United Airlines Holdings, Inc. · NASDAQ:UAL
United Airlines — Investor Day (June 2021)
47 slides from United Airlines's investor day presentation, Jun 29, 2021
Slide 1: Investor Event June 29, 2021
Investor Event June 29, 2021
Slide 2: Forward-looking statements
Certain statements in this presentation are forward-looking and thus reflect the Company's 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
Slide 3: The airline customers choose to fly; United Next; Financial targets
The airline customers choose to fly Scott Kirby, Chief Executive Officer United Next Andrew Nocella, EVP & Chief Commercial Officer Financial targets Gerry Laderman, EVP & Chief Financial Officer United Next
Slide 4: The airline customers choose to fly
The airline customers choose to fly Scott Kirby, Chief Executive Officer
Slide 5: Maximizing competitive advantages to de-commoditize air travel
United, like other airlines, is increasingly focused on maximizing individual competitive advantages to de-commoditize air travel Capitalizing on United's unique competitive advantages ▪ ‘United Next’ is much more than an aircraft purchase ▪ Only airline with hubs in seven of the largest and most pr
Slide 6: United Next
United Next Andrew Nocella, EVP & Chief Commercial Officer
Slide 7: Recall: 2018 transformation of mid-continent hubs
Recall: In 2018, began transformation of our mid-continent hubs Returns immediately positive, margin2 gap to other mid-continent hubs began to close as projected Margin1 gap to industry closed by ~2 points 2018-2019 Required fixing depth, breadth, connectivity Identified 10-point margin2 gap to simi
Slide 8: United Next: strengthening our position as the airline customers choose
‘United Next’ Strengthening our position as the airline our customers, travel agency partners, and corporate clientele choose Premier Global Carrier Signature product | Global | Higher margin | CASM-ex1 ~(8%) lower De-commoditize and differentiate versus others Correct gauge gap and optimize premium
Slide 9: Two different types of hubs; small gauge is correctable
United operates from two different types of hubs Small gauge is an easily correctable gap in both our mid-continent hubs and coastal gateways As before: Gauge, scale, and connectivity growth Facility constraints limit departure growth: Gauge lowers CASM-ex1 and offers better product Denver Coastal G
Slide 10: Hubs in the largest markets with most international demand
Recall: Our hubs are in the largest markets and business centers, with the most international demand D e n v e r N e w Y o rk S a n F ra n c is c o D a lla s C h ic a g o L o s A n g e le s M ia m i A tl a n ta W a s h in g to n D .C . H o u s to n S e a tt le M in n e a p o lis Passenger demand Tot
Slide 11: Long-haul network outperformed peers, even pre-crisis
United’s long-haul network outperformed peers, even pre-crisis Competitors went out of business, retired large widebody fleets, and are eliminating “strategic” flying ~9 pt ~16 pt ~8 pt PacificAtlanticDeep South America Overall Long-Haul ~0 pt Another uniquely United advantage, global flying has bee
Slide 12: Dependence on single-class 50-seaters limits domestic potential
However, we have not realized our full potential domestically because we have been dependent on single-class 50-seaters Gauge is an opportunity largely already addressed by industry – unique tailwind for United 104 114 175 Legacy Peers (Average) United U/LCC (Average) North America gauge (July 2019)
Slide 13: United Next retires 200+ single-cabin regional jets by 2026
‘United Next’ plan retires 200+ single-cabin regional jets by 2026 Source: Diio (2019, percent of Domestic departures, includes Canada); Internal schedules E Estimated 2026, internal network schedule projection Midwest hub departures on single-cabin regional jets 18% 19% 28% 42% ORDMSP DTW ORD Unite
Slide 14: Replacing regional jets requires narrowbodies
Replacing regional jets requires narrowbodies, announced today Gauge – Boeing 737 MAX 10 and Airbus A321neo are the largest in their class, will join the fleet in 2023 27% 4% Legacy Peers United ~33% United NextE +~30pts 1 Large narrowbodies (181+ seats) as a percent of total narrowbodies in fleet E
Slide 15: Gauge improves connectivity and strengthens hubs
Improving connectivity with gauge remains key to strengthening our hubs 1 “Small Cities” – the smallest Continental US airports that, in aggregate sum to 25% of Continental US departing seats (a total of the smallest 92% of airports) Source: Diio FY19; Share from MIDT for pax traveling abroad excl.
Slide 16: Improved connectivity leapfrogs competition in mid-continent hubs
Improved connectivity leapfrogs competition in mid-continent hubs Connectivity – adding bank scale without a need to grow above our facility capabilities 42% 10% 65% Legacy Peers United United NextE +55 pts 2019 Plan to increase average bank size by 15 flights from 2019 to 2026 % of banks ≥ 70 depar
Slide 17: Modern fleet closes structural gap; 134 seats by 2026
Modern, fuel-efficient fleet will close structural gap by 2026 Gauge – optimized for United’s seven hubs at 134 seats by 2026 104 109 ~134 2019 2026E2022E + ~30 seats per departure through 2026 on our North American fleet Total seats per short-haul departure North America mainline + regional fleet U
Slide 18: Narrowbodies enable premium seat growth
Narrowbodies enable premium seat growth; match United hub demographics Product differentiation 2019 2026E2022E 31 39 53 +~75% Premium seats per short-haul departure North America fleet Economy Plus® United FirstSM Premium seating will grow faster than non-premium E Estimated, based on latest interna
Slide 19: CRJ-550 differentiated from other 50-seaters
CRJ-550 differentiated from other 50-seaters United FirstSM Economy Plus® 1:1 carry-on capacity Onboard snack bar CRJ-550 deployment focused on Newark and Chicago, closing competitive gaps 19 CRJ-550: Uniquely United product for smaller, competitive markets matches United hub demographics
Slide 20: More premium widebody seats than competitors
Matching capacity to premium demand; more seats than competitors Product differentiation – international widebodies 44 32 63 United Foreign Flag Legacies1 Legacy Peers +40% Largest widebody premium cabins amongst U.S. legacy airlines We lead U.S. competitors in premium cabin seats United hub demogra
Slide 21: Signature interiors on all mainline jets by 2025
New leading and differentiated signature interiors on all mainline jets planned by 2025 Customer experience – enhancements for all cabins, turbocharging NPS Today, United took delivery of its first Boeing 737 MAX 8, the first aircraft with our signature interior 21 Signature interior features 1:1 ov
Slide 22: Culture change drives higher NPS scores
Culture change, improved customer focus drive higher NPS scores Customer experience FY 2020FY 2019 2021 YTD +36 pts Net Promoter Score1 1 Source: United NPS survey; data through 6/6/2021 2 Source: J.D. Power North America Airline Satisfaction Study (2021 vs. 2020 overall satisfaction improvement) 20
Slide 23: United Next fills six structural gaps
‘United Next’ plan will fill six structural gaps to achieve our potential Gauge impacts most structural gaps positively 1 Refers to North America gauge by 2026 2 Banks with 70 departures or more Note: Mid-continent hubs are DEN, IAH, ORD; all percentage figures represent estimated 2026 as compared t
Slide 24: Growth will primarily come from gauge
‘United Next’ growth will primarily come from gauge Better for customers and CASM-ex1 Expected capacity growth 2019-2026 CAGR2 Our plan maintains an approximately 50/50 split of international and domestic revenue over many years Higher gauge 2-4% New routes ~1% Increased frequency ~1% 4-6%Total 24 1
Slide 25: Premium seat growth provides unit revenue tailwinds
Premium seat growth and lower stage length will provide unit revenue tailwinds Domestic Economy1 seats only represented 30% of revenue in 2019; set to drop further 25 Domestic seat growth leans towards premium cabins, lowering reliance on economy revenue 73% Other70% 30% 2019 27% 2026 Domestic Econo
Slide 26: These opportunities are uniquely United
These opportunities are uniquely United These opportunities provide us a pathway to success even with elevated industry domestic capacity growth Uniquely United opportunities will provide unit revenue upside Network/fleet initiatives – drive cost tailwinds ▪ Building connectivity and scale ▪ Proven
Slide 27: Financial targets
Financial targets Gerry Laderman, EVP & Chief Financial Officer
Slide 28: Cost targets drive profitability and stronger balance sheet
'United Next' cost targets will drive greater profitability and more secure balance sheet $2B+ structural cost savings ~11% better fuel efficiency2 Cost-efficient growth ~30% gauge1 increase 1 Assumes 30 seat increase on 2019 average North America gauge of 104 seats; 2 Defined as fuel gallons consum
Slide 29: Over $2B of structural cost savings
Implementing over $2B of structural cost savings independent of gauge increase Streamlined management Productivity improvements through automation and process redesign ~$1.3B: Workforce efficiency Economies of scale through vendor consolidation Opportunistic contract renegotiations Reducing real est
Slide 30: Gauge increase provides CASM-ex tailwind
'United Next' gauge1 increase provides significant CASM-ex2 tailwind versus older and smaller aircraft 1 Assumes 30 seat increase on 2019 average North America gauge of 104 seats; 2 CASM-ex (operating expense per available seat mile) excludes fuel, profit sharing, third-party business expenses and s
Slide 31: Aircraft order provides cost-efficient growth
Aircraft order provides cost-efficient growth opportunity ▪ Efficient growth with improved productivity reduces average labor cost ▪ Better utilization of gates, facilities, and overhead means only a modest increase in fixed cost base United can grow with marginal CASM-ex1 below 6¢ 1 CASM-ex (operat
Slide 32: New large narrowbodies significantly reduce fuel burn
New generation large narrowbody aircraft provide significant fuel burn reduction 1 Measured as fuel cost per seat at 700 mile stage length Newer aircraft are at least 50% more fuel efficient per seat than our least efficient fleets $36 $25 $16 MAX950 seat RJ A319 (56%) Fuel cost per seat1 32
Slide 33: United Next results in ~8% lower CASM-ex in 2026
'United Next' plan results in ~(8%) lower CASM-ex1 in 2026 compared to pre-crisis levels 1 CASM-ex (operating expense per available seat mile) excludes fuel, profit sharing, third-party business expenses and special charges. CASM-ex is a non- GAAP financial measure. The Company is not able to provid
Slide 34: New orders complement existing orderbook
New orders complement existing orderbook Aircraft deliveries Capacity CAGR1 4.0% to 6.0% through 2026 40 54 168 54 68 132 40 138 2022 2023 16 2024+ 354 Existing orders New Boeing 737 MAX order New Airbus A321neo order 1 Compound Annual Growth Rate versus 2019 34
Slide 35: Flexibility to manage macro environment
We will retain significant flexibility to manage macro environment From 2023-2026, up to 275 aircraft can be retired, driving fuel efficiency and improved CASM-ex1 New aircraft can be used for growth or replacement Delivery timing can be adjusted in response to macro environment Delivery timing flex
Slide 36: Projected near-term capital investment
Projected near-term capital investment Expected adjusted capital expenditures1 ($B) 1 Non-GAAP measure that includes projects acquired through the issuance of debt and finance leases. Non-cash capital expenditures are not determinable at this time. Accordingly, United does not provide capital expend
Slide 37: Cost improvements enable earnings expansion
‘United Next’ cost structure improvements will enable earnings expansion Expect margin growth even if TRASM is down ~(4%) in 2023 and down ~(1%) in 2026, versus 2019 1 Adjusted EBITDA margin is a non-GAAP financial measure calculated as Earnings Before Interest, Taxes, Depreciation and Amortization
Slide 38: Cash flow and free cash flow conversion
Cash flow Expect operating cash flow to cover our adjusted capital expenditures in 2022 through 2024 80%+ 2019 58% 2026E Adjusted free cash flow conversion1 Targeting at least 80% free cash flow conversion1 in 2026+ 1 Defined as adjusted free cash flow divided by adjusted net income. Adjusted free c
Slide 39: Balance sheet restoration in 2026 to pre-crisis levels
Adjusted net debt1 ($B) Balance sheet restoration in 2026 to pre-crisis levels Adjusted total debt2 to adjusted EBITDAR3 $18 <$18 2019 $25 2021 2023 2026 $25 3.2 <4.0 2019 NM 2021 2023 2026 <2.5 1 Adjusted net debt is a non-GAAP measure defined as adjusted total debt less cash and cash equivalents a
Slide 40: Efficient growth with ~30 more seats per departure by 2026
Efficient growth with ~30 more seats per departure by 2026 ~(8.0%) lower CASM-ex2 in 2026 versus 2019 Uniquely United opportunities to capture premium revenue ‘United Next’ will ensure higher margins and result in a stronger balance sheet Revenue Gauge1 and network Unit cost improvement 1 North Amer
Slide 41: Appendix
Appendix
Slide 42: Financial targets
Financial targets FY19 FY23E FY26E Capacity (CAGR1 vs. 2019) 285M 4% - 5% 4% - 6% TRASM (vs. 2019) 15.18¢ ~(4%) ~(1%) CASM-ex2 (vs. 2019) 10.21¢ ~(4%) ~(8%) Fuel price / gallon $2.09 $2.07 $2.20 Adj. EBITDA margin3 15.7% ~16% ~20% Adj. pre-tax margin4 9.4% ~9% ~14% Adj. net debt ($B)5 $18 $25 < $18
Slide 43: Appendix A: reconciliation of GAAP to Non-GAAP financial measures
Appendix A: reconciliation of GAAP to Non-GAAP financial measures United evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (GAAP) and Non-GAAP financial measures, including adjusted earnings before interest, taxes, deprecia
Slide 44: Reconciliation: CASM-ex, year ended December 31, 2019
Appendix A: reconciliation of GAAP to Non-GAAP financial measures Year Ended December 31, 2019 CASM (cents) Cost per available seat mile (CASM) (GAAP) 13.67 Special charges 0.09 Third-party business expenses 0.06 Fuel expense 3.14 Profit sharing 0.17 CASM, excluding special charges, third-party busi
Slide 45: Reconciliation: adjusted EBITDA, EBITDAR and net debt
Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued) Adjusted EBITDA and adjusted EBITDAR (In millions) Year Ended December 31, 2019 Total Operating Revenue $ 43,259 Net income 3,009 Adjusted for: Depreciation and amortization 2,288 Interest expense, net of capitalized inter
Slide 46: Reconciliation: adjusted pre-tax income and margin
Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued) Adjusted pre-tax income and adjusted pre-tax margin (In millions) Year Ended December 31, 2019 Year Ended December 31, 2018 Total Operating Revenue 43,259 41,303 Pre-tax income (loss) (GAAP) 3,914 2,648 Adjusted to exclude
Slide 47: Reconciliation: free cash flow, adjusted net income, FCF conversion
Appendix A: reconciliation of GAAP to Non-GAAP financial measures (continued) Free Cash Flow (FCF), Adjusted Net Income, and FCF Conversion (In millions) Year Ended December 31, 2019 Capital expenditures (GAAP) $4,528 Property and equipment acquired through debt and finance leases 515 Adjusted capit