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UAL reported a fourth-quarter 2012 net loss of $620 million,

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Grandpa +65

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Integration woes help send United Airlines to loss

Joshua Freed, AP Airlines Writer9:24a.m. EST January 24, 2013


The parent company of United Airlines is reporting a $620 million loss in the fourth quarter as passengers stayed away following its problems earlier in the year with integrating Continental.
It posted a full-year loss of $723 million, too, almost wiping out its $840 million profit from 2011.
PHOTO GALLERY: The Boeing 787 flies for United Airlines
The fourth-quarter loss worked out to $1.87 per share. Excluding special items the loss would have been 58 cents per share, matching expectations of analysts surveyed by FactSet.
Superstorm Sandy cut $85 million from profits in 2012's final quarter.
United's struggles with technology issues - tied to the Continental integration - caused some customers to fly on other airlines. Traffic fell 3.2% in the fourth quarter.
A year ago United Continental Holdings Inc. lost $138 million, or 42 cents per share.

http://www.usatoday.com/story/trave...es-help-send-united-airlines-to-loss/1861119/
 
Genital Lee just creamed his pants.

No, I'm sure they are paying off integration costs. They have to paint planes, combine work groups, etc. All of that is very expensive. But, they did make $5.2 billion in ancillary revenue (fees) a year ago, so they have potential to be a "monster", they just have to get their "stuff together."



Bye Bye---General Lee
 
No, I'm sure they are paying off integration costs. They have to paint planes, combine work groups, etc. All of that is very expensive. But, they did make $5.2 billion in ancillary revenue (fees) a year ago, so they have potential to be a "monster", they just have to get their "stuff together."



Bye Bye---General Lee

No fair. It sounds like you actually read the fine print what the $430M of Q4 merger-related charges consisted of:

Integration-related costs: Includes compensation costs related to systems integration and training, costs to repaint aircraft and other branding activities, costs to write-off or accelerate depreciation on systems and facilities that are no longer used or planned to be used for significantly shorter periods, relocation costs for employees and severance primarily associated with administrative headcount reductions. In addition, on June 30, 2012 UAL became obligated under an indenture to issue to the Pension Benefit Guaranty Corporation ("PBGC"), no later than Feb. 14, 2013, $62.5 million aggregate principal amount of 8% Contingent Senior Unsecured Notes. UAL recorded a liability of approximately $48 million for the fair value of that obligation. The company classified the liability as an integration-related cost since the financial results of UAL, excluding Continental's results, would not have resulted in a financial triggering event under the 8% Notes indenture. In addition, on Dec. 31, 2012, the company entered into an agreement with the PBGC providing for, among other things, the replacement of (i) the company's contingent obligation to issue up to $500 million principal amount of 8% Contingent Senior Notes if certain financial triggers were met, of which $188 million had been incurred as of Dec. 31, 2012, with $400 million principal amount of new 8% Notes due 2024 and (ii) the $652 million outstanding of the company's 6% Senior Notes due 2031 with $326 million principal amount of new 6% Notes due 2026 and $326 million principal amount of new 6% Notes due 2028. The company is treating the substitution of the obligations outstanding on Dec. 31, 2012 as an extinguishment of such debt. The resulting charge of $309 million represents the fair value of the additional $212 million of 8% Notes that we agreed to issue and the change in the fair value of the other new 6% Notes and 8% Notes versus their previous carrying values. The company categorized the expense as an integration-related charge because the note restructuring would not have occurred if it were not for the merger.
 
HTML:
[QUOTE="Andy, post: 2372743, member: 569"]No fair.  It sounds like you actually read the fine print what the $430M of Q4 merger-related charges consisted of[/quote]

Wait, you mean once again General Privatepilot passed off publically available information as inside knowledge and analysis in his quest to impersonate a real airline pilot?  What a shocker. Earth moving stuff there General.  We're they as impressed over on Flyertalk?
 
analysis [FlightInternational]

link

ANALYSIS: Will United turn around in 2013?

United Airlines barely eked out a profit in 2012, while the majority of its US-based brethren posted impressive results.
This was not unexpected. The Chicago-based carrier fell short of its operational and revenue goals during both the second and third quarter, following an eventful move to a single passenger service system in March 2012. Jeff Smisek, chairman and chief executive of United, went so far as to apologise for these shortcomings during its second quarter earnings call in July.
"We are absolutely not satisfied with the financial results last year," he says during an earnings call on 24 January. "We need to generate better unit revenue and operate more efficiently, and we are taking actions to address both of those areas."
United reported a $589 million net profit excluding special charges in 2012. With the $1.3 billion in charges, it lost $723 million.
Delta Air Lines reported a $1.6 billion net profit excluding special charges - $1.01 billion with charges - and US Airways a $537 million net profit excluding charges, which jumped a remarkable 400% year-on-year, during the year. American Airlines, which is operating under chapter 11 bankruptcy protection, lost $130 million excluding charges.
Operating revenue at United was nearly flat, increasing a measly 0.1% to $37.2 billion compared to 2011, while operating expenses increased 5.2% to $37.1 billion. Traffic fell 1% while capacity fell 1.5%. Passenger revenue per available seat mile (PRASM) rose 1.7% to 13.09 cents while cost per available seat mile (CASM) excluding fuel and special items was up 2.6% - nearly one percentage point more - to 8.98 cents
Not the best results for one of the world's largest airlines.
"The year 2012 was a very difficult one for the company, with the merger of two airlines and several computer glitches, resulting in a PRASM disparity to the industry," says Helane Becker, an airline analyst at investment bank Dahlman Rose, in a report. "United is focused on rebuilding its brand [this year], which took a major hit in 2012."
Executives outlined a number of initiatives that will allow the airline to improve its results this year. These range from cuts to its management headcount to rolling back some of the staffing actions that it took to restore operational reliability during the middle of last year, and continuing with its fleet redeployment and network optimisation.
United will trim management and administrative headcount by 6%, or about 600 employees, from this February, says John Rainey, chief financial officer of United, during the call. This could help the airline slow the growth of its CASM excluding fuel and special items, as it has at other carriers.
Smisek says that the carrier began the cuts in December with a 7% reduction in the number of officers.
Measures used to improve reliability following a spike in delays during the third quarter of 2012 will be rolled back this year. These included increasing the number of staff at airports as well as the number of spare aircraft it keeps at its hubs - especially in its legacy United operation - and small increases to aircraft block and ground time, says Jim Compton, chief revenue officer of United, during the call.

U
nited and US Department of Transportation
The moves were needed to improve reliability during the second half of 2012 but, as Rainey puts it, the actions came with additional costs but little revenue.
"We have attacked some of our operational problems with, call it a blunt instrument, and we've thrown head count at it," he says. "We can be a lot more efficient. We can better deploy technology and, I think, over time we can actually see significant savings in other areas of the expense side."
Rolling back these moves is necessary and could achieve a lot of operational and revenue efficiencies that airlines, such as Delta that completed its merger with Northwest Airlines in 2008, are benefitting from. However, United must move with caution as it cannot afford to repeat its operational issues.
United lost corporate customer market share due to the issues, which will take time to regain. In contrast, Delta and US Airways each highlighted gains in corporate revenue during 2012 during their respective earning calls.
Fleet redeployment and optimisation remains a big potential revenue generating opportunity for United. The airline has already done a lot - it is concentrating its Boeing 747-400 fleet at San Francisco to reduce maintenance costs and has opened crew bases for the Boeing 737 in Chicago, Denver and Los Angeles, and the Airbus A320 family in Houston. Compton says that it will further redeploy its 169 large regional aircraft fleet around its hubs this year as a result of the new joint pilots agreement that was ratified in December.
United achieved less fleet optimisation than it planned to last year. "In part due to the lower than expected redeployment rollout, our revenue synergy realisation has been slower than we initially targeted," Compton said in October.
If the airline achieves everything it aims to in terms of its fleet - the 787 grounding withstanding - it could begin realising the $700 million to $800 million in revenue benefits from the merged networks in 2013, he said.
United's results could turn around this year, but it looks to still be a ways from the impressive returns of many of its peers. Executives anticipate a 4.5% to 5.5% increase in CASM excluding fuel and special items despite all of the initiatives they outlined. During just the first quarter, wage increases for employees and pension benefit liabilities will push the metric up a whooping 8% to 9% based on current guidance.
PRASM is only expected to increase by 2.5% during January. Far short of the continued increases that United will need throughout the year in order to surpass the jumps in CASM. Executives remain optimistic.
"2012 was the toughest year of our integration and it is behind us," says Rainey.
Smisek adds: "We are now in a position to go forward as a single carrier and compete effectively on a global scale." Let's see if United can.
 

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