United Airlines Holdings, Inc. · NASDAQ:UAL
United Airlines — IPO Roadshow (October 2020)
52 slides from United Airlines's IPO roadshow presentation, Oct 19, 2020
Slide 1: United Airlines Series 2020-1 EETC Investor Presentation
United Airlines Series 2020 - 1 EETC Investor Presentation October 19, 2020 $3.0bn EETC Financing
Slide 2: Forward-looking statements
2 Certain statements in this presentation, including statements regarding the potential impacts of the COVID - 19 pandemic and steps we plan to take in response thereto , are forward - looking and thus reflect our current expectations and beliefs with respect to certain current and future events and
Slide 3: Additional Information
3 Additional Information The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communica tio n relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC
Slide 4: Table of Contents
Table of Contents 1. Transaction Overview 2. Recent Developments 3. United Corporate Overview 4. Collateral Summary 5. 2020 - 1 EETC Structure 6. Summary of Transaction Strengths 7. Summary Term Sheet 8. Appendix A: Detailed Amortization Schedules 9. Appendix B: Additional Collateral Information 10.
Slide 5: Transaction Overview
Transaction Overview
Slide 6: Transaction Overview (1/3)
6 ▪ United Airlines (“United”, “UAL”, the “Airline” or the “Company”) intends to raise $3,000,000,000 through the offering of Class A Pass Through Certificates, Series 2020 - 1 (the “Certificates ”) ▪ The Class A Equipment Note underlying the Class A Certificates will have the benefit of a security
Slide 7: Transaction Overview (2/3)
7 1 Initial and Max LTV calculated as of October 30, 2020, which is assumed to be the closing date of the offering. 2 Average amortization per annum excludes the balloon payment. Transaction Overview (2/3) ▪ The Class A Certificates offered in the transaction will feature the following: — Senior amo
Slide 8: Transaction Overview (3/3)
8 Transaction Overview (3/3) ▪ Composition Test: — A minimum of 25% of all collateral value must consist of Spare Engines and Spare Parts — A minimum of 55% of all Spare Engines and Spare Parts (“Spares Collateral”) must consist of rotables and Spare Engines — A minimum of 60% of all Aircraft collat
Slide 9: United Airlines Series 2020-1 EETC Structural Summary
9 1 Initial LTV and M aximum LTV for the Class A Certificates is calculated as of October 30, 2020 , which is assumed to be the closing date of the offering. 2 The Class A Equipment Note will mature on the Final Expected Distribution Date. 3 The Final Maturity Date for the Class A Certificates is th
Slide 10: United Airlines Series 2020-1 EETC Structural Breakdown
10 United Airlines Series 2020 - 1 EETC Structural Breakdown ▪ The UAL 2020 - 1 transaction is structured so that each collateral group has a tailored amortization profile and LTV requirements ▪ The notional amortization schedules roll up to one Class A Equipment Note, whereby all principal and inte
Slide 11: Amortization Profile - Significant de-levering through tenor
11 Amortization Profile - Significant d e - levering through tenor Significant amortization results in declining LTV despite depreciation profile of assets LTV (%) Yrs 1 Lower of the mean and median of maintenance adjusted base values (“LMM MABV”), forward values for Aircraft and Spare Engines ar e
Slide 12: Recent Developments
Recent Developments
Slide 13: Key pillars achieved to manage through COVID
13 Key pillars achieved to manage through COVID I. Build and maintain liquidity ▪ Raised over $22 billion since the start of the crisis through diversified capital streams: commercial debt offerings, equity issuance, government aid (CARES Act Payroll Support Program) This EETC is one of the final pi
Slide 14: United believes it has built appropriate liquidity to manage through COVID-19
14 MPH secured notes and term loan 1 United received the last of the $5.1bn in expected CARES Act proceeds (grants + loans) on September 30 th . 2 The U.S. Treasury has advised United that it intends to allocate additional loan commitments under the CARES Act in October 2 020 , and that it expects t
Slide 15: United has variablized costs and is focused on the future
15 United has variablized costs and is focused on the future Variablized Costs ▪ Reduced operating costs by 59% versus 3Q19. Excluding special charges, reduced operating costs by 48% versus 3Q19 ▪ Restructured and streamlined our management and administrative functions. These reductions are expected
Slide 16: United Corporate Overview
United Corporate Overview
Slide 17: Best global network full of long-term opportunity
17 Source: OAG; reflects routes flown in 2019 Best global network full of long - term opportunity United has a balanced network across geographies supported by the best partners and renewed JVs Geography % of 2019 ASMs Domestic 57% Atlantic 18% Pacific 15% Latin 10% Diverse network Though COVID - 19
Slide 18: Prior to COVID-19, deleveraging plan positioned the balance sheet
18 1 Adjusted total debt is a non - GAAP measure that includes current and long - term debt, operating lease obligations and finance leas e obligations and noncurrent pension and postretirement obligations; adjusted EBITDAR is a non - GAAP metric that measures adjusted earnings before interest, inco
Slide 19: Business Traveler News Annual Airline Survey
19 Source: 2012 – 2019 Business Traveler News Airline Survey. Business and premium traffic buyers have noticed United’s success Overall scores Business Traveler News (BTN) Annual Airline Survey 2015 2017 2016 2018 2019
Slide 20: Collateral Overview
Collateral Overview
Slide 21: Collateral asset mix and composition
21 Spares Collateral Tier I Aircraft Tier II Aircraft Asset Mix / Composition (By Value) Collateral Value ($) 2 $1.9bn $1.7bn $2.2bn Collateral Value (%) 33% 29% 37% Details Spare Parts (excluding Spare Engines ) : 79% are rotable / repairable and 21% expendable Spare Engines : 46% are WB engines an
Slide 22: Spares Collateral – Spare Parts
22 Note: Spare Parts value reflects mba current market values as of August 2020. Spares Collateral – Spare Parts United’s Spare Parts inventory has grown over time with a 25% increase in net book value over the last 10 years Spare Part Type Description Example Value % of Collateral Rotable ▪ Parts t
Slide 23: Spares Collateral – Spare Parts security interest
23 Spares Collateral – Spare Parts Spare Parts Collateral Security Interest in Spare Parts ▪ An airline’s Spare Parts are essential to maintaining normal business operations ▪ United obtained current market value appraisals from mba on the Spare Parts collateral, showing a value of $ 1,277mm as of A
Slide 24: Spares Collateral – Spare Engines
24 Note : General Electric (“GE ”), CFM International (“CFM”) International Aero Engines (“IAE”), Pratt & Whitney (“P&W ”), Rolls Royce (“RR ”). 1 Please note that this is a historical average and post - COVID - 19 usage will change this estimate dramatically. 2 Charts and statistics weighted by LMM
Slide 25: Spares Collateral – Spare Engines by type
25 1 Value represents LMM base values from mba, ICF, BK adjusted for maintenance condition determined by mba as of Q3 2020. 2 The % represents the percentage by count related to United’s mainline fleet for NB/WB host engines. Spares Collateral – Spare Engines # Type Count Value 1 ($mm) Value as % To
Slide 26: Aircraft Collateral
26 Note: Aircraft collateral values reflect LMM base values from mba, ICF, BK adjusted for maintenance condition determined by mba as of Q3 2020 . 1 Percentages determined by Aircraft count. 2 Total row for average age column is calculated using a weighted average by value. Aircraft Collateral ▪ The
Slide 27: Aircraft Collateral Tier I and Tier II
27 Aircraft Collateral Aircraft collateral will be bifurcated into two tiers. Tier I includes most Aircraft less than 20 yrs old and Tier II includes all Aircraft 20 or more yrs old and all 757s, 767s, 777 - 200 (other than 777 - 200ER) and 737 - 700 (regardless of age) 29% of Total Collateral Value
Slide 28: Aircraft Collateral in the Context of United's Fleet
28 Aircraft Collateral in the Context of United’s Fleet 1 Note: Figures do not include aircraft that are owned or leased by United’s Regional carriers. Fleet data provided by the Comp any . 1 United’s mainline fleet includes 814 owned and leased aircraft. 2 Data provided as of September 2020. By Air
Slide 29: 2020-1 EETC Structure
2020 - 1 EETC Structure
Slide 30: Amortization and LTV Profiles (Overall)
30 Tier II Aircraft debt is fully repaid within 4 years Tier II Aircraft assets are released from the structure Note: Forward values for Aircraft and Spare Engines are based on LMM forward projections from mba, ICF and BK adjusted for projected maintenance condition determined by mba . Forward value
Slide 31: Amortization and LTV Profiles (By Group)
31 Note: Forward values for Aircraft and Spare Engines are based on LMM forward projections from mba, ICF and BK adjusted for projected maintenance condition determined by mba . Forward values for Spare Parts are assumed to stay flat through the tenor and reflect current market values from mba as of
Slide 32: Overview of Aircraft Release Mechanics
32 Tier II assets are all released from structure 1 LTV chart assumes no release in year 1 for Technical Impairment. Overview of Aircraft Release Mechanics Release Threshold LTV Maintained with Maximum Withdrawals 1 Release Thresholds ▪ Year 1 & 2: Up to $100mm (Year 1 releases for Technical Impairm
Slide 33: Summary of Transaction Strengths
Summary of Transaction Strengths
Slide 34: Key Transaction Strengths
34 Key Transaction Strengths ▪ The UAL 2020 - 1 EETC offering is a corporate recourse obligation to United Airlines ▪ Collateral includes substantially all of United’s Spare Parts and Spare Engines and 43% of aircraft fleet ▪ Strong essentiality of collateral as the assets are indispensable to Unite
Slide 35: Attractive Section 1110 Collateral
35 Attractive Section 1110 Collateral ▪ Strong asset mix consisting of 43% of United’s mainline Aircraft, substantially all of United’s Spare Engines, and substantia lly all of United’s Spare Parts ▪ All Spare Parts, Spare Engines and Aircraft in the collateral pool for this transaction will be elig
Slide 36: Ongoing LTV tests and composition test
36 Ongoing LTV tests ▪ The transaction benefits from three separate semi - annual notional LTV tests – one for each collateral group – to ensure the deal maintains appropriate overcollateralization levels through the tenor of the transaction ▪ All assets will be re - appraised semi - annually by an
Slide 37: Summary Term Sheet
Summary Term Sheet
Slide 38: Indicative Terms: Key Transaction Terms
38 Indicative Terms Format • Enhanced Equipment Trust Certificates (“EETC”) • SEC Registered Issuer • United Airlines, Inc. Legal Framework • Single Class A Equipment Note under a single indenture Use of Proceeds • To repay outstanding secured 364 - day bridge facilities, with the remainder for gene
Slide 39: Indicative Terms: Collateral Groups
39 Indicative Terms Collateral Groups Spare Parts & Engines Tier I Aircraft Tier II Aircraft Initial LTV • 60.3% • 50.0% • 45.0% Tenor / WAL • 7.0 / 5.0 years • 7.0 / 5.0 years • 4.0 / 4.0 years Amortization • Year 1 – 4: 5% p.a. • 7.5% p.a. thereafter • Year 1 – 2: 1 0% p.a. • Year 3 – 4: 15% p.a.
Slide 40: Indicative Terms: Certificates and Waterfall
40 Indicative Terms One Class of Certificates Offered • One senior tranche (Class A) representing amortizing debt • United retains the option to issue additional subordinated classes of Certificates at any time in the future Waterfall • Sequential amortization structure. Same waterfall before and af
Slide 41: Indicative Terms: Spare Parts Covenant
41 1 Eligible Regional Aircraft means any 2014 vintage or younger commercial jet aircraft that is an Embraer ERJ 175, Embraer ERJ 190 , Embraer ERJ 195, Bombardier CRJ 900 or any other comparable or improved model of regional commercial jet aircraft commonly configured to have at least 70 passenger
Slide 42: Indicative Terms: Release Threshold
42 Indicative Terms Release Threshold 1 • Year 1 & 2: Up to $100mm release flexibility (Year 1 releases for Technical Impairment only) • Year 3: Up to $100mm release flexibility, cumulatively $200mm • Year 4: Up to $50mm release flexibility, cumulatively $250mm • Year 5: Up to $50mm release flexibil
Slide 43: Appendix A: Detailed Amortization Schedules
Appendix A: Detailed Amortization Schedules
Slide 44: Projected Debt Balance and LTVs (1/2)
44 1 Forward values for Aircraft and Spare Engines are based on projected LMM maintenance adjusted base values. Forward values for Spare Parts are assumed to stay flat through the tenor and reflect current market values from mba as of Q3 2020. Projected Debt Balance and LTVs (1/2) Date Collateral Va
Slide 45: Projected Debt Balance and LTVs (2/2)
45 Projected Debt Balance and LTVs (2/2) Date Collateral Value 1 Class A Debt Balance Principal Amortization LTV July 15, 2024 5,081,129,990 1,508,837,500 144,037,500 29.7% October 15, 2024 4,959,038,744 1,364,800,000 144,037,500 27.5% January 15, 2025 3,198,150,790 1,278,643,750 86,156,250 40.0% Ap
Slide 46: Appendix B: Additional Collateral Information
Appendix B: Additional Collateral Information
Slide 47: Aircraft Collateral Pool Importance
47 Aircraft Collateral Pool Importance ▪ Small gauge mainline aircraft that bridges the gap between regional aircraft and mid - size narrowbody aircraft ▪ ETOPS capability enables the aircraft to fly key Latin missions ▪ Excellent takeoff performance that enables it to operate in challenging airport
Slide 48: Aircraft Collateral Pool Importance (continued)
48 ▪ Nearly all High - J (business class) configuration aircraft that provides 46 business class seats and 22 premium economy seats for high business traffic routes ▪ Newly reconfigured with Polaris product ▪ High network utility – long range and large capacity combination for European and South Ame
Slide 49: Aircraft Spare Engines
49 Aircraft Spare Engines Spare Engines Useful Life • Useful life typically assumed to be up to ~30 yr • Life cycle of an engine is longer than that of an airframe (30 - 40yr) • Limited by the production of the supported aircraft • Rotables and repairables can be repeatedly rehabilitated to a fully
Slide 50: Appendix C: Non-GAAP Reconciliation
Appendix C: Non - GAAP Reconciliation
Slide 51: Reconciliation of GAAP to Non-GAAP financial measures
51 Appendix: 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 unrealized (gains) losses on investments, and adjusted debt, that
Slide 52: Reconciliation of GAAP to Non-GAAP financial measures
52 Appendix: Reconciliation of GAAP to Non - GAAP financial measures UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of Am eri ca (GAAP) and Non - GAAP financial measures, including adjusted operating expense. UAL believes that