United Airlines Holdings, Inc. · NASDAQ:UAL
United Airlines — United Continental Holdings — JPMorgan Aviation, Transportation and Industrials Conference 2016
29 slides from United Airlines's conference presentation, Mar 8, 2016
Slide 1: JPMorgan Aviation, Transportation and Industrials Conference
JPMorgan Aviation, Transportation and Industrials Conference United Continental Holdings, Inc. March 8, Gerry Laderman – SVP Finance and acting Chief Financial Officer Doug Leo – SVP Revenue Management, Pricing and Network
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements included in this release are forward-looking and thus reflect our current expectations and beliefs with respect to certain current and future events and financial performance. Such forward-looking statements are and will be subject to many risks and uncertain
Slide 3: Focused on making United the best airline for employees, customers and shareholders
Focused on making United the best airline for employees, customers and shareholders Improve the operation Execute on revenue and network initiatives Continue sensible cost management Optimize capital allocation
Slide 4: Investing in people, processes and systems to drive further improvement
Investing in people, processes and systems to drive further improvement Employee engagement Tools & technology Out and back flying Operational simplification Consolidated arrival A:00 +6.1 pts 58.8% 52.7% FY1 FY1 Consolidated completion factor +1.5 pts 97.5% 96.0% FY1 FY1
Slide 5: Investing in people, processes and systems to drive further improvement
Investing in people, processes and systems to drive further improvement Employee engagement Out and back flying Tools & technology Operational simplification Consolidated arrival A:001 +15.8 pts 67.0% 51.2% YTD1 YTD1 Consolidated completion factor1 +0.3 pts 95.7% 96.0% YTD1 YTD1 1Through end of Febr
Slide 6: Focused on making United the best airline for employees, customers and shareholders
Focused on making United the best airline for employees, customers and shareholders Improve the operation Execute on revenue and network initiatives Continue sensible cost management Optimize capital allocation
Slide 7: Network and fleet themes support margin improvement
Network and fleet themes support margin improvement Grow capacity in line with demand Allocate capacity to maximize profitability Fly domestic more cost efficiently Improve segmentatio n & differentiatio n Expect 1Q16 PRASM to decrease 6%—8% year-over-year
Slide 8: Aligning capacity with demand to maximize revenue
Aligning capacity with demand to maximize revenue FY16 expected capacity Year-over-year change 1.0%—2.0% 2.1%—3.1% 1.5%—2.5% Domesti Internation Consolidate c al d ? Build capacity and network based on demand ? Overall capacity growth at or below GDP on average ? Shift capacity among markets to maxi
Slide 9: Reducing reliance on 50-seat aircraft…
Reducing reliance on 50-seat aircraft… seat aircraft fleet 318 ~60% decrease 254 238 <100 YE1 YE1 YE1 YE16 YE19 4 5 E E ? Address regional pilot shortage? Lower cost per seat? Improve reliability? Address customer preference ? Add ancillary revenue opportunities Source: SEC filings. YE16E as of Janu
Slide 10: Upgauging fleet drives margin expansion while also addressing regional pilot shortage
Upgauging fleet drives margin expansion while also addressing regional pilot shortage Average seats/departure Year-over-year change FY16E consolidated capacity 7.0% Year-over-year change ~5.0% ~5.0% 1.5%—2.5% 31% 3. (~2.0%) (~1.0%) Gaug Departure Stage Capacit e s Lengt y (0.5%) h FY1 FY1 FY1 FY16 4
Slide 11: Current structure features misalignment between customer willingness to pay, fares, and product/extras
Current structure features misalignment between customer willingness to pay, fares, and product/extras Customer type Fares Product/extras High value Average Pure price Lowest available fares Premier benefits Regular and ancillary No frills
Slide 12: Entry level fares permit us to better align products/extras and prices with segmented expectations
Entry level fares permit us to better align products/extras and prices with segmented expectations and willingness to pay Customer type Fares Product/extras High value Average Pure price Lowest qualifying fare Entry level fares Premier benefits Regular and ancillary No frills
Slide 13: Focused on making United the best airline for employees, customers and shareholders
Focused on making United the best airline for employees, customers and shareholders Improving long-term shareholder value Execute on revenue and network initiatives Continue sensible cost management Optimize capital allocation
Slide 14: Demonstrating good cost performance through a business cycle
Demonstrating good cost performance through a business cycle Non-fuel CASM1 Year-over-year change ~2.5% ~1.5% Pilot agreement FY14 FY16E 13%. Average ~1.0% Excluding 0.5%—1.5% new labor agreements (0.7%) FY1 FY1 FY16 5 E 1Excluding special charges, fuel, third-party business and profit sharing expen
Slide 15: Making good progress in improving efficiency and reducing non-fuel costs
Making good progress in improving efficiency and reducing non-fuel costs Annual non-fuel savings ($M) Maintenance Productivity Real estate $1,000 $800 $380 FY1 FY1 FY16 5 E
Slide 16: Will remain flexible in our management of future fuel expense
Will remain flexible in our management of future fuel expense Focus on outlook for net fuel exposure, net of potential revenue impact Build risk profile Continually assess considering ability to absorb or competitive self-insure net fuel environment exposure Hedge when mitigating net fuel exposure i
Slide 17: Focused on making United the best airline for employees, customers and shareholders
Focused on making United the best airline for employees, customers and shareholders Improve the operation Execute on revenue and network initiatives Continue sensible cost management Optimize capital allocation
Slide 18: Generating meaningful cash flow
Generating meaningful cash flow Operating cash flow Free cash flow1 ($B) ($B) $6.0 $2.5 $2.6 $1.4 $0.9 ($0.5) ($0.9) ($1.6) FY1 FY1 FY1 FY1 3 4 5 FY1 FY1 FY1 FY1 3 4 5 1For a GAAP to Non-GAAP reconciliation, see Appendix A
Slide 19: Optimize capital allocation
Optimize capital allocation Invest in Continue to make investments to support business priorities business Strengthen the Achieve investment grade balance sheet and well-funded balance sheet pension plans Shareholder On track to complete $3B share repurchase authorization in compensation 2016 Mainta
Slide 20: Investing in aircraft to support business priorities
Investing in aircraft to support business priorities Increase mainline flying to address Accelerate 747 Re-invest in existing regional pilot retirements fleet shortage
Slide 21: Recent fleet announcements
Recent fleet announcements Placed order for 25 737-700 aircraft Accelerating 747 retirement to 2018 In order to meet capacity needs, while also accelerating 747 retirements, converting 787s originally planned for delivery beyond 2019 into five 787-9s and four 777-300ERs with delivery beginning in 20
Slide 22: United's balance sheet is well positioned among peers
United’s balance sheet is well positioned among peers 2015 debt, pension, and post-retirement obligations1 ($ B) Invest in business $36.9 Strengthen the $ 23.8 balance sheet $20.4 $29.3 $10.1 $17.0 Shareholder $13.7 compensation $7.6 $3.4 UA DA AA L L L Debt Pension & post-retirement 1: Year-end 201
Slide 23: Significant progress in lowering interest expense and increasing unencumbered asset base
Significant progress in lowering interest expense and increasing unencumbered asset base Annual interest expense Unencumbered assets3 ($M) ($ B) (~35%) $1,047 $ 8.6 $ 3.5 $ 5.1 $669 $0.6 $0.3 $0.4 FY 1 FY YE 1,2 YE16 10 15 E 12010 data is pro forma 10 4 2Numbers may not sum due to rounding Aircraft
Slide 24: Have increased the pace of the buyback
Have increased the pace of the buyback Share repurchases ($M) Invest in business ~$1,500 Strengthen the balance sheet $520 $200 $250 $262 Shareholder compensation 1Q1 2Q1 3Q1 4Q1 1Q16 2 5 5 5 E % shares repurchased1 ~1% ~2% ~3% ~6% ~13% Cumulative percent of shares repurchased since end of 4Q14 1Q16
Slide 25: Focused on making United the best airline for employees, customers and shareholders
Focused on making United the best airline for employees, customers and shareholders Improve the operation Execute on revenue and network initiatives Continue sensible cost management Optimize capital allocation
Slide 26: Slide 26
Slide 27: 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 income (loss) before income taxes excluding special i
Slide 28: Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued)
Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued) Return on invested capital (ROIC) is a Non-GAAP financial measure that we believe provides useful supplemental information for management and investors by measuring the effectiveness of our operations’ use of invested capi
Slide 29: Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued)
Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued) Twelve Months Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended Capital Expenditures (in millions) December 31, 2015 December 31, 2014 December 31, 2013 December 31, 2012 Capital Expenditures ? GAAP $2,747