United Airlines Holdings, Inc. · NASDAQ:UAL
United Airlines — UAL — JP Morgan High Yield Conference 2006
40 slides from United Airlines's conference presentation, Feb 7, 2006
Slide 1: United Airlines - JP Morgan High Yield Conference
United Airlines (NASDAQ: UAUA) Jake Brace - Chief Financial Officer JP Morgan High Yield Conference February 7, 2006
Slide 2: Safe Harbor Statement
Safe Harbor Statement The information included in this presentation contains certain statements that are "Forward-Looking Statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of assumptions, risks and uncertainties related t
Slide 3: United Airlines
United Airlines ... Emerged from bankruptcy with a solid and competitive platform, but more work to do Sharply focused on improving margins by further improving operations, reducing costs, and realizing revenue premiums Meeting distinct customer needs with differentiated products and services Buildi
Slide 4: Building On a Solid Foundation
Building On a Solid Foundation Restructure Focus on Core Enhance Long-Term Shareholder Value
Slide 5: Operating Earnings Have Continued To Improve Despite Rising Fuel Costs
2002 2003 2004 2005 Despite Rising Fuel Costs, Operating Earnings Have Continued To Improve $2.5 B $2.1 B Note: Excludes special items
Slide 6: United's Route Network Remains Superior
United's Route Network Remains Superior Source: OAG January 2006 *Measured by ASMs UA Better Than #2 CARRIER Departure Share Cities Chicago O'Hare +11 +15 Denver +26 +48 Los Angeles +11 +17 San Francisco +51 +54 Washington Dulles +67 +82 Nov 2002 Dec 2005 Cities Served 194 204 Routes Flown 411 456 D
Slide 7: Average Annual Savings Of $7 Billion
Wage & Benefits Work Rules and Scope Pension Aircraft Obligations UAX Contracts Productivity Municipal Bonds East 2.5 0.7 0.645 0.85 0.52 1.8 0.07 Average Annual Savings Of $7 Billion Sustainable labor savings, with no snap-back or re- opener provisions Fundamental changes to business processes Incr
Slide 8: Reductions In Labor Unit Cost Have Been Significant
Reductions In Labor Unit Cost Have Been Significant . . . Southwest America West Northwest Continental Delta American United US Airways East -0.098 0.013 0.025 0.075 0.183 0.247 0.251 0.496 West 0.068 32% *Adjusted for outsourcing Source: Form 41 data Outsourcing Increases Apparent Labor Savings
Slide 9: Non-Labor Unit Cost Will Be Improved Further
.. . . And Non-Labor Unit Cost Will Be Improved Further Northwest US Airways Southwest Continental United Delta America West American East -0.064 -0.05 0.076 0.096 0.06 0.156 0.189 0.2 0.063 12%* Outsourcing Decreases Apparent Non-Labor Savings *Adjusted for outsourcing Source: Form 41 data
Slide 10: Restructuring Achieved Substantial Balance Sheet Delevering
Restructuring Achieved Substantial Balance Sheet Delevering $Billion Pre- Restructuring Post- Restructuring Change Exit Facility $ - $ 3.0 $ 3.0 Secured Debt And Leases 15.9 9.6 (6.3) Unsecured Debt 1.2 - - (1.2) New Notes - 1.2 1.2 Pension Liability 7.1 0.1 (7.0) Post-Retirement Liability 4.7 2.1 (
Slide 11: Employees Engaged And Delivering Operational Excellence
Employees Are Engaged And Continue To Deliver Operational Excellence 2000 2001 2002 2003 2004 YTD Nov 05 United 61.4 73.5 84 83.3 79.7 78.5 Industry (Excl. UA) 75 79.1 82.3 83 78.4 78 Industry (Excl. UA) United 2000 2001 2002 2003 2004 YTD Nov 05 United 6.57 5.07 3.76 3.93 3.95 4.11 Industry (Excl.
Slide 12: United Is Now Highly Competitive
United Is Now Highly Competitive Complex governance structure Uncompetitive cost structure Excess capacity Severely overleveraged Limited scope, productivity and portfolio authority Pre-Restructuring Post-Restructuring Traditional governance structure $7 billion in average annual cost savings Resize
Slide 13: Competitive Position
Competitive Position
Slide 14: Operating Margin Is Competitive With Network Peers
Operating Margin Is Competitive With Network Peers *Based on TME 3Q05; 4Q05 not yet released Note: Excludes all special charges; US includes US Airways and America West AA CO WN UA US* NW* DL* US 0.5 0.3 10.8 -1.2 -3.1 -6.2 -9.6 Consolidated Operating Margin Four Quarters Ended 4Q05 or 3Q05 for Carr
Slide 15: Revenue Strategy Is Succeeding
Revenue Strategy Is Succeeding Mainline RASM Four Quarters Ended 4Q05 or 3Q05 for Carriers Not Yet Reported 10.54 10.52 10.46 10.41 9.76 9.33 8.9 AA NW* CO UA US* DL* WN ¢/ASM *Based on TME 3Q05; 4Q05 not yet released Sources: Company Press Release and Form 41 data Note: Excludes regional affiliates
Slide 16: CASM Is Competitive Yet Opportunities Remain
CASM Is Competitive Yet Opportunities Remain For Further Improvement Mainline CASM Excluding Fuel Four Quarters Ended 4Q05 or 3Q05 for Carriers Not Yet Reported NW* AA UA US* DL* CO WN 8.29 7.48 7.46 7.45 7.44 7.42 6.37 ¢/ASM *Based on TME 3Q05; 4Q05 not yet released Sources: Company Press Release a
Slide 17: Unit Earnings Are Competitive
Unit Earnings Are Competitive AA CO UA WN US* NW* DL* 3.06 3.05 2.95 2.54 2.32 2.23 1.9 Mainline Unit Earnings excluding Fuel Costs (RASM minus CASM ex Fuel) Four Quarter Ending 4Q05 or 3Q05 for Carriers Not Yet Reported ¢/ASM *Based on TME 3Q05; 4Q05 not yet released Sources: Company Press Release
Slide 18: Our Attention Is Now Focused On Further Improving Core Elements
Our Attention Is Now Focused On Further Improving Core Elements Restructure Focus on Core Enhance Long-Term Shareholder Value Improve Margins Continuous improvement in operations and costs Optimize resources Enhance productivity Maximize revenue premiums Optimize network Align services to customer s
Slide 19: Productivity Initiatives Will Result In Over $300 million In 2006 Benefits
Productivity Initiatives Will Result In Over $300 million In 2006 Benefits Comprehensive and extensive portfolio of initiatives impacting all aspects of the business Resource Optimization: depeak all hubs, tighten aircraft turns, reduce scheduled block time, improve schedule coordination Maintenance
Slide 20: International Redeployment Will Accrue More Benefits
AA UA CO NW DL US International ASMs 61 56 40 37 35 13 International Redeployment Will Accrue More Benefits As Routes Mature US Flag Carriers 2005 International ASMs (Billions) Source: company traffic releases
Slide 21: Network Strength Allows Distinctive Customer Services
Network Strength Allows United To Offer Distinctive Customer Services US Flag Carriers ASM Share Annual Traffic Growth from/ to N. America (2005-'2024) AA CO DL UA US ASMs 0.49 0.2 0.15 0.08 0.08 Latin America 5.1% DL AA UA CO NW US ASMs 0.23 0.22 0.18 0.18 0.12 0.08 Atlantic 4.6% Pacific UA NW CO A
Slide 22: Right Product, To The Right Customer, At The Right Time
Focusing On Providing The Right Product, To The Right Customer, At The Right Time Low Value Medium Value High Value Share of Population 66 26 8 Share of Revenue 43 26 31 Share of Revenue (%) Share of Population (%) Leisure Medium-Value High-Value Differentiated Customer Segmentation Strategy Maximiz
Slide 23: New Portfolio Of Products Supports Customer Segmentation
New Portfolio Of Products Supports Clear Customer Segmentation Economy Plus to Elite MP members Revised elite benefits in 2006 explus aircraft offers First Class and Economy Plus Re-launch International First and Business Class (2006-2008) p.s.SM in markets with extraordinary premium cabin demand No
Slide 24: Portfolio Allows the Right Aircraft and Service in Each Market
Portfolio Allows the Right Aircraft and Service in Each Market ... United Branded Network
Slide 25: Segmentation is Driving Results
.... and Segmentation is Driving Results Complimentary to Mileage Plus Elites and Customers on full fare tickets Expect $50 Million in 2006 Upsell Revenue Low-fare airline serving leisure destinations in the U.S. and Mexico Improvement Load Factor +2 pts Segment Margin +10 pts Premium transcontinent
Slide 26: Related Products And Services Generate Over $1.5 Billion
Related Products And Services Generate Over $1.5 Billion In Additional Revenue Contributes over $800 million to passenger and related revenue Attracts and retains high-value customers More than 45 million members enrolled Value unlocked through co-brand partnerships and database marketing
Slide 27: Related Products And Services Generate Over $1.5 Billion
Contributes over $700 million to revenues Maximizes value of belly space with low marginal cost Built-in fuel surcharge reduces exposure to fuel prices Contributes approximately $250 million to revenues Monetizes downtime at maintenance, airport & flight training facilities Related Products And Serv
Slide 28: United Airlines
United Airlines ... Emerged from bankruptcy with a solid and competitive platform, but more work to do Sharply focused on improving margins by further improving operations, reducing costs, and realizing revenue premiums Meeting distinct customer needs with differentiated products and services Buildi
Slide 29: United Airlines - February 7, 2006
United Airlines (NASDAQ: UAUA) February 7, 2006
Slide 30: Appendix
Appendix Length-of-Haul Adjusted PRASM Stage-Length Adjusted CASM Capitalization Non-GAAP to GAAP Reconciliations
Slide 31: Length of Haul Adjusted Mainline PRASM
UA CO AA NW* DL* WN* 10.11 10 9.78 9.65 8.2 7.17 Length of Haul Adjusted Mainline Passenger Revenue Per ASM (PRASM) Adjusted to industry average length of haul (1,250 miles) Sources: Company Press Release and Form 41 data *Based on TME 3Q05; 4Q05 not yet released Four Quarters Ending 4Q05 or 3Q05 fo
Slide 32: Stage-Length Adjusted Mainline CASM Excluding Fuel
Stage-Length Adjusted Mainline Cost Per ASM (CASM) Excluding Fuel Adjusted to industry average stage length (1,000 miles) Sources: Company Press Release and Form 41 data, excluding special and reorganization items *Based on TME 3Q05; 4Q05 not yet released Four Quarter Ending 4Q05 or 3Q05 for Carrier
Slide 33: Total Capitalization
Total Capitalization Total Secured Debt and Leases $12.6 69% Other Notes and Securities 1.2 6% Defined Benefit Pension Plans and Post- Retirement Benefits 2.2 12% PBGC Convertible Preferred 0.4 2% Book Equity 1.9 11% Total Capitalization $18.3 100% ($'s In Billions) Note: as of Feburary 1, 2006, pos
Slide 34: Debt
Debt Exit Facility $2.8 billion 6-year term loan and $200 million revolving credit, 1% annual amortization, LIBOR+375 basis points PBGC Securities $500 million 6% 25-year Senior Notes $500 million 8% 15-year Contingent Notes 8 tranches of $62.5 million to be issued between 2009 and 2017 Contingent u
Slide 35: Equity
Equity 5 million shares of 2% convertible preferred stock to PBGC 15-year term, convertible after two years Issued at stated/liquidation value of $100 per share 125 million shares of common stock 115 million shares to be distributed to unsecured creditors and employees 10 million (8%) reserved for i
Slide 36: Non-GAAP to GAAP Reconciliations
Non-GAAP to GAAP Reconciliations The Company believes that the reported non- GAAP financial results provide management and investors a better perspective of the Company's core business and on-going financial performance and trends by excluding special, reorganization items and fuel for comparative p
Slide 37: Pre-tax and Operating Earnings
Pre-tax and Operating Earnings
Slide 38: Mainline RASM, Unit Earnings, and Mainline PRASM
Mainline RASM, Unit Earnings, and Mainline PRASM ^ ^
Slide 39: Mainline CASM Ex-fuel And Stage Length Adjusted
Mainline CASM Ex-fuel And Stage Length Adjusted Mainline CASM Ex-fuel
Slide 40: Slide 40