Q2 '15 Results - HUGE profit

Discussion in 'United Airlines | MileagePlus' started by Wandering Aramean, Jul 23, 2015.  |  Print Topic

  1. Wandering Aramean
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    http://ir.united.com/phoenix.zhtml?c=83680&p=irol-newsArticle&ID=2070357

    Revenue ($9.9bn) was down 4% and PRASM was down 5.6% to 13.41 cents. Fuel cost - after accounting for hedges and such - was $2.17/gallon, down 29% YoY. LF dropped 1.4% on an increase in ASMs of 2.3%.
     
  2. Wandering Aramean
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    Call was on 23 July 2015 at 0930a CDT. Some notes on interesting or exciting comments included in the call....


    Smisek:
    $1.3bn in profits, highest quarterly profit in history.

    1.8bn operating cash flow; nearly .5bn in free cash flow.

    Expected to complete a $1bn share repurchase in Q3 '15; authorized a new $3bn buyback to be completed by EoY 2017.

    0.3% non-fuel cost increases YoY. "Project Quality" is the reason; thanks employees for such.

    Our operational performance was below our expectations in June due to tough weather and mx issues. "We took steps to address the MX issues."
     
  3. Wandering Aramean
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    Jim Compton:

    "We work to deliver the choice and experience you desire"

    Strong US dollar and lower fuel prices drove lower PRASM. Revenue from our energy-related contracts decreased more than expected.

    Corporate rev decreased 5%; Oil & Gas corp rev decreased 30%. Excluding O&G corp was down 2%.

    Ancillary grew 7% per passenger YoY. Now generating $23+ per passenger.

    Expect 5-7% PRASM drop in Q3. Int'l down 11% & domestic 1-3%.
     
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  4. Wandering Aramean
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    We have reduced capacity in [energy markets] by 8% in Q3 & 7% in Q4.

    Brazil capacity cut due to dollar/real issues.

    TATL capacity cut 0.5% in Q4.
     
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  5. Wandering Aramean
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    Greg <dunno>:

    We have cancelled 24k fewer flights in H1 YoY. System-wide on-time performance 4% better in H1.

    June had T-Storms at one or more hub 25/30 days. Significant Mx write-ups in weeks 1-3 of June. Claim significant decrease in such over the past few week.
     
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  6. Wandering Aramean
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    John <alsodunno>:

    Project Quality contributed $350mm YTD and expected to hit $800mm in 2015; expect to realize $1bn in non-fuel savings by EoY 2016, a year ahead of schedule.
     
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  7. Wandering Aramean
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    Spent lots of money on things to solidify core financial performance:
    YTD debt prepayment at $920mm. Also paid $620mm in pension.

    $1.2bn+ in CapEx. $250mm in stock buyback. Azul stake. Fulcrum (biofuels) stake.
     
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  8. Wandering Aramean
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    Fleet expansion in Q2 15
    6x 737-900ER
    1x 789
    4x 73G (used)
    15x E175
     
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  9. Wandering Aramean
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    q: When do you expect to see RASM decline reverse
    Jim Compton: Expect 5-7% RASM decline in Q3. But starting in Q4 the YoY will start to account for many of the things which caused the drops to start in Q4 '14.

    q: Yield decline in just 3 markets like DL said?
    Jim: Dallas, Chicago & Houston
     
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  10. Wandering Aramean
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    q: Other than Oil & Gas what does corporate look like?

    Jim: Clearly we're experience pressure in the oil base (30%). But if you look at the non-oil based companies we're very pleased with our performance. In general the demand is still solid. A little bit of softtening as GDP forecasts have come down. The yields have come down but the demand is still strong.

    q: Going forward what are the biggest focus points on cost savings?

    John: While we have a specific $ & time associated this is becoming a way of doing business; there is further opportunity. The cost benefit from restructuring...Increase average gauge by 7% & decrease departures by 5% has significant benefits.
     
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  11. Wandering Aramean
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    q: TATL Capacity cut 0.5% in Q4 - Is that in conjunction with JV and is total industry change more/less than that?

    Jim Compton: Our capacity reductions are focused on where we think demand is relative to our network. We have those conversations with our partners and share with our network. Fleet flexibility allowing us to gauge appropriate to the expected demand.


    q: Are you considering a CC surcharge?
    A: No comment.
     
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  12. Wandering Aramean
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    Delivery of 77Ws starting end of 2016. Will make a decision about whether 77Ws or A350s replace 74s.

    Late 2019 a lot of 74s have heavy checks scheduled. Some might come out earlier.
     
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  13. Wandering Aramean
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    ATI authorities are involved in the discussions around JFK/EWR slot swap. Smisek is "highly confident" on completing the transaction.
     
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  14. Wandering Aramean
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    q: Is the domestic market becoming less aggressive (vis a vis competition in specific markets)?

    a: We're looking at 1-3% decline in domestic [PRASM??] which is lower than Q2 so, yes, things are getting more stable.
     
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  15. Wandering Aramean
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    There is a cost benefit to completing the CBAs but there is a big cultural/morale piece to those as well. Hopefully will be completed in the near future.

    Need to keep cost growth below inflation but also need to pay our employees a competitive wage. May also have efficiency components to make the numbers work.
     
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  16. Wandering Aramean
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    Very happy with the partnership in China with Air China. Limited ability to expand that into a JV.

    Smisek: As you know, China is not Open Skies. But eventually it will be and when that happens we will pursue a JV comparable to the ANA TPAC and A++ TATL.
     
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  17. Wandering Aramean
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    Call ended.
     
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  18. traveltoomuch

    traveltoomuch Silver Member

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    Wonder how much of that growth is from driving away Overentitled Elites (tm) and replacing them with (non-loyal) passengers who get hit by bag fees?
     
    Last edited: Jul 23, 2015
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  19. HaveMilesWillTravel
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    They don't have to thank this MMer. Zero revenue miles flown in Q2 on UA. Did use some miles to fly AC/LH.
     
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  20. Pizzaman
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    O&G down 30%. I have no knowledge how big this business is, but would imagine with Houston it's not small. Wonder if they lost a big Corp client.
     
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  21. Pizzaman
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    Thanks for all the summaries, Seth!
     
  22. Pizzaman
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    Any idea where the used planes are coming from? Hope the E175s replace smaller RJs (CR2s?).
     
  23. Garp74

    Garp74 Gold Member

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    I wondered at first if they just lost a ton of IAH<->Lagos traffic (a high yield city pair on the order of IAD<->GVA) because it's no longer safe to travel there.
     
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  24. HaveMilesWillTravel
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  25. okrogius

    okrogius Silver Member

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    Am I missing some recent change there? At least judging by the friend I know who lives there, it's about the same as it was a year ago - you really want a secured transport from the airport, but the rich parts of town (i.e. monthly housing rent of 10k) are perfectly reasonable to walk around in.

    Also chatting with that same friend, IAH-LOS still appears to be just O&G traffic. Wealthy Nigerians tends to take ATL-LOS since they prefer Atlanta culturally.
     
    Last edited: Jul 23, 2015
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