United Airlines (UAL) today announced its fourth-quarter and full-year 2016 financial results.
• Achieved best full-year on-time performance while reporting the lowest number of cancellations, delay minutes and mishandled bags in company history.
• UAL reported full-year net income of $2.3 billion, diluted earnings per share of $6.85, pre-tax earnings of $3.8 billion and pre-tax margin of 10.4 percent. Excluding special items, UAL reported full-year net income of $2.9 billion, diluted earnings per share of $8.65, pre-tax earnings of $4.5 billion and pre-tax margin of 12.2 percent.
• UAL reported fourth-quarter net income of $397 million, diluted earnings per share of $1.26, pre-tax earnings of $884 million and pre-tax margin of 9.8 percent. Excluding special items, UAL reported fourth-quarter net income of $562 million, diluted earnings per share of $1.78, pre-tax earnings of $857 million and pre-tax margin of 9.5 percent.
• Technicians and related employees ratified a joint contract in the fourth quarter. UAL has completed new agreements with every domestic unionized work group in 2016.
• Employees earned $628 million in profit sharing for 2016.
“Our fourth quarter financial and operating performance capped an outstanding year for United Airlines,” said Oscar Munoz, chief executive officer of United Airlines. “In 2016, we put into action our plan to become the best airline in the world, and last year’s results demonstrate we are on our way to achieving that ambition. We will continue delivering on this commitment by investing in our employees, elevating our customer experience and driving strong and consistent returns for our shareholders.”
Full-Year and Fourth-Quarter Revenue
For the fourth quarter of 2016, total revenue was $9.1 billion, an increase of 0.2 percent year-over-year. Fourth-quarter 2016 consolidated passenger revenue per available seat mile (PRASM) decreased 1.6 percent and consolidated yield decreased 1.2 percent compared to the fourth quarter of 2015. This outperformance versus the company’s initial guidance was due to stronger close-in bookings and yields in November and December. For the full-year 2016, consolidated PRASM declined 5.4 percent compared to the prior year driven by factors including a strong U.S. dollar, lower surcharges, reductions from energy-related corporate travel, and declining yields.
“We saw meaningful improvement in the pricing and demand environment in the quarter,” said Scott Kirby, president of United Airlines. “Looking forward, we anticipate first-quarter consolidated unit revenues to be approximately flat, marking the fourth straight quarter of sequential quarter-over-quarter improvement.”
Full-Year and Fourth-Quarter Costs
Total operating expense was $8.0 billion in the fourth quarter, up 1.2 percent year-over-year. Excluding special charges, total operating expense was $8.1 billion, a 3.2 percent increase year-over-year. Consolidated unit cost (CASM) decreased 0.8 percent compared to the fourth quarter of 2015 due mainly to lower fuel expense. Fourth-quarter consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, increased 4.1 percent year-over-year driven largely by the impact of labor agreements ratified in 2016. For the full year, consolidated CASM decreased 2.9 percent compared to full-year 2015 due to lower fuel expense. Excluding special charges, third-party business expenses, fuel and profit sharing, consolidated CASM increased 2.8 percent compared to the prior year due primarily to new labor agreements.
“I am very pleased with core cost performance achieved in the fourth quarter and full-year 2016 where we kept non-fuel cost growth excluding new labor deals nearly constant,” said Andrew Levy, executive vice president and chief financial officer of United Airlines. “I have great confidence we will achieve our cost efficiency targets outlined at our investor day as we look to offset rising fuel and labor costs.”
Liquidity and Capital Allocation
In the fourth quarter, UAL generated $658 million in operating cash flow and ended the quarter with $5.8 billion in unrestricted liquidity, including $1.35 billion of undrawn commitments under its revolving credit facility. UAL generated $5.5 billion in operating cash flow for the full year. The company continued to invest in its business through capital expenditures of $880 million in the fourth quarter and a total of $3.2 billion for the full year. Including assets acquired through the issuance of debt and airport construction financing and excluding fully reimbursable projects, the company invested $1.1 billion during the fourth quarter and $3.3 billion for the full year in adjusted capital expenditures. Free cash flow, measured as operating cash flow less adjusted capital expenditures, was $2.2 billion for the full year.
For the 12 months ended Dec. 31, 2016, the company’s return on invested capital was 19.3 percent. In the quarter, UAL purchased $156 million of its common shares. For full-year 2016, the company purchased $2.6 billion of its common shares, representing approximately 14 percent of shares outstanding, at an average price of $51.80 per share. As of Dec. 31, 2016, the company had $1.8 billion remaining to purchase shares under its existing share repurchase authority.
For more information on UAL’s first-quarter 2017 guidance, please visit ir.united.com for the company’s investor update.
Full-Year and Fourth-Quarter Highlights
Operations and Employees
• In the fourth quarter, United technicians and related employees voted to ratify a new joint collective bargaining agreement. During 2016, the company reached new agreements with every domestic unionized work group.
• Achieved best full-year on-time performance while reporting the lowest number of cancellations, delay minutes and mishandled bags in company history.
• In December, United earned its sixth consecutive perfect 100 percent score on the Human Rights Campaign’s Corporate Equality Index and a spot on the organization’s list of “Best Places to Work for LGBT Equality.”
• Employees earned cash-incentive payments of approximately $30 million for achieving operational performance goals in the quarter, marking a full year of bonus payouts for a total of approximately $120 million.
• Further enabled employees to provide a better experience to customers by equipping them with the technology and information they need, including more than 50,000 mobile devices in the operation.
Network and Fleet
• In the fourth quarter, launched service to Havana, Cuba from its Newark and Houston hubs. During 2016, the company also introduced new routes between San Francisco and five international destinations including Tel Aviv; Xi’an, China; Singapore; Auckland, New Zealand; and Hangzhou, China.
• In the fourth quarter, took delivery of the first Boeing 777-300ER in the company’s fleet, named the “New Spirit of United,” featuring the all-new United Polaris business class seat.
• During the quarter, announced a modification to its narrowbody order book by converting its original order for 65 Boeing 737-700 aircraft into four 737-800 aircraft to be delivered in 2017 and 61 737 MAX aircraft with delivery dates to be determined.
• During the year, took delivery of 22 new Boeing aircraft, including 737NGs, 787s and 777s, as well as six used Airbus A319 aircraft.
Customer Experience
• Launched a reimagined international travel experience, United Polaris service, in December and opened the first premier United Polaris lounge in Chicago.
• Opened automated screening lanes to increase efficiency and improve the screening experience for its customers at hubs in Chicago, Los Angeles and Newark during the fourth quarter.
• During the year, redesigned and upgraded seven United Clubs across the system.
• In 2016, re-introduced free snacks and began offering illy® premium coffee on board and in United Clubs.
• For 2016, MileagePlus® loyalty program named best overall frequent flyer program in the world for thirteenth consecutive year by Global Traveler.
• Flew 1,500 athletes, coaches and Team USA staff to the 2016 Rio Olympic and Paralympic Games over the summer as the company celebrated more than 35 years partnering with Team USA.
• Expanded capabilities of United’s award-winning mobile app, used on more than 28 million devices – enhancing the customer experience with new re-booking options and features to improve management of international travel documents.
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