United Airlines Holdings, Inc. · NASDAQ:UAL
United Airlines — United Continental Holdings — Investor Presentation (January 2018)
43 slides from United Airlines's investor presentation, Jan 23, 2018
Slide 1: Investor Update January 23, 2018
Investor Update January 23, 2018 Exhibit 99.1
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements included in this presentation are forward-looking and thus reflect our current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance. Such forward-looking statements are and will be subj
Slide 3: Chief Executive Officer Oscar Munoz
Chief Executive Officer Oscar Munoz
Slide 4: Agenda
Agenda Fourth-quarter and full-year 2017 results 2018 priorities United’s network and commercial strategy Financial update including full-year 2018 EPS and long-term EPS guidance Greater accountability and transparency
Slide 5: 4Q17 pre-tax margin exceeded guidance due to revenue and cost improvements
4Q17 pre-tax margin exceeded guidance due to revenue and cost improvements Pre-tax margin1 (%) Revenue outperformed as close-in bookings firmed 4Q PRASM of 0.2% vs. initial guidance of (3.0%) – (1.0%) Positive momentum in all regions going into 2018 Better cost performance driven by improved reliabi
Slide 6: Set strong foundation in 2017
Set strong foundation in 2017 Announced new $3B share repurchase program Rebanked Houston and expanded hub connectivity Strong relative non-fuel CASM Record breaking operational performance Earnings per share, diluted1 1 For a GAAP to non-GAAP reconciliation, see Appendix A
Slide 7: 2017 had the best operational performance in United history
2017 had the best operational performance in United history D:001 Completion factor1 1 Includes both mainline and regional operation Note: History as defined by time since the merger of United and Continental in October 2010 A:001
Slide 8: Operational reliability, service and experience underpin customer strategy
2014 (8 of 8) 2017 2015 (7 of 9) 2016 (51 of 9) Operational reliability, service and experience underpin customer strategy Rankings based on on-time performance, cancellations, MBR, complaints and IDB 1 Tied with JetBlue 2 American Airlines and US Airways merged in 2014; Alaska and Virgin America me
Slide 9: 2018 priorities – continued top-tier operational reliability is the foundation
2018 priorities – continued top-tier operational reliability is the foundation Strengthening our domestic network through growth Driving efficiency and productivity Continue investing in people, product and technology Our strategy drives sustainably higher profits and margins
Slide 10: President Scott Kirby
President Scott Kirby
Slide 11: Network strategy – outlook
Network strategy – outlook Network is our foundation Leverage our strengths “Uniquely United” opportunities Our network has tremendous potential – capitalizing on our strengths and improving our hub quality Other commercial elements require a strong network to succeed Overall strategy returns United
Slide 12: Network strength – strong international gateways
Network strength – strong international gateways Note: Totals are daily each way; demand aggregated for cities with multiple airports (NYC includes Newark, JFK, and LaGuardia; LA includes Burbank, Long Beach, Ontario, and Orange County; Miami includes Miami and Fort Lauderdale; SF includes Oakland,
Slide 13: Network strength – membership in best alliance provides greatest reach
Network strength – membership in best alliance provides greatest reach 28 191 18,400 member airlines countries served daily departures 20 177 16,609 member airlines countries served daily departures 15 157 13,199 member airlines countries served daily departures Star Alliance is the largest with wha
Slide 14: Each mid-continent hub has unique strengths
Each mid-continent hub has unique strengths ORD IAH DEN Connecting North-East, Midwest and West 3rd largest local market Southern tier transcontinental traffic Complemented by Latin America network Best hub for Mountain region Transcontinental traffic ORD, DEN and IAH all complement one another
Slide 15: Opportunity – mid-continent hubs not yet fulfilling their potential
Opportunity – mid-continent hubs not yet fulfilling their potential Hub scale UA hubs have lower connectivity than peers Hub profitability directly correlated with hub connectivity and is the most important element of a hub’s success Connectivity UA shrank without reducing fixed costs Asset efficien
Slide 16: International gateway hubs outperform our competitors
International gateway hubs outperform our competitors Hub type Margin gap International gateway1 ~7 pts Hub type and margin breakdown Mid-continent domestic hub quality3 Mid-continent flow2 ~(10) pts Hub scale – mid-continent hubs account for margin underperformance United mid-continent hubs have lo
Slide 17: Hub scale – shrinking invites competitive capacity growth
Hub scale – shrinking also invites competitive capacity growth in our hubs 2011 – 2016 seat growth (Legacy carriers) Note: Seat growth % rounded to nearest whole number; United hubs: SFO, LAX, DEN, IAH, ORD, CLE, IAD, EWR; AA hubs: LAX, PHX, DFW, ORD, CLT, MIA, DCA, PHL, JFK; DL hubs: SEA, LAX, SLC,
Slide 18: Hub scale – growth opportunities in mid-continent hubs are unique to United
Connecting itineraries (x1000) (Average of top mid-continent flow hubs) Hub destinations served (Weighted average of top mid-continent flow hubs) Hub departures to spoke (Weighted average of top mid-continent flow hubs) Depth Breadth Connectivity 16.8 Hub scale – growth opportunities in mid-continen
Slide 19: Connectivity - rebanking drives significant connection opportunities
Connectivity - rebanking drives significant connection opportunities Pre rebank (10 Directional banks) Post rebank (8 Omni-directional banks) LAS #1 accesses 10 net new connections (+21%) Example: LAS 1st departure New spokes in bank Connections moved to another bank Unchanged connections Hub 2018 v
Slide 20: Revenue quality – less exposed to smaller, higher-yield markets
Revenue quality – we are less exposed to smaller, higher-yield markets 1 Length of haul (LOH) adjusted yield; normalized to 1,400 miles. Note: small markets are <1.6M industry passengers per year, medium markets 1.6-6M industry passengers per year, large markets >6M industry passengers per year Sour
Slide 21: Asset efficiency - off-peak capacity reduced but costs remain the same
Asset efficiency - United reduces capacity in off-peak, but costs remain the same 1 Diio Schedule Data; Domestic and Canada United domestic seasonality1 Percent of peak month Airline has same number of gates, aircraft and employees in all months United shrank in off peak months (RASM maximizing) wit
Slide 22: We will track progress along four dimensions
Hub scale Spokes: % of spokes where UA ranks #1 or #2 35% Connectivity Flow traffic mix 57% Revenue quality Share of traffic in small markets 26% Asset efficiency Schedule seasonality (January ASM / highest month) 77% Profitability (Domestic + International) Pre-tax margin Pre-tax margin ex-specials
Slide 23: Our strategy drives sustainably higher profits and margins
Our strategy drives sustainably higher profits and margins Overall, expect 2018 capacity growth of 4.0% - 6.0% Expected highest level of growth in domestic region in order to improve connectivity and regain relevance Anticipate similar growth rate in 2019 – 2020 4.0% - 6.0% YOY consolidated ASM grow
Slide 24: Executive Vice President and Chief Commercial Officer Andrew Nocella
Executive Vice President and Chief Commercial Officer Andrew Nocella
Slide 25: Network is our starting point, surrounded by other commercial initiatives
Network is our starting point, surrounded by other commercial initiatives A stronger network is good for customers and shareholders Network design and alliances Revenue management and pricing Sales and distribution Products and services MileagePlus and co-brand credit card
Slide 26: Gemini revenue management test results
UA System Q3 YOY Gross RASM by YOY Capacity Growth Gemini expected to contribute 70 bps of PRASM improvement in 2018 Gemini vs. Orion test results1 Yield PRASM 1 Stage 1.1 Test ended on Nov 14th and included markets representing 10% of System revenue over a 10-week travel period Note: Gemini is the
Slide 27: Expanding segmentation initiatives
United® Premium Plus Basic Economy Currently offered on the bottom 5 fare buckets In 2018, we plan to: Implement more dynamic buy-ups Sell seat assignments Expand Rollout begins in 2018 To be introduced on long-haul fleet 3-year implementation Expanding segmentation initiatives
Slide 28: 2018 PRASM – initiatives expected to moderate impact of high growth
YOY 2018 Gross PRASM at +1.0% YOY 2018 PRASM drivers (Contribution in % pts) 2018 PRASM – initiatives expected to moderate the impact of high growth (0.5) – (1.0) OA competitive growth UA relative growth Higher growth expected to drive a PRASM headwind Smaller gauge increases exposure to high yield/
Slide 29: Executive Vice President and Chief Financial Officer Andrew Levy
Executive Vice President and Chief Financial Officer Andrew Levy
Slide 30: Improving profitability while growing the network
Improving profitability while growing the network Improve efficiency and productivity Provide long-term CASM-ex1 guidance Accountable for higher profitability Focus on CASM Introduce 2018 EPS guidance Introduce 2020 EPS target A strong balance sheet is the foundation – maintaining $5B - $6B of liqui
Slide 31: Non-fuel CASM growth meaningfully lower in 2018 and beyond
Improved asset utilization Higher employee productivity Aircraft lease to own Increased operational efficiency given improved reliability CASM and non-fuel CASM1 H/(L) YOY Non-fuel CASM growth meaningfully lower in 2018 and beyond Headwinds Tailwinds 1 For a GAAP to non-GAAP reconciliation, see Appe
Slide 32: Productivity – labor, aircraft and ground assets
Productivity – labor, aircraft and ground assets Productivity (ASMs/FTEs) Mainline aircraft utilization (Departures/aircraft per day) Gate utilization (Average turns per gate on a peak day1) 1 Peak Thursday in July More effectively utilizing existing assets across the business
Slide 33: Capital expenditures in 2018 expected to be $3.6B - $3.8B
Capital expenditures in 2018 expected to be $3.6B - $3.8B 24 scheduled aircraft deliveries in 2018 Opportunistic purchases of aircraft off-lease Continue to invest in product, technology and infrastructure 2019/2020 capex expected to be higher than 2018, but below 2017 Adjusted capital expenditures1
Slide 34: Fleet plan provides flexibility in an economic downturn
Fleet plan provides flexibility in an economic downturn Aircraft count Flexibility in mainline fleet (Aircraft at year-end) Levers to manage fleet through 2020 ~120 Includes: ~90 aircraft eligible to return to lessor Lease expirations Used aircraft Manage order book
Slide 35: 2018 Guidance
2018 Guidance Non-fuel costs1 EPS, diluted2 Capex 4.0% to 6.0% (1.0%) to flat $6.50 to $8.50 $3.6B to $3.8B Capacity 1 Excludes fuel, profit sharing, third-party business expense and special charges, the nature and amount of which are undeterminable at this time. For a GAAP to non-GAAP reconciliatio
Slide 36: Reaching financial targets will guide our long term network strategy
Reaching financial targets will guide our long term network strategy $11.00 - $13.00 $6.50 - $8.50 Target earnings per share, diluted2 1Compound annual growth rate 2Excludes special charges, the nature of which are not determinable at this time. Accordingly, the company is not providing earnings gui
Slide 37: Chief Executive Officer Oscar Munoz
Chief Executive Officer Oscar Munoz
Slide 38: Closing
Closing Strengthening our hubs is a critical foundation to maximize profitability Driving revenue improvements from all areas of business Improving efficiency and productivity Greater accountability and transparency Moving to annual guidance with 2018 EPS range Providing multi-year network growth st
Slide 39: UNITED
UNITED
Slide 40: Appendix A: reconciliation of GAAP to Non-GAAP financial measures
Appendix A: reconciliation of GAAP to Non-GAAP financial measures UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (GAAP) and Non-GAAP financial measures, including pre-tax income and pre-tax margin excluding special c
Slide 41: Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued)
Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued) Cost per available seat mile (CASM) is a common metric used in the airline industry to measure an airline’s cost structure and efficiency. UAL reports CASM excluding profit sharing, third-party business expenses, fuel, and
Slide 42: Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued)
Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued) Year Ended December 31, Earnings per share, excluding special charges 2017 Diluted earnings per share $7.02 Less: special charges and hedge adjustments 0.58 Less: tax effect related to special charges and hedge adjustments
Slide 43: Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued)
Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued) UAL believes that adjusting capital expenditures for assets acquired through the issuance of debt and capital leases, airport construction financing and excluding fully reimbursable projects is useful to investors in order
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