Log in
E-mail
Password
Show password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

UNITED AIRLINES HOLDINGS, INC.

(UAL)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

UNITED AIRLINES : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

10/20/2021 | 04:20pm EST
This Management's Discussion and Analysis of Financial Condition and Results of
Operations is provided as a supplement to and should be read in conjunction with
the consolidated financial statements and related notes included elsewhere in
this Quarterly Report on Form 10-Q to enhance the understanding of our results
of operations, financial condition and cash flows.
EXECUTIVE SUMMARY
Overview
United Airlines Holdings, Inc. (together with its consolidated subsidiaries,
"UAL" or the "Company") is a holding company, and its principal, wholly-owned
subsidiary is United Airlines, Inc. (together with its consolidated
subsidiaries, "United"). This Quarterly Report on Form 10-Q is a combined report
of UAL and United, including their respective consolidated financial statements.
As UAL consolidates United for financial statement purposes, disclosures that
relate to activities of United also apply to UAL, unless otherwise noted.
United's operating revenues and operating expenses comprise nearly 100% of UAL's
revenues and operating expenses. In addition, United comprises approximately the
entire balance of UAL's assets, liabilities and operating cash flows. When
appropriate, UAL and United are named specifically for their individual
contractual obligations and related disclosures, and any significant differences
between the operations and results of UAL and United are separately disclosed
and explained. We sometimes use the words "we," "our," "us," and the "Company"
in this report for disclosures that relate to all of UAL and United.
The Company transports people and cargo through its mainline operations, which
utilize jet aircraft with at least 126 seats, and regional operations, which
utilize smaller aircraft that are operated under contract by United Express
carriers. The Company serves virtually every major market around the world,
either directly or through participation in Star Alliance®, the world's largest
airline alliance.
Third Quarter 2021 Overview
Our business and operating results for 2021 continue to be significantly
impacted by the novel coronavirus (COVID-19) pandemic. Given the impact of the
pandemic on our business and operating results in 2020, we believe that a
comparison of our results in 2021 to 2019 for certain key metrics in this
financial overview discussion is more reflective of the impact of the COVID-19
pandemic.
The Company cut, relative to the third quarter of 2019, approximately 28% of its
scheduled capacity for the third quarter of 2021 and expects its scheduled
capacity in the fourth quarter of 2021 to be down approximately 23% versus the
fourth quarter of 2019.
Operating revenue for the third quarter of 2021 decreased by $3.6 billion to
$7.8 billion, or 31.9%, versus the third quarter of 2019. Operating revenue is
expected to decrease between 25% and 30% in the fourth quarter of 2021 as
compared to the same period in 2019.
Operating expense for the third quarter of 2021 decreased by $3.2 billion to
$6.7 billion, or 32.2%, versus the third quarter of 2019.
Impact of the COVID-19 Pandemic and Outlook
The COVID-19 pandemic, together with the measures implemented or recommended by
governmental authorities and private organizations in response to the pandemic,
has had an adverse impact that has been material to the Company's business,
operating results, financial condition and liquidity. The Company has seen
increasing demand for travel both domestically and in countries where entry is
permitted; however, as the situation surrounding the COVID-19 pandemic remains
fluid, the pandemic has continued to negatively impact travel demand. It remains
difficult to reasonably assess or predict the full extent of the ongoing impact
of the COVID-19 pandemic on the Company's longer-term operational and financial
performance, which will depend on a number of future developments, many of which
are outside the Company's control, such as the ultimate duration of and factors
impacting the recovery from the pandemic (including the efficacy and speed of
vaccination programs in curbing the spread of the virus in different markets,
the introduction and spread of new variants of the virus that may be resistant
to currently approved vaccines and the continuation of existing or
implementation of new government travel restrictions), the volatility of
aircraft fuel prices, customer behavior changes and fluctuations in demand for
air travel, among others. The Company's recovery from the COVID-19 pandemic has
not followed a linear path, and due to the significant uncertainty that remains,
its future operating performance, particularly in the short-term, may be subject
to volatility. The Company is taking steps to be prepared for recovery as demand
for travel continues to increase in line with recent customer booking trends,
which include making certain investments in the recovery.
                                       30
--------------------------------------------------------------------------------
                               Table of Contents


Risks and uncertainties related to the COVID-19 pandemic are further described
in Part II, Item 1A. Risk Factors- "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 liquidity" in our Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2021.
As the COVID-19 pandemic affected global aviation as well as major economic and
financial markets, we have taken steps to mitigate the effects of the COVID-19
pandemic on our business and have remained focused on protecting the health and
safety of our workforce and customers and transforming our customers' onboard
experience in preparation for an eventual recovery from the COVID-19 pandemic:
Cost Reductions. The Company has identified approximately $2.2 billion of annual
permanent structural cost reductions including improvements in labor
efficiencies. During the first quarter of 2021, the Company offered voluntary
leaves of absence to certain U.S.-based front-line employees. This program
included (based on employee group, age and completed years of service) a
partially-paid leave of absence with active health care coverage and travel
privileges. Employees who separate from the Company after the end of such
program receive certain separation benefits, such as post-employment health
benefits and travel privileges. Approximately 4,500 employees elected to
participate in this program, and it is expected that the majority of them will
separate from employment at the end of their leave of absence. See Note 5 and
Note 9 to the financial statements included in Part I, Item 1 of this report for
additional information on charges related to these programs.
Liquidity. The Company entered into a number of transactions to improve its
liquidity and manage its capital. In the first nine months of 2021, the Company:
•issued, through a private offering to eligible purchasers, $4.0 billion in
aggregate principal amount of two series of notes, consisting of $2.0 billion in
aggregate principal amount of 4.375% senior secured notes due 2026 (the "2026
Notes") and $2.0 billion in aggregate principal amount of 4.625% senior secured
notes due 2029 (the "2029 Notes" and, together with the 2026 Notes, the
"Notes");
•entered into a new Term Loan Credit and Guaranty Agreement (the "New Term Loan
Facility") initially providing term loans up to an aggregate amount of
$5.0 billion and a new Revolving Credit and Guaranty Agreement (the "New
Revolving Credit Facility" and, together with the New Term Loan Facility, the
"New Loan Facilities") initially providing revolving loan commitments of up to
$1.75 billion;
•repaid in full the $1.4 billion aggregate principal amount outstanding under
the term loan facility (the "2017 Term Loan Facility") included in the Amended
and Restated Credit and Guaranty Agreement, dated as of March 29, 2017 (the
"Existing Credit Agreement");
•repaid in full the $1.0 billion aggregate principal amount outstanding under
the revolving credit facility (the "2017 Revolving Credit Facility") included in
the Existing Credit Agreement;
•repaid in full the $520 million aggregate principal amount outstanding under
the Loan and Guarantee Agreement, dated as of September 28, 2020, among United,
UAL, the U.S. Treasury Department ("Treasury") and the Bank of New York Mellon,
as administrative agent, as amended (the "CARES Act Loan"), which was entered
into pursuant to the loan program established pursuant to the Coronavirus Aid,
Relief, and Economic Security Act (the "CARES Act");
•entered into approximately $0.6 billion in new enhanced equipment trust
certificates ("EETC"); and
•raised approximately $0.5 billion in net cash proceeds from the issuance and
sale of UAL common stock.
In addition to the foregoing transactions, United entered into the following
agreements with Treasury:
PSP2. On January 15, 2021, United entered into a Payroll Support Program
Extension Agreement (the "PSP2 Agreement") with Treasury providing the Company
with total funding of approximately $3.0 billion, pursuant to the Payroll
Support Program established under Subtitle A of Title IV of Division N of the
Consolidated Appropriations Act, 2021. These funds were used to pay for the
wages, salaries and benefits of United employees, including the payment of lost
wages, salaries and benefits to returning employees who were previously impacted
by involuntary furloughs. Approximately $2.1 billion was provided as a direct
grant and $870 million as indebtedness evidenced by a 10-year senior unsecured
promissory note (the "PSP2 Note"). See Note 2 to the financial statements
included in Part I, Item 1 of this report for additional information on the
warrants issued in connection with the PSP2 Note and Note 8 of this report for a
discussion of the PSP2 Note.
                                       31
--------------------------------------------------------------------------------
                               Table of Contents


PSP3. On April 29, 2021, in connection with the Payroll Support Program
established under Section 7301 of the American Rescue Plan Act of 2021, United
entered into a Payroll Support Program 3 Agreement (the "PSP3 Agreement") with
Treasury providing the Company with total funding of approximately $2.8 billion.
Approximately $2.0 billion was provided as a direct grant and $810 million as
indebtedness evidenced by a 10-year senior unsecured promissory note (the "PSP3
Note"). These funds will be used by United exclusively for the continuation of
payment of its employee wages, salaries and benefits. See Note 2 to the
financial statements included in Part I, Item 1 of this report for additional
information on the warrants issued in connection with the PSP3 Note and Note 8
of this report for a discussion of the PSP3 Note.
United Next. In the second quarter of 2021, United entered into firm narrow-body
aircraft orders for 200 Boeing 737 MAX aircraft and 70 Airbus A321neo aircraft.
The "United Next" plan will have a transformational effect on the customer
experience and is expected to increase the total number of available seats per
domestic departure by almost 30% by 2026 and significantly lower carbon
emissions per seat. The new aircraft will come with a new signature interior
that includes seat-back entertainment in every seat, larger overhead bins for
every passenger's carry-on bag and the industry's fastest available in-flight
WiFi, as well as a bright look-and-feel with LED lighting. The new aircraft will
allow the Company to replace older, smaller mainline jets and at least 200
single-class regional jets with larger aircraft, which we expect will lead to
significant sustainability benefits compared to older planes: an expected 11%
overall improvement in fuel efficiency and an expected 17-20% lower carbon
emission per seat compared to older planes.
Environmental Sustainability
During the third quarter of 2021, the Company entered into a non-binding
off-take agreement for the purchase of sustainable aviation fuel with Alder
Fuels LLC to advance its previously announced commitments of reducing its carbon
emission footprint.
In 2020, United pledged to become 100% green by reducing, compared to 2019, its
greenhouse gas emissions by 100% by 2050 without relying on voluntary carbon
offsets, and in 2021, United pledged to reduce, compared to 2019, its carbon
intensity by 50% by 2035.
Our current expectations described above are forward-looking statements and our
actual results and timing may vary materially based on various factors that
include, but are not limited to, those discussed below under "Forward-Looking
Information" and in Part II, Item 1A. Risk Factors, in our Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2021.
RESULTS OF OPERATIONS
The following discussion provides an analysis of our results of operations and
reasons for material changes therein for the three and nine months ended
September 30, 2021 as compared to the corresponding periods in 2020.
Third Quarter 2021 Compared to Third Quarter 2020
The Company recorded net income of $473 million in the third quarter of 2021 as
compared to a net loss of $1.8 billion in the third quarter of 2020. The Company
considers a key measure of its performance to be operating income (loss), which
was $1.0 billion of income for the third quarter of 2021, as compared to a
$1.6 billion loss for the third quarter of 2020, an approximately $2.7 billion
increase year-over-year, primarily as a result of improvements in demand for air
travel. Significant components of the Company's operating results for the three
months ended September 30 are as follows (in millions, except percentage
changes):
                                    2021          2020        Increase (Decrease)       % Change
Operating revenue                 $ 7,750      $  2,489      $              5,261       211.4
Operating expense                   6,713         4,104                     2,609        63.6
Operating income (loss)             1,037        (1,615)                    2,652       164.2
Nonoperating expense, net            (434)         (717)                     (283)      (39.5)
Income tax expense (benefit)            130        (491)                      621               NM
Net income (loss)                 $   473      $ (1,841)     $              2,314       125.7


                                       32
--------------------------------------------------------------------------------
                               Table of Contents

Certain consolidated statistical information for the Company's operations for the three months ended September 30 is as follows:

                                                                                          Increase
                                                     2021              2020              (Decrease)             % Change
Passengers (thousands) (a)                          32,145             9,739                 22,406              230.1
Revenue passenger miles ("RPMs" or "traffic")
(millions) (b)                                      41,031            10,613                 30,418              286.6
Available seat miles ("ASMs" or "capacity")
(millions) (c)                                      53,886            22,212                 31,674              142.6
Passenger load factor (d)                             76.1  %           47.8  %              28.3 pts.                  N/A
Passenger revenue per available seat mile
("PRASM") (cents)                                    12.32              7.42                   4.90               66.0
Average yield per revenue passenger mile
("Yield") (cents) (e)                                16.18             15.54                   0.64                4.1
Cargo revenue ton miles ("CTM") (millions) (f)         758               685                     73               10.7
Cost per available seat mile ("CASM") (cents)        12.46             18.48                  (6.02)             (32.6)
Average price per gallon of fuel, including fuel
taxes                                             $   2.14          $   1.31          $        0.83               63.4
Fuel gallons consumed (millions)                       800               387                    413              106.7
Employee headcount, as of September 30              85,300            87,900                 (2,600)              (3.0)
(a) The number of revenue passengers measured by
each flight segment flown.
(b) The number of scheduled miles flown by revenue passengers.
(c) The number of seats available for passengers multiplied by the number of scheduled miles those seats are flown.
(d) Revenue passenger miles divided by available seat miles.
(e) The average passenger revenue received for each revenue passenger mile flown.
(f) The number of cargo revenue tons transported multiplied by the number of miles flown.


Operating Revenue. The table below shows year-over-year comparisons by type of
operating revenue for the three months ended September 30 (in millions, except
for percentage changes):
                             2021         2020        Increase (Decrease)       % Change
Passenger revenue          $ 6,637      $ 1,649      $              4,988       302.5
Cargo                          519          422                        97        23.0
Other operating revenue        594          418                       176   

42.1

Total operating revenue    $ 7,750      $ 2,489      $              5,261   

211.4

The table below presents selected third quarter passenger revenue and operating data, broken out by geographic region, expressed as year-over-year changes:

                                                   Increase (decrease) from 

2020:

                                   Domestic      Atlantic       Pacific       Latin        Total
Passenger revenue (in millions)   $ 3,599       $    658       $  112       $  619       $ 4,988
Passenger revenue                   288.8  %       361.5  %     115.5  %     499.2  %      302.5  %
Average fare per passenger           25.9  %       (14.8) %      (9.1) %       4.2  %       21.9  %
Yield                                10.6  %        (8.7) %      (3.7) %      (2.0) %        4.1  %
PRASM                                67.6  %        91.9  %      33.6  %      40.3  %       66.0  %
Passengers                          208.8  %       442.0  %     137.1  %     474.9  %      230.1  %
RPMs (traffic)                      251.7  %       405.8  %     123.8  %     511.6  %      286.6  %
ASMs (capacity)                     132.0  %       140.5  %      61.4  %     327.1  %      142.6  %
Passenger load factor (points)       28.0           35.0          9.5       

22.6 28.3



Passenger revenue increased $5.0 billion, or 302.5%, in the third quarter of
2021 as compared to the year-ago period, primarily due to improvements in demand
for air travel as COVID-19 vaccinations are increasingly available in the United
States and certain other jurisdictions and as more governments are lifting
travel and quarantine restrictions.
Cargo revenue increased $97 million, or 23.0%, in the third quarter of 2021 as
compared to the year-ago period, primarily due to stronger yields on freight
revenue and higher cargo tonnage from increased widebody departures of passenger
flights.
                                       33
--------------------------------------------------------------------------------
                               Table of Contents


Other operating revenue increased $176 million, or 42.1%, in the third quarter
of 2021 as compared to the year-ago period, primarily due to an increase in
mileage revenue from non-airline partners, including the co-branded credit card
partner, JPMorgan Chase Bank, N.A., and higher revenue from United Club lounges
due to increased travelers' visits in the third quarter of 2021.
Operating Expenses. The table below includes data related to the Company's
operating expenses for the three months ended September 30 (in millions, except
for percentage changes):
                                                                                       Increase
                                                     2021             2020            (Decrease)             % Change
Salaries and related costs                        $ 2,487          $ 2,229          $        258                11.6
Aircraft fuel                                       1,710              508                 1,202               236.6
Depreciation and amortization                         623              626                    (3)               (0.5)
Landing fees and other rent                           652              500                   152                30.4
Regional capacity purchase                            520              425                    95                22.4
Aircraft maintenance materials and outside
repairs                                               346              115                   231               200.9
Distribution expenses                                 218               53                   165               311.3
Aircraft rent                                          58               50                     8                16.0
Special charges (credits)                          (1,098)          (1,081)                   17                       NM
Other operating expenses                            1,197              679                   518                76.3
Total operating expenses                          $ 6,713          $ 4,104          $      2,609                63.6


Salaries and related costs increased $258 million, or 11.6%, in the third
quarter of 2021 as compared to the year-ago period, despite the 3.0% decrease in
headcount, primarily due to several factors including an increase in front-line
employees' wages from higher flight activity, prior year schedule reductions for
management and administrative employees and prior year Company offered leaves of
absence for front-line employees.
Aircraft fuel expense increased by $1.2 billion, or 236.6%, in the third quarter
of 2021 as compared to the year-ago period, due to both higher average price per
gallon of fuel and increased consumption. The table below presents the
significant changes in aircraft fuel cost per gallon in the three months ended
September 30, 2021 as compared to the year-ago period:
                                               (In millions)                                                       Average price per gallon
                                            2021             2020            % Change                     2021                    2020             % Change
Fuel expense                             $  1,710          $ 508                 236.6  %       $       2.14                    $ 1.31                  63.4  %
Fuel consumption (gallons)                    800            387                 106.7  %


Landing fees and other rent increased $152 million, or 30.4%, in the third
quarter of 2021 as compared to the year-ago period, primarily due to an increase
in capacity-based rent and landing fees.
Regional capacity purchase increased $95 million, or 22.4%, in the third quarter
of 2021 as compared to the year-ago period, primarily due to increased regional
flying and increased pass-through maintenance costs.
Aircraft maintenance materials and outside repairs increased $231 million, or
200.9%, in the third quarter of 2021 as compared to the year-ago period,
primarily due to higher volumes of flying and the timing of heavy check
maintenance events.
Distribution expenses increased $165 million, or 311.3%, in the third quarter of
2021 as compared to the year-ago period, primarily due to higher credit card
fees and commissions and higher volume of global distribution fees as a result
of the overall increase in passenger revenue.
Details of the Company's special charges (credits) include the following for the
three months ended September 30 (in millions):
                                                                  2021           2020
CARES Act grant                                                $ (1,132)      $ (1,494)
Impairment of assets                                                 46             38
Severance and benefit costs                                           5            350

(Gains) losses on sale of assets and other special charges (17)

        25
Special charges (credits)                                      $ (1,098)      $ (1,081)


                                       34
--------------------------------------------------------------------------------
                               Table of Contents


See Note 9 to the financial statements included in Part I, Item 1 of this report
for additional information on the Company's special charges (credits).
Other operating expenses increased $518 million, or 76.3%, in the third quarter
of 2021 as compared to the year ago period, primarily due to increased flight
activity which resulted in an increase in our catering, airport ground handling,
navigation fees, technology projects and crew-related expenses.
Nonoperating Income (Expense). The table below shows year-over-year comparisons
of the Company's nonoperating income (expense) for the three months ended
September 30 (in millions, except for percentage changes):
                                                                                         Increase
                                                      2021             2020             (Decrease)             % Change
Interest expense                                   $  (449)         $  (345)         $         104                30.1
Interest capitalized                                    18               16                      2                12.5
Interest income                                         11                8                      3                37.5
Unrealized gains (losses) on investments, net          (34)              15                    (49)                      NM
Miscellaneous, net                                      20             (411)                  (431)                      NM
Total                                              $  (434)         $  (717)         $        (283)              (39.5)


Interest expense increased $104 million, or 30.1%, in the third quarter of 2021
as compared to the year-ago period, primarily due to the issuance of additional
debt in the current year to provide additional liquidity to the Company during
the COVID-19 pandemic.
Unrealized losses on investments, net, was $34 million in the third quarter of
2021 as compared to gains of $15 million in the year-ago period, primarily due
to the change in the market value of the Company's investments in equity
securities. See Note 6 to the financial statements included in Part I, Item 1 of
this report for information related to these equity investments.
Miscellaneous, net changed by $431 million in the third quarter of 2021 as
compared to the year-ago period, primarily due to $415 million of special
termination benefits and settlement losses related to furloughs and voluntary
separation programs under the Company's defined benefit pension plan covering
certain non-pilot U.S. employees and postretirement medical programs recorded in
2020. See Notes 5, 6, 7 and 9 to the financial statements included in Part I,
Item 1 of this report for additional information.
Income Taxes. See Note 4 to the financial statements included in Part I, Item 1
of this report for information related to income taxes.
First Nine Months 2021 Compared to First Nine Months 2020
The Company recorded a net loss of $1.3 billion in the first nine months of 2021
as compared to a net loss of $5.2 billion in the first nine months of 2020. The
Company considers a key measure of its performance to be operating income
(loss), which was a $614 million loss for the first nine months of 2021, as
compared to a $4.2 billion loss for the first nine months of 2020, a $3.6
billion decrease year-over-year, primarily as a result of improvements in demand
for air travel. Significant components of the Company's operating results for
the nine months ended September 30 are as follows (in millions, except
percentage changes):
                                    2021          2020        Increase (Decrease)       % Change
Operating revenue                $ 16,442      $ 11,943      $              4,499        37.7
Operating expense                  17,056        16,167                       889         5.5
Operating loss                       (614)       (4,224)                   (3,610)      (85.5)
Nonoperating expense, net          (1,098)       (2,225)                   (1,127)      (50.7)
Income tax benefit                   (394)       (1,277)                     (883)      (69.1)
Net loss                         $ (1,318)     $ (5,172)     $             (3,854)      (74.5)


                                       35
--------------------------------------------------------------------------------
                               Table of Contents

Certain consolidated statistical information for the Company's operations for the nine months ended September 30 is as follows:

                                                                                           Increase
                                                      2021              2020              (Decrease)             % Change
Passengers (thousands)                               70,728            42,911                 27,817                64.8
RPMs (millions)                                      86,793            56,812                 29,981                52.8
ASMs (millions)                                     123,869            92,113                 31,756                34.5
Passenger load factor                                  70.1  %           61.7  %               8.4 pts.                   N/A
PRASM (cents)                                         10.75             10.20                   0.55                 5.4
Yield (cents)                                         15.35             16.54                  (1.19)               (7.2)
CTM (millions)                                        2,415             1,876                    539                28.7
CASM (cents)                                          13.77             17.55                  (3.78)              (21.5)
Average price per gallon of fuel, including fuel
taxes                                             $    1.98          $   1.65          $        0.33                20.0
Fuel gallons consumed (millions)                      1,915             1,501                    414                27.6
Employee headcount, as of September 30               85,300            87,900                 (2,600)               (3.0)


Operating Revenue. The table below shows year-over-year comparisons by type of
operating revenue for the nine months ended September 30 (in millions, except
for percentage changes):
                              2021          2020        Increase (Decrease)       % Change
Passenger revenue          $ 13,319      $  9,395      $              3,924        41.8
Cargo                         1,622         1,088                       534        49.1
Other operating revenue       1,501         1,460                        41 

2.8

Total operating revenue    $ 16,442      $ 11,943      $              4,499 

37.7



The table below presents selected passenger revenue and operating data, broken
out by geographic region, expressed as year-over-year changes for the nine
months ended September 30, 2021 compared to the nine months ended September 30,
2020:
                                                     Increase (decrease) from 2020:
                                   Domestic      Atlantic      Pacific       Latin       Consolidated
Passenger revenue (in millions)   $ 3,553       $    57       $ (389)      $  703       $     3,924
Passenger revenue                    56.5  %        4.3  %     (47.5) %      72.3  %           41.8  %
Average fare per passenger           (5.6) %      (16.5) %      32.9  %     (20.6) %          (14.0) %
Yield                                (8.3) %      (21.1) %      68.6  %     (12.1) %           (7.2) %
PRASM                                14.7  %      (19.7) %     (23.9) %     (16.0) %            5.4  %
Passengers                           65.7  %       25.0  %     (60.5) %     117.0  %           64.8  %
RPMs (traffic)                       70.7  %       32.4  %     (68.9) %      96.1  %           52.8  %
ASMs (capacity)                      36.4  %       30.1  %     (31.0) %     105.3  %           34.5  %
Passenger load factor (points)       15.8           1.0        (32.1)        (3.1)              8.4


Passenger revenue increased $3.9 billion, or 41.8%, in the first nine months of
2021 as compared to the year-ago period, primarily due to the increased
availability of the COVID-19 vaccine and a recovery in the demand for air
travel, as demonstrated by a 64.8% increase in passengers year-over-year.
Cargo revenue increased $534 million, or 49.1%, in the first nine months of 2021
as compared to the year-ago period, primarily due to strong yields of cargo-only
flights as a result of increased demand for critical goods during the course of
the COVID-19 pandemic.
Other operating revenue increased $41 million, or 2.8%, in the first nine months
of 2021 as compared to the year-ago period, primarily due to the impact of the
partial demand recovery on co-brand credit card spending and increased credit
card acquisitions.
                                       36
--------------------------------------------------------------------------------
                               Table of Contents


Operating Expenses. The table below includes data related to the Company's
operating expenses for the nine months ended September 30 (in millions, except
for percentage changes):
                                                                                          Increase
                                                     2021              2020              (Decrease)             % Change
Salaries and related costs                        $  6,987          $  7,354          $        (367)              (5.0)
Aircraft fuel                                        3,793             2,474                  1,319               53.3
Depreciation and amortization                        1,866             1,859                      7                0.4
Landing fees and other rent                          1,735             1,552                    183               11.8
Regional capacity purchase                           1,546             1,550                     (4)              (0.3)
Aircraft maintenance materials and outside
repairs                                                917               659                    258               39.2
Distribution expenses                                  442               379                     63               16.6
Aircraft rent                                          165               147                     18               12.2
Special charges (credits)                           (3,423)           (2,467)                   956                      NM
Other operating expenses                             3,028             2,660                    368               13.8
Total operating expenses                          $ 17,056          $ 16,167          $         889                5.5


Salaries and related costs decreased $367 million, or 5.0%, in the first nine
months of 2021 as compared to the year-ago period, primarily due to lower
headcount as a result of various employee voluntary separation programs since
the start of the COVID-19 pandemic and a $233 million increase in tax credits
provided by the Employee Retention Credit under the CARES Act.
Aircraft fuel expense increased $1.3 billion, or 53.3%, in the first nine months
of 2021 as compared to the year-ago period, primarily due to a higher average
price per gallon of fuel and increased consumption. The table below presents the
significant changes in aircraft fuel cost per gallon in the nine months ended
September 30, 2021 as compared to the year-ago period:
                                                (In millions)                                                       Average price per gallon
                                            2021             2020             % Change                     2021                    2020             % Change
Fuel expense                             $ 3,793          $ 2,474                  53.3  %       $       1.98                    $ 1.65                  20.0  %
Fuel consumption (gallons)                 1,915            1,501                  27.6  %


Landing fees and other rent increased $183 million, or 11.8%, in the first nine
months of 2021 as compared to the year-ago period, primarily due to an increase
in capacity-based rent and landing fees.
Aircraft maintenance materials and outside repairs increased $258 million, or
39.2%, in the first nine months of 2021 as compared to the year-ago period,
primarily due to higher volumes of flying and increased heavy check maintenance
events.
Distribution expenses increased $63 million, or 16.6%, in the first nine months
of 2021 as compared to the year-ago period, primarily due to higher credit card
fees and commissions and higher volume of global distribution fees as a result
of the overall increase in passenger revenue. Distribution expenses were also
impacted by the mix of leisure travel versus business travel, which requires the
use of different distribution channels and forms of payment.
Details of the Company's special charges (credits) include the following for the
nine months ended September 30 (in millions):
                                                                  2021           2020
CARES Act grant                                                $ (4,021)      $ (3,083)
Impairment of assets                                                105            168
Severance and benefit costs                                         433            413
(Gains) losses on sale of assets and other special charges           60             35
Special charges (credits)                                      $ (3,423)      $ (2,467)


See Note 9 to the financial statements included in Part I, Item 1 of this report
for additional information on the Company's special charges (credits).
Other operating expenses increased $368 million, or 13.8%, in the first nine
months of 2021 as compared to the year-ago period, primarily due to increases in
ground handling, passenger services, and personnel-related costs from increased
flying and higher expenditures on information technology projects.
                                       37
--------------------------------------------------------------------------------
                               Table of Contents

Nonoperating Income (Expense). The following table illustrates the year-over-year dollar and percentage changes in the Company's nonoperating income (expense) for the nine months ended September 30 (in millions, except for percentage changes):

                                                                                          Increase
                                                      2021              2020             (Decrease)             % Change
Interest expense                                   $ (1,228)         $   (712)         $        516                72.5
Interest capitalized                                     57                54                     3                 5.6
Interest income                                          30                45                   (15)              (33.3)
Unrealized gains (losses) on investments, net            91              (295)                 (386)                      NM
Miscellaneous, net                                      (48)           (1,317)               (1,269)              (96.4)
Total                                              $ (1,098)         $ (2,225)         $     (1,127)              (50.7)


Interest expense increased $516 million, or 72.5%, in the first nine months of
2021 as compared to the year-ago period, primarily due to the issuance of
additional debt in the current year period to provide additional liquidity to
the Company during the COVID-19 pandemic.
Unrealized gains on investments, net, was $91 million in the first nine months
of 2021 as compared to $295 million in unrealized losses in the year-ago period,
primarily due to the change in the market value of the Company's investments in
equity securities. See Note 6 to the financial statements included in Part I,
Item 1 of this report for information related to these equity investments.
Miscellaneous, net decreased $1.3 billion in the first nine months of 2021 as
compared to the year-ago period, primarily due to the $697 million of credit
loss allowances associated with the Company's Term Loan Agreement, with, among
others, BRW Aviation Holding LLC and BRW Aviation LLC, and the related guarantee
recorded in the first quarter of 2020, and lower special termination benefits
related to voluntary separation programs under the Company's defined benefit
pension plan covering certain non-pilot U.S. employees and postretirement
medical programs. See Notes 5, 6, 7 and 9 to the financial statements included
in Part I, Item 1 of this report for additional information.
Income Taxes. See Note 4 to the financial statements included in Part I, Item 1
of this report for information related to income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Current Liquidity
As of September 30, 2021, the Company had $19.4 billion in unrestricted cash,
cash equivalents and short-term investments, as compared to $11.7 billion at
December 31, 2020. We believe that our existing cash, cash equivalents and
short-term investments, together with cash generated from operations, will be
sufficient to satisfy our anticipated liquidity needs for the next twelve
months, and we expect to meet our long-term liquidity needs with our anticipated
access to the capital markets and projected cash from operations. We regularly
assess our anticipated working capital needs, debt and leverage levels, debt
maturities, capital expenditure requirements (including in connection with our
capital commitments for our firm order aircraft) and future investments or
acquisitions in order to maximize shareholder return, efficiently finance our
ongoing operations and maintain flexibility for future strategic transactions.
We also regularly evaluate our liquidity and capital structure to ensure
financial risks, adequate liquidity access and lower cost of capital are
efficiently managed. We expect to maintain an elevated level of liquidity in the
near term as we navigate through the remainder of 2021, which may lead to the
issuance of additional debt securities, the repurchase or redemption of debt
securities prior to maturity or the issuance of common stock, as well as to the
pursuit of financing options for our firm aircraft order and other related
capital expenditures consistent with our historical practice prior to the onset
of the COVID-19 pandemic. While we have been able to access the capital markets
to meet our significant long-term debt and finance lease obligations and future
commitments for capital expenditures, including the acquisition of aircraft and
related spare engines, we must return to profitability in order to service our
debt and maintain appropriate liquidity levels for our long-term operating
needs.
On January 15, 2021, United entered into the PSP2 Agreement with Treasury,
providing the Company with total funding of approximately $3.0 billion,
consisting of approximately $2.1 billion as a direct grant and $870 million as
indebtedness evidenced by the PSP2 Note. See Note 8 to the financial statements
included in Part I, Item 1 of this report for a discussion of the PSP2 Note.
On April 29, 2021, United entered into a PSP3 Agreement with Treasury, providing
the Company with total funding of approximately $2.8 billion, consisting of
approximately $2.0 billion as a direct grant and $810 million as indebtedness
                                       38
--------------------------------------------------------------------------------
                               Table of Contents


evidenced by the PSP3 Note. See Note 8 to the financial statements included in
Part I, Item 1 of this report for a discussion of the PSP3 Note.
The New Revolving Credit Facility provides revolving loan commitments of up to
$1.75 billion until April 21, 2025. No borrowings were outstanding under the New
Revolving Credit Facility at September 30, 2021.
In addition, the Company has backstop financing commitments available from
certain of its aircraft manufacturers for a limited number of its future
aircraft deliveries, subject to certain customary conditions.
We have a significant amount of fixed obligations, including debt, leases of
aircraft, airport and other facilities, and pension funding obligations. As of
September 30, 2021, the Company had approximately $41.6 billion of debt, finance
lease, operating lease and sale-leaseback obligations, including $3.3 billion
that will become due in the next 12 months. In addition, we have substantial
noncancelable commitments for capital expenditures, including the acquisition of
certain new aircraft and related spare engines.
Our debt agreements contain customary terms and conditions as well as various
affirmative, negative and financial covenants that, among other things, restrict
the ability of the Company and its subsidiaries to incur additional indebtedness
and pay dividends or repurchase stock. As of September 30, 2021, UAL and United
were in compliance with their respective debt covenants.
As of September 30, 2021, a substantial portion of the Company's assets,
principally aircraft and certain related assets, its loyalty program, certain
route authorities and airport slots, was pledged under various loan and other
agreements. As of April 21, 2021, the Company pledged as collateral for the
Notes and the New Loan Facilities the following: (i) all of United's route
authorities granted by the U.S. Department of Transportation to operate
scheduled service between any international airport located in the United States
and any international airport located in any country other than the United
States (except Cuba), (ii) United's rights to substantially all of its landing
and take-off slots at foreign and domestic airports, including at John F.
Kennedy International Airport, LaGuardia Airport and Ronald Reagan Washington
National Airport (subject to certain exclusions), and (iii) United's rights to
use or occupy space at airport terminals, each to the extent necessary at the
relevant time for servicing scheduled air carrier service authorized by an
applicable route authority.
See Note 8 to the financial statements included in Part I, Item 1 of this report
for additional information on aircraft financing and other debt instruments.
As of September 30, 2021, United had firm commitments and options to purchase
aircraft from The Boeing Company ("Boeing") and Airbus S.A.S. ("Airbus") as
presented in the table below:
                                                                                                 Scheduled Aircraft Deliveries
                                        Number of Firm                Last Three Months
       Aircraft Type                    Commitments (a)                    of 2021                       2022                  2023              After 2023
Airbus A321XLR                                   50                               -                         -                     -                   50
Airbus A321neo                                   70                               -                         -                    16                   54
Airbus A350                                      45                               -                         -                     -                   45
Boeing 737 MAX                                  371                               4                        48                   114                  205
Boeing 787                                        8                               1                         7                     -                    -

(a) United also has options and purchase rights for additional aircraft.



During the third quarter of 2021, the Company elected to accelerate the delivery
of eight Boeing 737 MAX aircraft from 2023 to 2022. The aircraft listed in the
table above are scheduled for delivery through 2030. To the extent the Company
and the aircraft manufacturers with whom the Company has existing orders for new
aircraft agree to modify the contracts governing those orders, or to the extent
rights are exercised pursuant to the relevant agreements to modify the timing of
deliveries, the amount and timing of the Company's future capital commitments
could change.
United has an agreement to purchase ten used Airbus A319 aircraft, which it
intends to sell, with expected delivery dates in 2021 and 2022.
In 2020, United entered into agreements with third parties to finance through
sale and leaseback transactions new Boeing model 787 aircraft and Boeing model
737 MAX aircraft subject to purchase agreements between United and Boeing. In
connection with the delivery of each aircraft from Boeing, United assigned its
right to purchase such aircraft to the buyer, and simultaneous with the buyer's
purchase from Boeing, United entered into a long-term lease for such aircraft
with the buyer as lessor. Twenty Boeing model aircraft were delivered in the
first nine months of 2021 under these transactions (and each is presently
subject to
                                       39
--------------------------------------------------------------------------------
                               Table of Contents


a long-term lease to United). Remaining aircraft in the agreements are scheduled
to be delivered in the last three months of 2021.
As of September 30, 2021, UAL and United have total capital commitments related
to the acquisition of aircraft and related spare engines, aircraft improvements
and non-aircraft capital commitments for approximately $34.5 billion, of which
approximately $0.9 billion, $5.3 billion, $7 billion, $4.8 billion, $4.3 billion
and $12.2 billion are due in the last three months of 2021, for the full years
2022, 2023, 2024, and 2025, and after 2025, respectively. To the extent the
Company and Boeing agree to modify the timing of Boeing 737 MAX deliveries, the
amount and timing of the Company's future capital commitments could change.
Credit Ratings. As of the filing date of this report, UAL and United had the
following corporate credit ratings:
                                               S&P                       Moody's                    Fitch
UAL                                             B+                         Ba2                        B+
United                                          B+                          *                         B+

* The credit agency does not issue corporate credit ratings for subsidiary entities.



These credit ratings are below investment grade levels; however, the Company has
been able to secure financing with investment grade credit ratings for certain
enhanced equipment trust certificates ("EETCs"), term loans, and secured bond
financings. Downgrades from current rating levels, among other things, could
affect the fair market value of existing debt and restrict the availability
and/or increase the cost of future financing for the Company.
Sources and Uses of Cash
Operating Activities. Cash flows provided by operations were $2.3 billion for
the nine months ended September 30, 2021 compared to cash flows used in
operations of $2.0 billion for the same period in 2020. The increase is
primarily attributable to partial improvements in the demand for passenger
travel as well as total government grant funding provided under the PSP2
Agreement and PSP3 Agreement of $4.1 billion, partially offset by continuing
operating losses as a result of the COVID-19 pandemic.
Investing Activities. Capital expenditures were approximately $1.6 billion in
each of the nine months ended September 30, 2021 and 2020. Capital expenditures
for the nine months ended September 30, 2021 were primarily attributable to
advance deposits for future aircraft purchases.
Financing Activities. Significant financing events in the nine months ended
September 30, 2021 were as follows:
Debt, Finance Lease and Other Financing Liability Principal Payments. During the
nine months ended September 30, 2021, the Company made payments for debt,
finance leases, and other financing liabilities of $4.6 billion, primarily for
repayments of $1.4 billion aggregate principal amount outstanding under the 2017
Term Loan Facility, $1.0 billion aggregate principal amount outstanding under
the 2017 Revolving Credit Facility, and $520 million aggregate principal amount
outstanding under the CARES Act Loan.
Debt Issuances. During the nine months ended September 30, 2021, United received
and recorded:
•$870 million from the PSP2 Note;
•$600 million of proceeds as debt from the EETC pass-through trusts established
in February 2021;
•$810 million from the PSP3 Note;
•$5.0 billion from the New Term Loan Facility; and
•$4.0 billion from the Notes.
See Note 8 to the financial statements included in Part I, Item 1 of this report
for additional information.
Share Issuance. During the nine months ended September 30, 2021, the Company
raised approximately $532 million in net cash proceeds from the issuance and
sale of UAL common stock through "at the market offerings" under equity
distribution agreements entered into in June 2020 and March 2021. During the
quarter ended September 30, 2021, no shares were sold through "at the market
offerings".
                                       40
--------------------------------------------------------------------------------
                               Table of Contents


Commitments, Contingencies and Liquidity Matters. As described in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the
"2020 Form 10-K"), the Company's liquidity may be adversely impacted by a
variety of factors, including, but not limited to, pension funding obligations,
reserve requirements associated with credit card processing agreements,
guarantees, commitments, contingencies and the ongoing impact of the COVID-19
pandemic.
See the 2020 Form 10-K and Notes 5, 6, 7, 8 and 9 to the financial statements
contained in Part I, Item 1 of this report for additional information.
                                       41
--------------------------------------------------------------------------------
                               Table of Contents


CRITICAL ACCOUNTING POLICIES
See "Critical Accounting Policies" in Part II, Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations in the 2020 Form
10-K.
FORWARD-LOOKING INFORMATION
This report contains certain "forward-looking statements," within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including in Part I, Item 2,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in this report, relating to, among other things, the
potential impacts of the COVID-19 pandemic and steps the Company plans to take
in response thereto and goals, plans and projections regarding the Company's
financial position, results of operations, market position, product development,
ESG targets and business strategy. Such forward-looking statements are based on
historical performance and current expectations, estimates, forecasts and
projections about the Company's future financial results, goals, plans and
objectives and involve inherent risks, assumptions and uncertainties, known or
unknown, including internal or external factors that could delay, divert or
change any of them, that are difficult to predict, may be beyond the Company's
control and could cause the Company's future financial results, goals, plans and
objectives to differ materially from those expressed in, or implied by, the
statements. Words such as "should," "could," "expects," "will," "plans,"
"intends," "anticipates," "indicates," "remains," "believes," "estimates,"
"may," "projects," "forecast," "guidance," "outlook," "goals", "targets" and
other words and terms of similar meaning and expression are intended to identify
forward-looking statements, although not all forward-looking statements contain
such terms.
Additionally, forward-looking statements include statements that do not relate
solely to historical facts, such as conditional statements, statements which
identify uncertainties or trends, discuss the possible future effects of current
known trends or uncertainties, or which indicate that the future effects of
known trends or uncertainties cannot be predicted, guaranteed or assured. All
forward-looking statements in this report are based upon information available
to us on the date of this report. We undertake no obligation to publicly update
or revise any forward-looking statement, whether as a result of new information,
future events, changed circumstances or otherwise, except as required by
applicable law or regulation.
Our actual results could differ materially from these forward-looking statements
due to numerous factors including, without limitation, the following: the
adverse impacts of the ongoing COVID-19 global pandemic, and possible outbreaks
of another disease or similar public health threat in the future, on our
business, operating results, financial condition, liquidity and near-term and
long-term strategic operating plan, including possible additional adverse
impacts resulting from the duration and spread of the pandemic; unfavorable
economic and political conditions in the United States and globally; the highly
competitive nature of the global airline industry and susceptibility of the
industry to price discounting and changes in capacity; high and/or volatile fuel
prices or significant disruptions in the supply of aircraft fuel; our reliance
on technology and automated systems to operate our business and the impact of
any significant failure or disruption of, or failure to effectively integrate
and implement, the technology or systems; our reliance on third-party service
providers and the impact of any significant failure of these parties to perform
as expected, or interruptions in our relationships with these providers or their
provision of services; adverse publicity, harm to our brand; reduced travel
demand, potential tort liability and voluntary or mandatory operational
restrictions as a result of an accident, catastrophe or incident involving us,
our regional carriers, our codeshare partners, or another airline; terrorist
attacks, international hostilities or other security events, or the fear of
terrorist attacks or hostilities, even if not made directly on the airline
industry; increasing privacy and data security obligations or a significant data
breach; disruptions to our regional network and United Express flights provided
by third-party regional carriers; the failure of our significant investments in
other airlines, equipment manufacturers and other aviation industry participants
to produce the returns or results we expect; further changes to the airline
industry with respect to alliances and joint business arrangements or due to
consolidations; changes in our network strategy or other factors outside our
control resulting in less economic aircraft orders, costs related to
modification or termination of aircraft orders or entry into less favorable
aircraft orders, as well as any inability to accept or integrate new aircraft
into our fleet as planned; our reliance on single suppliers to source a majority
of our aircraft and certain parts, and the impact of any failure to obtain
timely deliveries, additional equipment or support from any of these suppliers;
the impacts of union disputes, employee strikes or slowdowns, and other
labor-related disruptions on our operations; extended interruptions or
disruptions in service at major airports where we operate; the impacts of
seasonality and other factors associated with the airline industry; our failure
to realize the full value of our intangible assets or our long-lived assets,
causing us to record impairments; any damage to our reputation or brand image;
the limitation of our ability to use our net operating loss carryforwards and
certain other tax attributes to offset future taxable income for U.S. federal
income tax purposes; the costs of compliance with extensive government
regulation of the airline industry; costs, liabilities and risks associated with
environmental regulation and climate change; the impacts of our significant
amount of financial leverage from fixed obligations, the possibility we may seek
material amounts of additional financial liquidity in the short-term and the
impacts of insufficient liquidity on our financial condition and business;
failure to comply with the covenants in the MileagePlus financing agreements,
resulting in the possible acceleration of the MileagePlus indebtedness,
foreclosure upon the collateral securing the
                                       42
--------------------------------------------------------------------------------
                               Table of Contents


MileagePlus indebtedness or the exercise of other remedies; failure to comply
with financial and other covenants governing our other debt; changes in, or
failure to retain, our senior management team or other key employees; current or
future litigation and regulatory actions, or failure to comply with the terms of
any settlement, order or arrangement relating to these actions; increases in
insurance costs or inadequate insurance coverage; and other risks and
uncertainties set forth under Part II, Item 1A., Risk Factors, of our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2021, as well as other risks
and uncertainties set forth from time to time in the reports we file with the
U.S. Securities and Exchange Commission (the "SEC").
The foregoing list sets forth many, but not all, of the factors that could
impact our ability to achieve results described in any forward-looking
statements. Investors should understand that it is not possible to predict or
identify all such factors and should not consider this list to be a complete
statement of all potential risks and uncertainties. In addition, certain
forward-looking outlook provided in this report relies on assumptions about the
duration and severity of the COVID-19 pandemic, the timing of the return to a
more stable business environment, the volatility of aircraft fuel prices,
customer behavior changes and return in demand for air travel, among other
things (together, the "Recovery Process"). If the actual Recovery Process
differs materially from our assumptions, the impact of the COVID-19 pandemic on
our business could be worse than expected, and our actual results may be
negatively impacted and may vary materially from our expectations and
projections. It is routine for our internal projections and expectations to
change as the year or each quarter in the year progresses, and therefore it
should be clearly understood that the internal projections, beliefs and
assumptions upon which we base our expectations may change. For instance,
forward capacity is matched with current observed bookings trends and published
flight schedules for the quarter and we will monitor future demand and booking
trends and adjust capacity, as needed. As such, our actual flown capacity may
differ materially from currently published flight schedules or current
estimations.

© Edgar Online, source Glimpses

All news about UNITED AIRLINES HOLDINGS, INC.
02:04pBiden told it will take two weeks to have definitive data on Omicron variant
RE
11/26Delta, United not revising South Africa flights amid variant concerns
RE
11/26New COVID variant Omicron triggers global alarm, market sell-off
RE
11/26U.S. imposes travel ban from eight African countries over Omicron variant
RE
11/26Equities, oil prices, U.S. Treasury yields all drop on COVID variant fears
RE
11/26Stocks tumble on new coronavirus variant fear
RE
11/26US Travel Stocks Hammered on New COVID-19 Variant Fears as Europe Eyes Travel Ban for C..
MT
11/26Dow falls over 2% as new virus variant spooks investors
RE
11/26Risk assets plunge as virus fears cause post-Thanksgiving blues
RE
11/26WRAPUP 16-New COVID variant Omicron triggers global alarm, market sell-off
RE
More news
Analyst Recommendations on UNITED AIRLINES HOLDINGS, INC.
More recommendations