United Continental Holdings, Inc. today announced fourth-quarter and pro forma full-year 2010 financial results. UAL results for the fourth quarter include the financial results of its two operating subsidiaries, United Airlines and Continental Airlines. Prior to the merger on Oct. 1, 2010, UAL results only included the financial results of United Airlines. Pro forma results that consolidate the financial results for Continental for periods prior to Oct. 1, 2010, are included for meaningful year-over-year comparisons.

UAL reported fourth-quarter 2010 net income of $160 million or $0.44 diluted earnings per share excluding $485 million of special items consisting primarily of merger-related costs and other special charges, an improvement of $347 million compared to the pro forma results year-over-year. On a GAAP basis, UAL reported fourth-quarter net loss of $325 million or $1.01 diluted loss per share.
UAL reported pro forma full-year 2010 net income of $1.6 billion excluding $765 million of special items, resulting in a net margin of 4.8 percent. On a GAAP basis, UAL reported full-year 2010 net income of $253 million.
UAL consolidated passenger revenue increased 15.8 percent in the fourth quarter of 2010 compared to the pro forma results for the same period in 2009. Fourth-quarter 2010 consolidated passenger revenue per available seat mile (PRASM) increased 11.5 percent compared to the pro forma results year-over-year.
UAL ended the year with $8.7 billion in unrestricted cash, cash equivalents and short-term investments.
Employees of the combined company earned $224 million in profit sharing for full-year 2010.
“Thanks to the hard work of my co-workers, we made a fourth-quarter profit, excluding special items, in a typically weak quarter,” said Jeff Smisek, UAL’s president and chief executive officer. “While making significant progress integrating United and Continental, we never lost focus on running a good operation. We made a solid profit for the year, and we look forward to distributing $224 million in profit sharing to our co-workers on Valentine’s Day.”

Fourth-Quarter Revenue and Capacity

For the fourth quarter of 2010, UAL total revenue was $8.4 billion, an increase of 15.0 percent compared to the pro forma results for the same period in 2009. Consolidated passenger revenue for the fourth quarter rose 15.8 percent, or $1.0 billion, compared to the pro forma results for the same period in 2009.

Consolidated revenue passenger miles (RPMs) for the fourth quarter of 2010 increased 4.0 percent on a pro forma basis, while capacity (as measured by available seat miles or ASMs) increased 3.8 percent year-over-year on a pro forma basis, resulting in a fourth-quarter consolidated load factor of 82.0 percent.

Consolidated yield for the fourth quarter of 2010 increased 11.3 percent year-over-year on a pro forma basis. Fourth-quarter 2010 consolidated PRASM increased 11.5 percent compared to the pro forma results for the same period of 2009.

Mainline RPMs in the fourth quarter of 2010 increased 3.5 percent on a mainline capacity increase of 3.4 percent year-over-year on a pro forma basis, resulting in a fourth-quarter mainline load factor of 82.7 percent. Mainline yield for the fourth quarter of 2010 increased 12.4 percent over the pro forma results for the same period in 2009. Fourth-quarter 2010 mainline PRASM increased 12.5 percent year-over-year on a pro forma basis.

“The great service our co-workers delivered to our customers resulted in strong fourth-quarter revenue performance,” said Jim Compton, UAL’s executive vice president and chief revenue officer. “With our focus on the customer, operational performance and capacity discipline, we look forward to improving our revenue performance as we integrate the two networks.”

Cargo revenue in the fourth quarter of 2010 increased 13.6 percent, or $37 million, year-over-year on a pro forma basis driven by an increase in fuel surcharges and strength in yields. Other revenue in the fourth quarter of 2010 increased 8.0 percent, or $53 million, year-over-year on a pro forma basis driven by continued growth in ancillary revenue.

Fourth-Quarter Costs

Total consolidated expenses for the fourth quarter of 2010, excluding special items, increased $740 million or 10.2 percent compared to the pro forma results for the fourth quarter of 2009, of which $438 million was due to higher fuel costs. Fourth-quarter 2010 consolidated expenses, excluding fuel, profit-sharing programs and special items, increased $317 million or 6.0 percent year-over-year on a pro forma basis on 3.8 percent higher capacity. Total consolidated expenses increased $1.1 billion or 15.0 percent compared to the pro forma results for the fourth quarter of 2009.

Consolidated costs per available seat mile (CASM), excluding special items, increased 6.1 percent and mainline CASM, excluding special items, increased 6.3 percent in the fourth quarter of 2010 compared to the pro forma results for the same period last year. Fourth-quarter 2010 consolidated and mainline CASM increased 10.9 and 12.3 percent year-over-year on a pro forma basis, respectively.

On a pro forma basis, consolidated fuel prices, excluding the impact of hedges, for the fourth quarter of 2010 increased 17.6 percent compared to the fourth quarter of 2009, while consolidated fuel consumption increased 3.3 percent year-over-year on a pro forma basis.

In the fourth quarter, consolidated CASM excluding special items and holding fuel rate and profit sharing constant increased 1.0 percent and mainline CASM excluding special items and holding fuel rate and profit sharing constant increased 1.1 percent compared to the pro forma results for the same period of 2009. Fourth quarter 2010 includes $130 million of expense related to the execution of the trans-Atlantic joint venture for the first nine months of 2010.

“Our fourth-quarter results demonstrate the great job our entire team did operating efficiently and controlling costs despite numerous challenges throughout the quarter,” said Zane Rowe, UAL’s executive vice president and chief financial officer. “We remain focused on achieving our goal of sustained profitability and this quarter’s results are another step in the right direction.”

Fourth-Quarter Liquidity

UAL ended the year with $8.7 billion in unrestricted cash, cash equivalents and short-term investments. During the fourth quarter, the company generated approximately $106 million of operating cash flow, made scheduled debt and net capital lease payments of $527 million and had gross capital expenditures of $257 million. In October 2010, Continental issued $427 million of enhanced equipment trust certificates securities at a blended annual interest rate of 4.88 percent. During the quarter, $175 million of Continental convertible debt was converted into UAL equity. In addition, the company pre-paid $148 million of debt in January of 2011.

Merger Integration

Since closing the merger on Oct. 1, 2010, United and Continental continued to make significant progress integrating the two carriers. The company has already repainted more than 200 aircraft in the new United livery, selected key technology platforms and begun the process of integrating information technology systems, and continued to co-locate check-in and ticket counter facilities to streamline operations that began when Continental joined Star Alliance in 2009. The carriers are now co-located at 22 airports, including the company’s hubs at Chicago, Denver, Houston, Narita and New York/Newark Liberty. The carriers also made strides to align several employee programs, announcing new on-time incentive and perfect attendance programs.

otable 2010 Accomplishments

On Oct. 1, 2010, a wholly owned subsidiary of United Continental Holdings, Inc. merged with Continental, creating a world-class global airline.

Based on preliminary numbers, UAL anticipates that its carriers will lead their network peers in on time performance for domestic scheduled flights. For the calendar year 2010, United recorded an on-time arrival rate (flights arriving within 14 minutes of scheduled arrival time) as measured by the U.S. Department of Transportation (DOT) for U.S. domestic scheduled flights of 85.2 percent and a systemwide mainline segment completion factor of 98.5 percent. Continental recorded an on-time arrival rate as measured by DOT of 81.4 percent for U.S. domestic scheduled flights and a
systemwide mainline segment completion factor of 99.0 percent for the year.

United expanded its worldwide network by launching service to Africa with daily nonstop flights between Washington Dulles and Accra, Ghana, with continuing service to Lagos, Nigeria. Continental inaugurated service between New York/Newark and Munich and between Orange County and Hawaii, and announced new flights to Auckland, New Zealand and Lagos, Nigeria, from its Houston hub and service between New York/Newark and Cairo, Egypt.
The airlines continued to reconfigure their international aircraft with new lie-flat seats in first and business class. United has now reconfigured 53 of 91 aircraft (21 767s, eight 777s and 24 747s) in its international widebody fleet. Continental installed new BusinessFirst seats on its Boeing 777 and 757 aircraft, with 56 of 63 international aircraft (22 777s and 34 757s) now complete. Continental also continued its DIRECTV® installation, with the service now offered on 165 narrowbody aircraft.

The company bolstered its industry leading aircraft order book. United executed definitive agreements with Airbus for 25 Airbus A350 XWBs and with Boeing for 25 Boeing 787s. Continental placed into service 13 new fuel-efficient Boeing aircraft, leased three used Boeing 757-300s and removed from service three older, less efficient Boeing 737-300s.
The airlines introduced new products that offer travelers the option of customizing their travel experience with services they value, including Continental’s extra legroom seating and FareLock and United’s premium meal offerings on certain flights.

Continental concluded agreements on four new labor contracts including two with the International Brotherhood of Teamsters representing Continental’s aircraft maintenance technicians and fleet service employees and two with the Transport Workers Union representing Continental’s dispatchers and simulator engineers. In addition, in January 2011, the company reached a tentative agreement with the International Association of Machinists representing Continental’s flight attendants.

Employees of the combined company earned cash incentive payments for operational performance totaling $67 million during 2010.

United demonstrated continued commitment to the advancement of alternative fuels by completing the first flight by a U.S. commercial airline using natural gas synthetic jet fuel, and became the first airline to conduct two trans-Atlantic flights using state-of-the-art flight planning to demonstrate the potential for fuel savings and carbon emission reductions.