United Airlines Holdings, Inc. · NASDAQ:UAL
United Airlines — Debt Investor Presentation (June 2020)
47 slides from United Airlines's debt investor presentation, Jun 15, 2020
Slide 1: MileagePlus Investor Presentation
MileagePlus Investor Presentation June 15, 2020
Slide 2: Forward-looking statements
2 Certain statements 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 subject to many risks and un
Slide 3: Certain Limitations; Non-GAAP Financial Measures
3 Certain Limitations The contents of this presentation are not to be construed as legal, regulatory, business, tax or accounting advice. You shoul d c onsult your own attorney, business advisor, tax advisor and accountant as to legal, regulatory, business, tax and accounting advice. Under no circum
Slide 4: Agenda
Agenda 1. Summary Overview 2. MileagePlus Overview 3. MileagePlus Key Highlights 4. MileagePlus Financial Overview 5. Transaction Structure Overview 6. United Recent Developments Appendix A: United liquidity and capitalization Appendix B: Non - GAAP Reconciliations
Slide 5: Summary Overview
Summary Overview
Slide 6: Executive summary
6 1 Figures as a percentage of United 2019 revenue and adjusted EBITDAR. Adjusted EBITDAR for UAL and EBITDA for MPH are non - GAAP m easures. Figure also includes cash flows from United For a reconciliation to GAAP, see Appendix B. 2 The Facility may be replaced or refinanced in whole or in part wi
Slide 7: United guidance and liquidity outlook
7 1 Operating expenses excluding special charges, salaries and related costs and depreciation is a non - GAAP measure and certain com ponents, including special charges, are not determinable at this time. Accordingly, United is not providing this guidance on a GAAP basis. 2 Non - GAAP measure that i
Slide 8: MileagePlus Overview
MileagePlus Overview
Slide 9: United Airlines' MileagePlus loyalty program overview
9 $5.3 billion 2019 cash flow from sales MileagePlus, established in 1981, is a global leader in loyalty; today, MPH is rated in the top 3 loyalty programs by value globally 1 1 Stifel: April 2020 Note; On Point Loyalty: ON POINT LOYALTY 2020 REPORT TOP 100 MOST VALUABLE AIRLINE LOYALTY PROGRAMS. 2
Slide 10: MileagePlus overview – earning and redeeming miles
10 ¹ Percentage of 2019 redemption volume. Spending on an MPH credit card or with MPH partners Flying on United or selected Star Alliance and other airline partners Members may also buy miles directly from MPH MileagePlus overview – earning and redeeming miles Ways Members Redeem Miles Ways Members
Slide 11: MileagePlus overview – illustrative miles earning transaction
11 1 Members may also acquire miles directly from MPH. 2 The price at which United buys miles from MPH is subject to adjustment such that MPH’s United related EBITDA margin (defined as the quotient of (i) United related revenue, minus MPH operating expenses excluding depreciation and amortization, m
Slide 12: MileagePlus overview – pricing and cash flow mechanics
12 ▪ Monthly / quarterly purchase of miles – Chase / Visa co - brand agreements recently extended into 2029 – 3 to 5 - year contracts for many other third - party partners – Purchase price per mile determined by partner contracts ▪ Monthly purchase of miles – Guaranteed minimum margin of 20% 1 – 20
Slide 13: Innovative financing backed by critical asset of United
13 4 3 ▪ First - priority security interest in critical IP , enhanced by bankruptcy - remote IP SPV and pledge of IP license ▪ Collection account provides access to cash collections at MPH ▪ Collection account structure and cash trap mechanism ensures that debt service 1 is paid out of gross cash co
Slide 14: MileagePlus Key Highlights
MileagePlus Key Highlights
Slide 15: Key highlights of MileagePlus program
15 Key highlights of MileagePlus program 1 2 3 4 5 MileagePlus is critical to United’s core business and drives enhanced revenue generation Premium and growing member base with attractive demographics and high retention Strategic partnerships with leading brands and relationships with non - United a
Slide 16: MileagePlus is critical to United's core business
16 MPH members contribute the majority of United’s flight revenue and have a higher growth rate 1 Adjusted EBITDAR for UAL and EBITDA for MPH are non - GAAP measures. For a reconciliation to GAAP, see Appendix B. ▪ MPH drives a material portion of United’s profitability – In 2019, MPH generated $1.8
Slide 17: MileagePlus drives revenue growth (cont'd)
17 ▪ MPH drives significant acceleration of revenue growth – flight revenues from members grew at an almost 10% CAGR from 2017 to 2019, approximately twice the growth rate for non - members ▪ For the 5 year period from Jan 2015 to Dec 2019, member yield (revenue per mile flown) was on average more t
Slide 18: Premium and growing member base with attractive demographics
18 1 Hub metros include New York, San Francisco, Chicago, Los Angeles, Houston, District of Columbia, and Denver. Premium and growing member base with attractive demographics and high retention 2 Age Demographics Years in Program Income Range Member Geography¹ MPH has a highly attractive member base
Slide 19: Member base retention and satisfaction (cont'd)
19 1 Active members are defined as MPH members who conducted flight or program activity in the past 18 months. 2 Based on 2017 data. 3 From July 2019 to December 2019. “NPS” refers to Net Promoter Score a customer research - based satisfaction score. Premium and growing member base with attractive d
Slide 20: Strategic partnerships with leading brands and other carriers
20 Strategic partnerships with leading brands and relationships with non - United air carriers and other partners 3 Partnership Type Air & Currency Partnerships (39) Non - Air Partnerships (51) Co - Brand / Payment Partnerships (21) Deep, long standing ecosystem of accrual and redemption partners: O
Slide 21: Diversity of cash flow driving stable performance
21 34 % 27 % 29 % 66 % 73 % 71 % $ 3,624 $ 5,072 $ 5,330 2017 2018 2019 Cash flow from sales to 3rd parties (M) Cash flow from sales to United (M) ▪ Over 70% of 2019 cash flows originated from 3rd parties (which include spend on co - branded credit card, other lifestyle retail/travel related activit
Slide 22: Resilient EBITDA independent of United performance
22 1 Defined as the ratio of miles issued to miles redeemed. 2 Adjusted EBITDAR for UAL and EBITDA for MPH are non - GAAP measures. For a reconciliation to GAAP, see Appendix B. Diversity of cash flow driving long - term track record of stable financial performance (cont’d) MPH has demonstrated resi
Slide 23: Strong margins and ability to control redemption costs
23 Attractive business model with strong and stable margins with the ability to nimbly control redemption costs Example Levers to Adjust Non - Air Redemption Expense MPH has full discretion to use various levers to change both the awards offered to program members and the value of these awards, whil
Slide 24: MileagePlus Financial Overview
MileagePlus Financial Overview
Slide 25: Growing program with engaged and loyal customers
25 Growing program with engaged and loyal customers Miles issued by MPH (YOY) Actual miles redeemed (YOY) United 80 % Other 20 % Travel 97 % Other 3 % Redemption breakdown Travel vs non - travel United % of travel Given majority of redemptions are travel related, redemption costs are expected to be
Slide 26: MileagePlus financials
26 1 2017 cash flow from sales to third - parties are impacted by the utilization of a $865 million prepayment of miles sold in earlie r years. ² Represents the change in the MileagePlus miles sold (in total and separately to United and third parties) for the period presented to the corresponding pe
Slide 27: COVID-19's impact on MPH cash flows
27 COVID - 19’s impact on MPH cash flows As demand for redemptions has decreased, miles returned to customers’ accounts for cancelled flights are exceeding new bookings ▪ Miles earned on United are down ~97% for April and May combined, which negatively impacts cash inflows for MPH – However, members
Slide 28: Transaction Structure Overview
Transaction Structure Overview
Slide 29: Transaction structure diagram
29 Licensing Fee Transfer of Mileage Plus IP 2 Cash payments (1) from United to MPH to purchase miles and (2) from MPH to United for mileage redemption governed by Intercompany Agreements 1 IPCO is indirectly wholly - owned by MPH; 2 MileagePlus IP (other than the Madrid IP) will first be transferre
Slide 30: Summary of key transaction terms (1/4)
30 Term Description Borrowers • Mileage Plus Holdings, LLC (“ MPH ” or “ Company ”) • Mileage Plus Intellectual Property Assets, Ltd. (newly - formed bankruptcy - remote - structured Cayman SPV to hold all IP collateral) (“ IPCO ”) Parent Guarantors • United Airlines Holdings, Inc. (“ Parent ”) • Un
Slide 31: Summary of key transaction terms (2/4)
31 Summary of key transaction terms (2/4) Term Description Security • Senior guarantees from (i) the Parent Guarantors and (ii) the Parent Subsidiary Guarantors • Senior secured guarantees from the Company Subsidiary Guarantors • First - priority perfected pledge (subject to permitted liens) of Unit
Slide 32: Summary of key transaction terms (3/4)
32 Summary of key transaction terms (3/4) Term Description Affirmative and Negative Covenants • Usual and customary for financings of this kind, including standard reporting covenants, separateness covenants with respect to IPCO and limitati on s on changes to the MileagePlus program and material mo
Slide 33: Summary of key transaction terms (4/4)
33 Summary of key transaction terms (4/4) Term Description Permitted Junior Indebtedness • Incurrence of additional junior secured debt will be permitted up to $750mm and subject to various conditions, including (i) rat ing agency confirmation, (ii) lien and payment subordination terms consistent wi
Slide 34: MPH License – summary of key terms (1/2)
34 MPH License – summary of key terms (1/2) Term Description Licensor • Mileage Plus Intellectual Property Assets, Ltd. (newly - formed, bankruptcy - remote Cayman special - purpose vehicle) (“ IPCO ”) Licensee • Mileage Plus Holdings, LLC (“ MPH ”) License Grant • IPCO grants to MPH an exclusive, r
Slide 35: MPH License – summary of key terms (2/2)
35 MPH License – summary of key terms (2/2) Description Termination Events • The following events will be T ermination Events under the MPH License : – Payment default (subject to materiality thresholds and cure periods to be agreed) – Breaches of covenants and representations and warranties under t
Slide 36: United Sublicense – summary of key terms (1/2)
36 United Sublicense – summary of key terms (1/2) Term Description Licensor • MPH Sublicensee • United Airlines, Inc. (“ United ”) Sublicense Guarantors • United Airlines Holdings, Inc. (“ UAL ”) and all “Subsidiary Guarantors” under the Facility Sublicense Grant • MPH grants UAL a non - exclusive,
Slide 37: United Sublicense – summary of key terms (2/2)
37 United Sublicense – summary of key terms (2/2) Description Termination Events • The following events will be Termination Events under the United Sublicense : – Payment default (subject to materiality thresholds and cure periods to be agreed); – Breaches of covenants and representations and warran
Slide 38: United Recent Developments
United Recent Developments
Slide 39: United recent demand trends
39 1 Reflects data through June 12, 2020. 2 Ticketed passenger revenue is a component of total passenger revenue. It excludes ancillary fees and frequent flyer revenue (i ncluding both passengers flying on awards and the deferred revenue associated with frequent flyer miles earned will traveling) am
Slide 40: Adjusting capital and operating expenditures to maintain liquidity
40 United is continually adjusting capital and operating expenditures to maintain a strong liquidity position ▪ On track to achieve more than $2.5 billion of reductions in adjusted capital expenditures, bringing expected full - year adjusted capital expenditures to below $4.5 billion – Stopped over
Slide 41: United plans to maintain strong liquidity position
41 1 Year - to - date have received $3.5B of proceeds; with $1.5B still expected to be received. 2 Potential CARES Act Secured Loan and MPH Facility have not yet been drawn. United plans to maintain strong liquidity position despite operating environment Term Loans Expects to have ~$17B of available
Slide 42: CARES Act offers United flexibility for future funding
42 CARES Act offers United flexibility for future funding ▪ United is receiving approximately $5.0 billion from the U.S. Treasury Department through the Payroll Support Program under the CARES Act in the form of an approximate $3.5 billion grant and an approximate $1.5 billion 10 - year loan which w
Slide 43: UNITED MileagePlus
UNITED 5 MileagePlus.
Slide 44: Appendix A: United liquidity and capitalization
44 Note: Common equity issuance, CARES Act items and Spare Engine Bridge were done after 3/31/2020; Revolving Credit Facility wa s u ndrawn as of 3/31/2020 1 Represents proceeds from equity issuance completed in April 2020. 2 Adjusted total debt is a non - GAAP measure that includes current and long
Slide 45: Appendix B: Reconciliation of GAAP to Non-GAAP financial measures
45 Appendix B: Reconciliation of GAAP to Non - GAAP financial measures UAL provides financial metrics, including earnings before interest, taxes, depreciation and amortization and aircraft rent (E BIT DAR), excluding special charges and nonoperating special items, and adjusted debt, that we believe
Slide 46: Appendix B: Reconciliation of GAAP to Non-GAAP (cont'd)
46 Appendix B: Reconciliation of GAAP to Non - GAAP financial measures (cont’d) (in millions) Three months ended March 31, Twelve months ended March 31, Year Ended December 31, MPH EBITDA 2020 2019 2020 2019 2018 2017 2016 2015 2014 Net income (GAAP) $426 $372 $1,632 $1,578 $1,625 $371 $1,214 $911 $
Slide 47: Appendix B: Reconciliation – Adjusted Debt (cont'd)
47 Appendix B: Reconciliation of GAAP to Non - GAAP financial measures (cont’d) UAL provides financial metrics, including earnings before interest, taxes, depreciation and amortization and aircraft rent (E BIT DAR), excluding special charges and nonoperating special items, and adjusted debt, that we
United Airlines Holdings — Debt Investor Presentation (June 2020) on 6ix