 Dahlman Rose Global
Transportation
Conference
United Continental
Holdings, Inc.
September 5, 2012
Exhibit 99.1 |
 John
Rainey Executive Vice President and Chief Financial
Officer |
 Safe
Harbor Statement Certain statements included in this presentation are
forward-looking and thus reflect our current expectations and beliefs with
respect to certain current and future events and financial performance. Such forward-looking statements are and will be
subject to many risks and uncertainties relating to our operations and business
environment that may cause actual results to differ materially from any future
results expressed or implied in such forward-looking statements. Words such as
“expects,”
“will,”
“plans,”
“anticipates,”
“indicates,”
“believes,”
“forecast,”
“guidance,”
“outlook”
and similar expressions
are intended to identify forward-looking statements. Additionally,
forward-looking statements include statements which do not relate solely
to historical facts, such as 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 presentation are based upon information
available to us on the date of this presentation. 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. Our actual results could differ materially from these
forward-looking statements due to numerous factors including, without
limitation, the following: our ability to comply with the terms of our various financing arrangements; the
costs and availability of financing; our ability to maintain adequate liquidity; our
ability to execute our operational plans; our ability to control our costs,
including realizing benefits from our resource optimization efforts, cost reduction initiatives and
fleet replacement programs; our ability to utilize our net operating losses; our
ability to attract and retain customers; demand for transportation in the
markets in which we operate; an outbreak of a disease that affects travel demand or travel behavior;
demand
for
travel
and
the
impact
that
global
economic
conditions
have
on
customer
travel
patterns;
excessive
taxation
and
the inability to offset future taxable income; general economic conditions (including
interest rates, foreign currency exchange rates, investment or credit market
conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in
relevant markets); our ability to cost-effectively hedge against increases in the
price of aircraft fuel; any potential realized or unrealized gains or losses
related to fuel or currency hedging programs; the effects of any hostilities, act of war or terrorist
attack; the ability of other air carriers with whom we have alliances or partnerships
to provide the services contemplated by the respective arrangements with such
carriers; the costs and availability of aviation and other insurance; the costs
associated with security measures and practices; industry consolidation or changes in
airline alliances; competitive pressures on pricing and demand; our capacity
decisions and the capacity decisions of our competitors; U.S. or foreign
governmental legislation, regulation and other actions (including open skies
agreements and environmental regulations); labor costs; our ability to
maintain satisfactory labor relations and the results of the collective bargaining agreement process
with our union groups; any disruptions to operations due to any potential actions by
our labor groups; weather conditions; the possibility that expected merger
synergies will not be realized or will not be realized within the expected time period; and
other risks and uncertainties set forth under Item 1A., Risk Factors of the
Company’s Annual Report on Form 10-K, as well as other risks and
uncertainties set forth from time to time in the reports we file with the SEC. Consequently, forward-looking
statements should not be regarded as representations or warranties by us that such
matters will be realized. 3
3 |
 United is
transforming We are building a new airline
Broad, business-centric network
Capacity discipline and business flexibility
Investing in our people, customers,
products and technology
Creating economic value over the
business cycle
4
Strengthening the balance sheet |
 Managing the business to create long-term shareholder
value
5
Earnings
Stability
Earnings
Expansion
Improve
Capital
Structure
Creating Long-Term Shareholder Value |
 6
Earnings
Stability
Earnings
Expansion
Improve
Capital
Structure
Creating Long-Term Shareholder Value |
 The
world’s best network Serving the most destinations of any global
carrier Hubs in the four largest U.S. cities
50 of Fortune 100 companies headquartered in hubs
Rankings for US carriers by ASMs as of 2011
Source: Earnings releases and SEC filings
7
Best Network for Business Customers |
 8
Note: Rolling consolidated capacity for prior twelve months; industry includes AMR,
DAL, LUV and LCC; capacity proforma for merged carriers Source: Earnings
releases and SEC filings (10%)
(5%)
0%
5%
4Q09
4Q08
4Q07
4Q06
4Q10
Industry
ex-UAL
2Q12
4Q11
Maintaining capacity discipline is core to our long-term
success |
 Source: SEC filings and investor updates
Further reducing capacity in response to economic outlook
Reduced FY 2012 consolidated
capacity twice since start of the
year
Expect FY 2012 consolidated
capacity of (0.75%) to (1.75%)
year-over-year
September –
December 2012
Consolidated Capacity Guidance
Year-over-Year % Change in ASMs
Current
Guidance
Original
Guidance
(2.0%)
(3.0%)
Previously
Updated
Guidance
(1.0%)
(2.0%)
9
(0.5%)
0.5% |
 ROIC
goal of 10% over the business cycle Return on Invested Capital
10
Note: Results prior to 4Q 2010 pro forma; ROIC calculation available in Appendix A
and on our website: http//:ir.united.com Source: SEC filings
1. Source: Kiodex –
Platts US Gulf Coast Jet
10.3%
11.3%
7%
8%
9%
10%
11%
12%
13%
14%
TME 2Q 2012
2010 -
2Q 2012
10%
Threshold
Jet A Price ($/bbl)
1
Achieved 10% ROIC goal in most recent twelve month period despite elevated
fuel prices
70
80
90
100
110
120
130
140
Jan. 2012
Jan. 2011
Jan. 2010
Aug. 2012 |
 United’s ROIC calculation
NOPAT
Adjusted pre-tax income
+ Interest expense
+ Interest component of
+ Net interest on pension
Adjusted for cash taxes
Invested Capital
Total assets
+ Capitalized A/C rent (at 7.0x)
-
Non-interest bearing liabilities
Invested capital begins with total assets and removes only liabilities that
do not require a return (e.g. advanced ticket sales, accounts payable)
Note: NOPAT excludes special items, see non-GAAP reconciliation in Appendix B;
Interest components of NOPAT include tax effect at annualized cash tax rate
Source: SEC fillings
11
capitalized A/C rent
ROIC =
ROIC =
Net Operating Profit After Tax (NOPAT)
Average Invested Capital |
 ROIC
goal of 10% over the business cycle 12
$1.0 -
$1.2B of synergies
Capacity discipline
Strengthen our balance sheet
Grow high margin components of our business
Product and technology investments |
 13
(10%)
(5%)
0%
5%
10%
S&P 500
Airline
Industry
Pre-Tax Margin YoY Change (%)
2003
2005
2007
2009
2011
Airline multiple lags other industries due to high leverage
and earnings volatility
Forward P/E Ratio
17
16
14
14
12
6
Note: Airline industry P/E ratio includes UAL, ALK, DAL, JBLU, LCC and LUV;
Other industry P/E ratios include only S&P 500 companies
Source: SEC filings and Thomson One, August 2012 |
 14
Earnings
Stability
Earnings
Expansion
Improve
Capital
Structure
Creating Long-Term Shareholder Value |
 Boeing 737
MAX 9
Investing in our fleet
Highly efficient
Great fit for network
Unrivaled customer
experience |
 Investing in our product and technology
New United
Club in
ORD T-2
Boeing
Sky
Interior
Enhanced
Agent
Interface
Global
Satellite
Wi-Fi |
 Growing high margin components of our business
17
90 million members worldwide
100+ partnerships to earn
Unmatched redemption opportunities
Up to 5 more inches of space in coach
Ancillary Revenue
Economy Plus
Value-add products & services
Dynamic pricing
Improved CRM targeting |
 18
Earnings
Stability
Earnings
Expansion
Improve
Capital
Structure
Creating Long-Term Shareholder Value |
 Net
Debt 1
($B)
19
Net Debt
1
incl. Pension
2
($B)
2012 interest expense
3
expected to decline more than 20% vs. 2010
Committed to strengthening the balance sheet
($3.9)
2011
$12.0
2010
$13.5
2009
$15.9
($3.2)
2011
$16.2
12.0
$17.3
13.5
$19.4
15.9
Net Debt
Pension
2009
2010
4.2
3.8
3.5
Note: Results prior to 4Q 2010 pro forma 1.
Year end balances; Includes aircraft rent capitalized at 7 times 2.
Pension includes the under-funded portion of pension and post-retirement liabilities 3.
2012 interest expense is midpoint of non-operating expense guidance from July 2012 investor Update Source: Earnings
releases, SEC filings and July 2012 Investor Update |
 $4B
of non-aircraft debt coming due in next four years 20
Scheduled Debt & Capital Lease Payments ($B)
0.6
1.1
1.3
1.2
0.4
2016
$1.0
2015
$2.1
2014
$2.2
2013
$1.9
2012
$1.5
0.8
0.9
0.9
0.9
0.6
Aircraft
Non-Aircraft |
 Increasing unencumbered asset base
21
$11.3
$7.7
$5.1
$3.0
2015
2013
2014
2012
Unencumbered Asset Balance ($B)
Note: Cumulative total of assets generally accepted as collateral in financing
transactions and not then encumbered; Asset values derived from historical
appraisals and company estimates; 2012 amount includes currently available
assets and assets expected to become unencumbered by 2012 year-end |
 Creating shareholder value
22
Improve cost of capital
Manage liquidity levels
Reduce amount of leverage
Increase pool of
unencumbered assets
Improve credit rating
Improve Valuation
Capacity discipline
Stable earnings
Invest in product, technology
Grow high margin businesses
Generate ROIC in excess of
10% over the business cycle
Strengthen Balance Sheet |
 23
Appendix A: ROIC calculation
NOPAT ($M)
TME 2Q12
Adjusted
Pre-Tax
Income
1
$1,146
+ Interest Expense
2
870
+
Interest
Component
of
Capitalized
Aircraft
Rent
2
490
+
Net
Interest
on
Pension
2
166
Adjusted for Cash Taxes
(6)
NOPAT
$2,666
Invested Capital ($M)
TME 2Q12
Total Assets
$38,726
+ Capitalized Aircraft Rent (@ 7.0x)
7,077
-
Non-Interest Bearing Liabilities
(19,863)
Average Invested Capital
$25,940
Return on Invested Capital
10.3%
Source: Earnings releases and SEC filings;
1.
Excludes special, one-time items. See non-GAAP reconciliation in Appendix
B 2.
Interest components of NOPAT include tax effect at annualized cash tax rate
|
 24
Appendix B: Non-GAAP Financial Reconciliation
Pre-tax Earnings ($M)
TME 2Q12
Earnings / (Loss) Before Income Taxes
$407
Add: Special Items
739
Adjusted Earnings / (Loss) Before Income Taxes
$1,146
Note: Non-GAAP financial measures are presented because they provide management
and investors with the ability to measure and monitor UAL’s performance
using similar criteria on a consistent basis. UAL believes that adjusting for
special items is useful to investors because they are non-recurring items not
indicative of UAL’s on-going performance. Special items relate to
activities that are not central to UAL’s ongoing operations or are unusual in nature. |