United Airlines records satisfactory profit in 3Q16

United Airlines has delivered another satisfactory third-quarter and year-to-date on-time performance in its history of operation, according to its third-quarter 2016 financial results.

The airline reported third-quarter net income of $965 million, diluted earnings per share of $3.01, pre-tax earnings of $1.5 billion and pre-tax margin of 15.2 percent.

Excluding special items, UAL reported third-quarter net income of $997 million, diluted earnings per share of $3.11, pre-tax earnings of $1.6 billion and pre-tax margin of 15.7 percent.

Flight attendants ratified a joint contract and the company reached a tentative agreement with technicians and related employees for a joint contract.

“We delivered another very good quarter, demonstrating the progress United continues to make at improving our customer experience, which included our best third quarter on-time performance in company history,” said Oscar Munoz, chief executive officer of United Airlines. “As we execute our strategy to build the world’s best airline, we will remain intensely focused on engaging our employees, running a great operation and improving our financial performance.”

Third-Quarter Revenue

For the third quarter of 2016, total revenue was $9.9 billion, a decrease of 3.8 percent year-over-year. Third-quarter 2016 consolidated passenger revenue per available seat mile (PRASM) decreased 5.8 percent and consolidated yield decreased 5.7 percent compared to the third quarter of 2015. The decline in PRASM continues to be driven by factors including a strong U.S. dollar, lower surcharges, reductions from energy-related corporate travel, and declining yields.

Third-Quarter Costs

Total operating expense including special charges was $8.3 billion in the third quarter, down 1.4 percent year-over-year. Excluding special charges, total operating expense was $8.2 billion, a 1.0 percent improvement year-over-year. Consolidated unit cost (CASM) including special charges, third-party business expenses, fuel and profit sharing decreased 3.3 percent compared to the third quarter of 2015 due mainly to lower oil prices. Consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, increased 3.4 percent year-over-year driven largely by the impact of recently ratified labor agreements.

Liquidity and Capital Allocation

In the third quarter, UAL generated $1.1 billion in operating cash flow and ended the quarter with $6.2 billion in unrestricted liquidity, including $1.35 billion of undrawn commitments under its revolving credit facility.

The company continued to invest in its business through capital expenditures of $689 million in the third quarter. Including assets acquired through the issuance of debt and airport construction financing and excluding fully reimbursable projects, the company invested $679 million in adjusted capital expenditures during the third quarter. Free cash flow, measured as operating cash flow less adjusted capital expenditures, was $459 million in the third quarter and $2.6 billion year-to-date.

For the 12 months ended Sept. 30, 2016, the company’s return on invested capital was 19.6 percent.

In the quarter, UAL purchased $255 million of its common shares, representing 1.5 percent of shares outstanding. Since the initial repurchase announcement in July 2014, the company has purchased $4.0 billion of its common shares, representing approximately 20 percent of shares outstanding. As of Sept. 30, 2016, the company had $2.0 billion remaining to purchase shares under its existing share repurchase authority.

Overall Highlights for Third-Quarter

Operations and Employees

• Flight attendants ratified a joint contract covering 25,000 employees.

• Reached a tentative agreement with technicians and related employees for a joint contract.

• Achieved best September, third-quarter and year-to-date on-time performance in company history.

• Employees earned cash-incentive payments of approximately $30 million for achieving operational performance goals in the quarter, marking ten straight months of bonus payouts.

• Solidified the company’s executive leadership, bringing significant experience and expertise to the team.

Network, Fleet and Customer Experience

• Raised $920 million in financing through an enhanced equipment trust certificate transaction at a blended interest rate of 2.94 percent.

• Launched new international routes between San Francisco and Auckland, New Zealand; and between San Francisco and Hangzhou, China.

• Announced the launch of service to Havana, Cuba from the company’s Newark and Houston hubs.

• Flew approximately 1,500 athletes, coaches and Team USA staff to the 2016 Rio Olympic and Paralympic Games as the company celebrated more than 35 years partnering with Team USA.

• Took delivery of four new Boeing 737NG aircraft and one used Airbus A319 aircraft.

• In the third quarter, United’s industry-leading mobile app surpassed more than 24 

million downloads and 1 million visits per day.

For more information on UAL’s fourth-quarter 2016 guidance, please visit ir.united.com for the company’s investor update.