Item 8.01 Other Events
Liquidity Enhancing Activities
United Airlines, Inc. ("United"), a wholly-owned subsidiary of United Airlines
Holdings, Inc. ("UAL" and, together with United, the "Company"), expects to have
approximately $17 billion of available liquidity at the end of the third quarter
of 2020, which includes liquidity available under the Company's $2 billion
revolving credit facility, $5 billion of committed financing to be secured by
the Company's loyalty program, MileagePlus (further described below), as well as
$4.5 billion expected to be available to the Company through the Coronavirus
Aid, Relief, and Economic Security Act (the "CARES Act") Loan Program.
The Company continues to work with the U.S. Treasury Department on the CARES Act
Loan Program loan, and it is the Company's expectation that, if the Company
takes the loan, it will use available slots, gates and routes collateral. The
Company believes it has sufficient slots, gates and routes collateral available
to meet the collateral coverage that may be required for the full $4.5 billion
available to the Company under the Loan Program.
On June 12, 2020, UAL, United and their subsidiaries Mileage Plus Holdings, LLC
("MPH") and Mileage Plus Intellectual Property Assets, Ltd. ("MIPA") entered
into a commitment letter (the "Commitment Letter") with Goldman Sachs Lending
Partners LLC ("GSLP"), Barclays Bank PLC and Morgan Stanley Senior Funding, Inc.
(collectively, the "Lead Arrangers" or the "Committed Lenders") pursuant to
which, the Committed Lenders have committed to provide MPH and MIPA with, and
the Lead Arrangers have agreed to arrange, a term loan facility of up to $5.0
billion, subject to the satisfaction of certain customary conditions (the
"MileagePlus Financing"). GSLP will act as sole structuring agent and lead left
arranger for the MileagePlus Financing. It is expected that MPH and MIPA will
seek long-term debt financing in lieu of borrowing the full available amount
under the committed term loan facility, or in order to refinance amounts drawn
under the committed term loan facility, subject to market and other conditions.
Prior to the closing of the proposed MileagePlus Financing, United and MPH will
contribute to MIPA their respective rights to certain MileagePlus intellectual
property, including brands and member data. The debt issued in the proposed
MileagePlus Financing will be secured on a first priority basis by, among other
things, the assets of MIPA, MPH and their subsidiaries, specified cash accounts
that include the accounts into which MileagePlus revenues are or will be paid by
its marketing partners and by United, and pledges of the equity in MIPA, MPH and
certain additional subsidiaries. In addition, UAL, United and certain of their
subsidiaries, including all subsidiaries of MPH, will provide senior guarantees
of the obligations under the proposed MileagePlus Financing. MIPA and MPH will
continue to be wholly-owned subsidiaries of UAL and United, and the MileagePlus
program is expected to continue to operate as it has in the past. The agreements
governing the MileagePlus Financing will include the requirement that, upon the
occurrence of certain mandatory prepayment events, which include, among others,
issuances of debt other than permitted debt, MPH and MIPA will prepay the
MileagePlus Financing debt to the extent of any cash proceeds received in
connection with such prepayment event, plus an applicable premium. In addition,
the financing documents will provide that an uncured early amortization event,
which includes, among others, the failure to meet a required debt service
coverage ratio, will require MPH and MIPA to make one or more early amortization
payments. The occurrence of an event of default under the financing documents
may cause the entire outstanding portion of the MileagePlus Financing debt to
become immediately due and payable.
Following the closing of the proposed MileagePlus Financing, MPH and MIPA intend
to lend to the Company the net proceeds from the MileagePlus Financing, after
depositing a portion of such proceeds in a reserve account.
The MileagePlus Financing is expected to be seamless for both MileagePlus
members and partners, with no change in the day-to-day operations of the
Multiplying MPH 2019 EBITDA by a factor of 12 equates to a MileagePlus valuation
of approximately $21.9 billion.
In connection with commencing discussions with potential investors in the
proposed MileagePlus Financing, the Company is making available certain
information about MPH and the proposed MileagePlus Financing, a copy of which is
attached to this report as Exhibit 99.1, and a term sheet setting forth the
significant terms and conditions of the proposed MileagePlus Financing, a copy
of which is attached to this report as Exhibit 99.2.
There is no assurance that the proposed MileagePlus Financing will be completed
on the terms described herein or at all or when it may be completed.
The Company continues to see a steady improvement in demand in the domestic
United States and certain international destinations, with a more than 70%
reduction in customer cancellation rates since the high rates experienced in
April 2020. June ticketed passenger revenue is expected to be up close to 400%
Net bookings for the remainder of the second quarter and the third quarter have
remained positive since the end of May.
As such, for July 2020 the Company expects consolidated capacity to be down
approximately 75%, and domestic capacity to be down approximately 70%, which is
almost double the June 2020 schedule. The Company also expects July passenger
revenue to be up between 50% and 100% versus the Company's June 2020 passenger
April 2020 May 2020 June 2020E July 2020E
Available Seat Miles1 year-over-year down 88% down 88% down ~85% down ~75%
down 84% down 85% down ~85% down ~70%
International down 93% down 92% down ~90% down ~80%
Passenger Load Factor2 year over year 16% 35% ~50% ~55%
13% 39% ~60%
International 20% 25% ~40%
Ticketed Passenger Revenue3 year-over-year down 98% down 95% down ~90% down 82% - 88%
Gross year-over-year bookings4
down 87% down 82% down 73%5
1The number of seats available for passengers multiplied by the number of
scheduled miles those seats are flown.
2Revenue passenger miles divided by available seat miles.
3Ticketed passenger revenue is a component of total passenger revenue. It
excludes ancillary fees and frequent flyer revenue (including both passengers
flying on awards and the deferred revenue associated with frequent flyer miles
earned will traveling) among other items, which are reported as part of
passenger revenue. It also excludes passenger revenue associated with expired
tickets, other airline interline billing differences, certain travel agency
commissions, charters, customer compensation for oversold flights, and changes
4Gross bookings include new bookings made for all future time periods as
compared to the corresponding month in 2019.
5June gross bookings reflect month-to-date bookings through June 13, 2020.
Cargo revenues continue to be strong and are expected to be up over 30% in the
second quarter of 2020 versus the second quarter of 2019. These results support
international cargo-only flying and have been a significant driver of revenue
and cash flow to the Company.
Including Cargo and other revenue, the Company now expects total revenues to be
down 88% in the second quarter of 2020 compared to the second quarter of 2019.
The Company has aggressively managed its costs and capital expenditures to
preserve cash. Operating expenses in the second quarter are expected to decline
by 53% as compared to the second quarter of 2019. Operating expenses excluding
special charges, salaries and related costs and depreciation are expected to
decline by 72% in the second quarter or $4.6 billion.6 In addition, the Company
is on track to achieve more than $2.5 billion of full-year reductions in
adjusted capital expenditures, bringing expected 2020 full-year adjusted capital
expenditures to below $4.5 billion.7
The Company currently expects average daily cash burn for the second quarter of
2020 to be at the low end of the previously-provided guidance range of between
$40 million and $45 million, at approximately $40 million per day. The Company
also currently expects average daily cash burn in the third quarter of 2020 to
be approximately $30 million per day. For this purpose, "cash burn" is defined
as net cash from operations, less investing and financing activities. Proceeds
from the issuance of new debt (excluding expected aircraft financing),
government grants associated with the Payroll Support Program of the CARES Act
and any new issuances of UAL common stock are not included in this figure.
The Company expects to end the second quarter of 2020 with approximately $9.4
billion in total liquidity which does not include the proposed MileagePlus
Financing, the approximately $500 million of funding to be received under the
Payroll Support Program of the CARES Act, which is expected to be received in
July 2020, or the $4.5 billion CARES Act loan.
In the second quarter of 2020, the Company's wholly-owned subsidiary, MPH,
expects to record revenue, net of redemptions, of $300 to $350 million. In April
and May 2020, MPH recorded cash flow from sales of $270 million and $185
million, respectively, which results are preliminary and subject to change.
While the Company has seen improvements in the demand environment as described
above, it continues to expect that demand will be reduced year-over-year as of
October 1, 2020. Since March 2020, thousands of Company employees have elected
to take part in voluntary programs, including leaves of absences, reduced work
hours and voluntary separation programs. The Company plans to continue to use
these and similar programs to align payroll expenses with the demand environment
and is continuing negotiations with its labor union partners; however, it is
possible that the Company may need to use furloughs or other measures to align
its payroll expenses with the demand environment. As required by applicable
federal and state law, including the Worker Adjustment and Retraining
Notification Act of 1988, the Company anticipates issuing certain required
notices to employees in July 2020.
Update to Risk Factors
The Company is providing the following risk factors to update the risk factors
of the Company previously disclosed in periodic reports filed with the U.S.
Securities and Exchange Commission (the "SEC"), including its Annual Report on
Form 10-K for the fiscal year ended December 31, 2019 (the "2019 Form 10-K") and
its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020
(the "Q1 2020 Form 10-Q").
6Operating expenses excluding special charges, salaries and related costs and
depreciation is a non-GAAP measure and certain components, including special
charges, are not determinable at this time. Accordingly, the Company is not
providing this guidance on a GAAP basis.
7Non-cash capital expenditures are not determinable at this time. Accordingly,
the Company is not providing capital expenditure guidance on a GAAP basis.
The global pandemic resulting from a novel strain of coronavirus has had an
adverse impact that has been material to the Company's business, operating
results, financial condition and liquidity, and the duration and spread of the
pandemic could result in additional adverse impacts. The outbreak of another
disease or similar public health threat in the future could also have an adverse
effect on the Company's business, operating results, financial condition and
In December 2019, a novel strain of coronavirus ("COVID-19") was reported in
Wuhan, China, and the World Health Organization (the "WHO") subsequently
declared COVID-19 a "pandemic." As a result of COVID-19, the U.S. government has
declared a national emergency, the U.S. Department of State has issued numerous
travel advisories, including a global Level 4 "do not travel" advisory advising
U.S. citizens to avoid all international travel, and the U.S. government has
implemented a number of travel-related protocols, including enhanced screenings
and mandatory 14-day quarantines. Many foreign and U.S. state governments have
instituted similar measures and declared states of emergency.
In the United States and other locations around the world, throughout the first
half of 2020, people were instructed to stay home or "shelter in place" and
public events, such as conferences, sporting events and concerts, have been
canceled, attractions, including theme parks and museums, have been closed,
cruise lines have suspended operations and schools and businesses are operating
with remote attendance, among other actions. In addition, governments,
non-governmental organizations and entities in the private sector have issued
non-binding advisories or recommendations regarding air travel or other social
distancing measures, including limitations on the number of persons that should
be present at public gatherings. While "shelter in place" restrictions and
similar advisories and recommendations have been reduced or otherwise eased in
certain circumstances, this varies by jurisdiction and organization. In
addition, numerous jurisdictions have provided that more severe restrictions
could be reimposed or newly imposed depending on the continued spread of
COVID-19. In that case, other governmental restrictions and regulations in the
future in response to COVID-19 could include additional travel restrictions
(including restrictions on domestic air travel within the United States,
requirements for passengers to wear face coverings while traveling, requirements
for passengers to submit to temperature checks or other health examinations
prior to entering an airport or boarding an airplane or requirements to limit
the number of seats that can be occupied on an aircraft to allow for social
distancing), quarantines of additional populations (including our personnel),
restrictions on our ability to access our facilities or aircraft, requirements
. . .
Item 9.01 Financial Statements and Exhibits
99.1 Information regarding Mileage Plus Holdings, LLC and the MileagePlus
99.2 Material Terms of the Proposed MileagePlus Financing
104 Cover Page Interactive Data File (embedded with the Inline XBRL
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