is on track to lose $544 million on fuel hedges this quarter. That included $72 million in realized losses and another $472 million in unrealized losses. Those positions forced United to put $400 million into restricted cash for the parties on the other side of its oil price bets. |
FWIW, it already reported here: http://www.flyertalk.com/forum/showthread.php?t=879105
And IMhO, not too many companies have the capital (or access to capital) to pull the trigger on the deal. Furthermore, UA already has almost 3B in assets that they could still exploit (although I am sure M+ is figured into that number). Finally, a sale in todays market would not be for top potential dollar. |
How would MP generate revenue as a stand alone company?
What would the business model be? |
Originally Posted by grayland
(Post 10550872)
How would MP generate revenue as a stand alone company?
What would the business model be? |
I have little faith of the current executive team to execute this in a way that brings value to the brand or to the customer.
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Air Canada did this to Aeroplan years back and it seems to have worked out OK for them (and me).
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Originally Posted by anc-ord772
(Post 10551007)
I have little faith of the current executive team to execute this in a way that brings value to the brand or to the customer.
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TravelClub survived the demise of SR (SwissAir) and it greatly assisted in getting the successor airline LX on its legs ^.
That would be a fantastic move of UA and greatly boost my confidence collecting miles with them. |
Originally Posted by d3van
(Post 10551023)
Air Canada did this to Aeroplan years back and it seems to have worked out OK for them (and me).
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Gee, with that HUGE liability off the books, UA might someday find a buyer, too.
Let's see.... |
Originally Posted by roberto99
(Post 10551123)
Gee, with that HUGE liability off the books, UA might someday find a buyer, too.
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Originally Posted by roberto99
(Post 10551123)
Gee, with that HUGE liability off the books, UA might someday find a buyer, too.
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$252 million loss ($779 million if you include the hedge losses) for the quarter. Someone must like the results...pre market trading has the stock over $13/share.
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Originally Posted by Shareholder
(Post 10551111)
Yup, the frequent flyer program was valued by The Market several times more than the airline! And as a shareholder, has worked out OK for me too!
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Call just started... here is the full release of financials:
http://ir.united.com/phoenix.zhtml?c...939&highlight= UAL Corporation Reports Third Quarter 2008 Results Delivering Competitive Revenue, Controlling Costs, and Executing on Plan to Return to ProfitabilityCHICAGO, Oct. 21 /PRNewswire-FirstCall/ -- UAL Corporation (Nasdaq: UAUA), the holding company whose primary subsidiary is United Airlines, reported a third quarter net loss of $779 million or $252 million, if non-cash, net mark- to-market losses on fuel hedge contracts and certain accounting charges are excluded, despite an increase of $946 million in consolidated fuel expense. For the third quarter ended Sept. 30, 2008, the company: -- Reported basic and diluted loss per share of $1.99 excluding non-cash, net mark-to-market hedge losses and certain accounting charges outlined in note 5. United's reported GAAP loss per share was $6.13. -- Recorded $519 million in non-cash, net mark-to-market losses on its fuel hedge contracts, as a result of the drop in oil prices at the end of the quarter. The company recorded a cash gain of $17 million on contracts that settled during the quarter bringing its consolidated cash fuel expense to $2.5 billion, $946 million higher than the prior year. -- Reported a 6.1 percent increase year-over-year in mainline passenger unit revenue (PRASM), excluding special items and Mileage Plus accounting impacts. Including these items, mainline PRASM increased 4.5 percent year-over-year. -- Demonstrated good cost control while reducing capacity, with mainline cost per available seat mile (CASM), excluding fuel and certain accounting charges, flat versus the same period in 2007, despite 4.0 percent lower capacity. Mainline CASM including fuel and certain accounting charges for the quarter was up 30.8 percent versus the third quarter of 2007, reflecting a 96.4 percent increase in mainline fuel price per gallon including non-cash, net mark-to- market hedge losses. -- Raised $1.4 billion in cash through various activities including aircraft financings, asset sales and amending its credit card agreements. |
Originally Posted by DogHead
(Post 10550357)
Looks like UA is making first steps towards selling M+ by assigning new FFP boss with task of " ... developing Mileage Plus into a standalone business ... ".
Also, customer experience and marketing will come under one umbrella with responsibility " ... for brand strategy, customer communications, merchandising, united.com, and the overall design of the customer experience ... ". Full story: http://www.marketwatch.com/news/stor...E%7D&dist=hppr |
Originally Posted by visorboy1974
(Post 10552614)
$252 million loss ($779 million if you include the hedge losses) for the quarter. Someone must like the results...pre market trading has the stock over $13/share.
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Call is now over, if anyone wants to listen, its usually out there for a few weeks. Here are some things I found notable:
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Originally Posted by jhayes_1780
(Post 10553638)
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Here are points I found bothersome:
1. At $80 per barrel, Ms. Mikells pointed out their estimate of cash outlays to cover open hedge contracts at $600 million. 2. The $1 billion financing from Chase is being secured by a second lien position against the Mileage Plus database. They would not answer questions posed as to the profitability of the Mileage Plus unit. They did footnote in the report that excluding Mileage Plus and other accounting, mainline PRASM increased 4.5% year over year, in line with the 4% capacity reduction. There is no doubt the Mileage Plus unit is profitable, yet by leveraging it as they have for the sake of liquidity, how much of the value will not be realized when it is spun-off. Projected traffic is expected to be off 10% to 12% (consolidated, the expected decrease in domestic traffic exceeding that of international) in the fourth quarter of 2008 over the fourth quarter of 2007, yet Mr. Tague would not answer the question posed as to what October traffic is to date. I would suspect that if October traffic were exceeding projections he would have answered that question. (Why do I get the feeling Mr. Tague is a big mistake?) Mr. Tague did point out that the revenue unbundling has been met with "moderate" resistance and they have experienced a decrease in traffic because of it. He went on to say that it has been key in improving United's revenue performance and will remain in place. Their feeling is that the loss in market share will be made up in PRASM. Yet the 3rd quarter showed mainline PRASM only increasing slightly over capacity reductions. This number should have been higher. To their credit they have taken steps to improve shareholder value in the short-term, but I remain very concerned about the erosion of the brand and its effects in the long term. |
If M+ does indeed get spun off, might it mean the end of Starnet blocking? I'm afraid it will mean more, but one can always hope.
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Originally Posted by andersjt
(Post 10554227)
Here are points I found bothersome:
1. At $80 per barrel, Ms. Mikells pointed out their estimate of cash outlays to cover open hedge contracts at $600 million. The flip side is that drastically lower oil prices, while costing UA money on the existing hedges, potentially results in billions of dollars in savings on fuel purchases. As long as unit revenue doesn't tank in an accompanying worldwide economic slowdown, things are looking OK. |
Originally Posted by FWAAA
(Post 10554490)
Did they provide any guidance for the exposure at, say, the recent price today of $71/bbl? Wonder what the pain will be if oil slides to $35/bbl or $40/bbl?
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Originally Posted by jhayes_1780
(Post 10554524)
no... however she did indicate how much was hedged and at what prices. Later I will find out the numbers and post them here.
Code:
Hedge Positions as of Oct. 17, 2008 |
I can almost bet that since UA has already booked the losses and paid out the cash as collateral they will execute transactions that will bring the average price per barrel on the hedges down without impacting the actual cash flows. (ie. recognize the paper loses and enter into a new agreement with a new strike)
Rightly or wrongly they just look stupid for hedging at such high numbers. rich |
Originally Posted by bmvaughn
(Post 10554081)
Awesome, that will be more than half the 744s and over a third of the 763s.
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Originally Posted by FWAAA
(Post 10554490)
Did they provide any guidance for the exposure at, say, the recent price today of $71/bbl? Wonder what the pain will be if oil slides to $35/bbl or $40/bbl?
The flip side is that drastically lower oil prices, while costing UA money on the existing hedges, potentially results in billions of dollars in savings on fuel purchases. As long as unit revenue doesn't tank in an accompanying worldwide economic slowdown, things are looking OK. Until these open contracts have expired, they will be paying extra for the fuel, and that will eventually be a cash outlay. While they may have taken mark to market writedowns on these contracts in the third quarter, they will have to shift the cost to above the line when the fuel is consumed, which will affect CASM for some time. As you pointed out, they are going to be under a lot of pressure to increase unit revenue. This conference call had a lot of the same feeling as the Annual Meeting back in June (minus the pickets and disruptions). Real questions about operational deficiencies were not answered. Mr. Tague did admit to the mistake of trying to charge for meals on international flights, and the subsequent backlash, but he would not answer the question as to how it may have affected loads and revenue. Mr. Tilton pointed out that while the U.S. economy was floundering in the third quarter, companies such as McDonald's were finding growth overseas, and he said that United was well positioned to compete in that regard (thus the focus on the new seats). Wake up Mr. Tilton, what is happening now in the financial markets is global, and companies such as McDonald's are going to find their overseas growth hampered by the lack of available credit or capital. Executives that still have jobs will not be traveling as much. Mr. Tague, I'm not sure what you meant by working on the "cleanliness" of the product, but until the image and experience that is the United can be improved worldwide, United is not going to be competitive. The seats are not enough, the whole customer service experience has to be seamless systemwide (international and domestic). With contracts with some very disgruntled pilots and flight attendants expiring on December 31, 2009, and your inability to improve employee morale, your product is going to remain pretty "dirty." |
Originally Posted by andersjt
(Post 10554937)
Mr. Tague, I'm not sure what you meant by working on the "cleanliness" of the product, but until the image and experience that is the United can be improved worldwide, United is not going to be competitive. The seats are not enough, the whole customer service experience has to be seamless systemwide (international and domestic). With contracts with some very disgruntled pilots and flight attendants expiring on December 31, 2009, and your inability to improve employee morale, your product is going to remain pretty "dirty."
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not sure if i am missing something here, but seems like (and appeciate any additions from anyone with better financial acumem than moi ) but seems like:
(1) UA got late into the hedging game and got burned big... how many folks on this board trashed them for not hedging? (SW got burned too). (2) the after adjustment loss of $150 does not look bad to me, certainly looks good after ARMs 360 loss (who I think is the most analogous competator to them), but bad compaired to DL (50 unadjusted, for some reason I don't have the adjusted from their release) (3) The opp revenue increase (6.1%) however does not match up well with DL (up 9%) and ARM (up 8%). (4) I can't quickly find the PRASM for each, but 4.5% increase given their capacity cuts looks bad to me, show the debundling is not working well for them. Not sure also how this stacks up with CO (who also had a hedging loss) (5) the cash (2.9B) is it up, flat? no comparison given which is interesting. Delta is at $3.1B (up from 2.6), ARM is at $4.62 (down from 5.5B) So seems to me that UA is in better shape that AA, not as good as DL, but able to staying in business, particularly with falling oil prices. |
Originally Posted by spin88
(Post 10555381)
not sure if i am missing something here, but seems like (and appeciate any additions from anyone with better financial acumem than moi ) but seems like:
(1) UA got late into the hedging game and got burned big... how many folks on this board trashed them for not hedging? (SW got burned too).
Originally Posted by spin88
(Post 10555381)
(2) the after adjustment loss of $150 does not look bad to me, certainly looks good after ARMs 360 loss (who I think is the most analogous competator to them), but bad compaired to DL (50 unadjusted, for some reason I don't have the adjusted from their release)
Originally Posted by spin88
(Post 10555381)
(3) The opp revenue increase (6.1%) however does not match up well with DL (up 9%) and ARM (up 8%).
(4) I can't quickly find the PRASM for each, but 4.5% increase given their capacity cuts looks bad to me, show the debundling is not working well for them.
Originally Posted by spin88
(Post 10555381)
(5) the cash (2.9B) is it up, flat? no comparison given which is interesting. Delta is at $3.1B (up from 2.6), ARM is at $4.62 (down from 5.5B)
Originally Posted by spin88
(Post 10555381)
So seems to me that UA is in better shape that AA, not as good as DL, but able to staying in business, particularly with falling oil prices.
I realize that UA has the oft-mentioned $3.0 billion of unencumbered assets - but borrowing against those and realizing anywhere near that amount right now would be quite a feat. AMR said last week that it holds about $3.5 billion of assets against which it could borrow - and I call BS on that for the same reason as at UA. UA blamed much of its first quarter 2008 weakness on its lack of strength in warm-weather destinations - another advantage for AA in the fourth quarter of this year plus the first quarter of 2009. The Caribbean and S America strength will help AA for the next six months - perhaps balancing out (or beating) UA's Asian and European (with LH) strength. I'd conclude that AMR and UA are about even - each has reported some advantages over the other in this latest quarter, and each has a big challenge to arrive at next summer's busy travel season (if there is one) with a healthy cash balance. Best of luck to both. |
Originally Posted by FWAAA
(Post 10555650)
I disagree. UA has been hedging for quite a while now and has saved hundreds of millions of dollars via its hedging efforts. And WN? It has saved $1.3 billion on fuel this year alone thru its hedging efforts - I'd say it hasn't been burned yet. Its non-cash writedown of the third quarter merely reverses much of its non-cash gains of the second quarter.
UA's net loss (net of all special items) was $250 million, not $150 million. I'd say that places UA a lot closer to AMR. Agree that DL's results are impressive. Agreed. Not quite. UA's cash at the end of the quarter was flat since June 30, but that was after raising $1.4 billion of new cash during the quarter. UA had to give almost $400 million to hedge counterparties and used the rest, primarily, at the gas pump. AMR's cash was $4.6 billion, down from $5.1 (not $5.5) billion at June 30. AMR raised similar amounts as UA during the quarter. Cash collateral held by AMR from its hedge counterparties was down by more than $600 million during the quarter. Not sure how you conclude that UA is in better shape than AMR. AMR still has $239 million of hedge counterparty cash collateral deposits in its possession, compared to the $378 million UA had to give to its counterparties. Further, AMR hasn't hinted at any $600 million additional exposure if oil remains at $80/bbl or falls further (as did UA). I realize that UA has the oft-mentioned $3.0 billion of unencumbered assets - but borrowing against those and realizing anywhere near that amount right now would be quite a feat. AMR said last week that it holds about $3.5 billion of assets against which it could borrow - and I call BS on that for the same reason as at UA. UA blamed much of its first quarter 2008 weakness on its lack of strength in warm-weather destinations - another advantage for AA in the fourth quarter of this year plus the first quarter of 2009. The Caribbean and S America strength will help AA for the next six months - perhaps balancing out (or beating) UA's Asian and European (with LH) strength. I'd conclude that AMR and UA are about even - each has reported some advantages over the other in this latest quarter, and each has a big challenge to arrive at next summer's busy travel season (if there is one) with a healthy cash balance. Best of luck to both. re UA's opperating loss, it was $150M: From the press release: Excluding the non-cash, net mark-to-market hedge loss and certain accounting charges outlined in note 5, in the third quarter of 2008 the company generated an operating loss of $150 million, versus operating income of $592 million last year primarily as a result of the $946 million increase in consolidated cash fuel expense. The significant increase in average cash fuel price caused the company to generate a net loss, excluding the non-cash, net mark-to-market hedge losses and certain accounting charges, of $252 million in the third quarter of 2008. Including the non-cash, net mark-to- market hedge losses and certain accounting charges, the company reported an operating loss for the quarter of $491 million and a net loss of $779 million. I think I quoted the same figure for AA (opp loss, after adjustments), but I may have gotten it wrong. re Hedging, for SW it has clearly been a plus, they just got hit this quarter, but UA has historically not had major hedges (certainly not at the percentage of use they had this quarter) and while they have benifited in the past, I would be curious if you added up the hedges sense BKR if they will be ahead, or behind. Lots of UA hedges at $133 per BBL |
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