United Airlines Holdings, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. United Airlines, Inc. is UAL’s principal wholly owned subsidiary; the combined filing’s operating results are substantially those of United.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Operating revenue | $12.112 billion | $5.471 billion | $19.678 billion | $8.692 billion |
| Operating income (loss) | $878 million | $(270) million | $(498) million | $(1.651) billion |
| Net income (loss) | $329 million | $(434) million | $(1.048) billion | $(1.791) billion |
| Operating margin | 7.2% | (4.9)% | (2.5)% | (19.0)% |
Q2 passenger revenue was $10.829 billion, up 148% year over year; cargo revenue was $574 million, down 5.3%, and other operating revenue was $709 million, up 42.1%. Q2 adjusted operating margin, a non-GAAP measure, was 8.2% (versus (22.3)%); CASM-ex was 11.62 cents, down 15.2% year over year. GAAP CASM increased 23.8% to 17.94 cents.
Q2 capacity was about 85% of Q2 2019 levels. Revenue was 6.2% above Q2 2019, while operating expense was 13.1% higher. The six-month results remained loss-making despite substantial improvement from 2021.
Cash, debt, and liquidity
- First-half operating cash flow was $4.167 billion, versus $3.122 billion in 2021. Investing cash outflow was $3.914 billion, including $3.302 billion of short-term and other investment purchases; financing cash outflow was $1.654 billion. Cash, cash equivalents, and restricted cash declined $1.401 billion to $17.132 billion.
- At June 30, unrestricted cash, cash equivalents, and short-term investments totaled $20.1 billion. The company reported $1.75 billion available under its revolving credit facility, with no balance drawn, and said liquidity should cover anticipated needs for the next 12 months.
- Balance-sheet long-term debt was $29.175 billion and current maturities were $3.012 billion. Total debt, finance-lease, operating-lease, and sale-leaseback obligations were approximately $39.4 billion, including $4.5 billion due within 12 months. The company said it must return to sustained profitability to service debt and maintain appropriate long-term liquidity.
- UAL and United reported compliance with debt covenants. A substantial portion of assets, including aircraft, loyalty-program assets, certain route authorities, slots, and gates, was pledged under financing arrangements.
Changes, outlook, and risks
- Passenger demand and revenue improved sharply as travel recovered. Fuel expense increased 209% in Q2 to $3.811 billion; average fuel price rose 112% year over year to $4.18 per gallon, alongside increased consumption. Management expected fuel costs to remain elevated or rise further during 2022.
- Q2 expense increases also reflected more flying, higher staffing and activity-related costs, maintenance, distribution, ground handling, and passenger services. The prior-year comparison included $1.079 billion of CARES Act grant income in Q2 2021, which did not recur.
- Q2 special operating charges were $112 million, primarily including $94 million for legal matters. The filing cites legal decisions that may affect the company’s ability to assert federal preemption in certain disputes. Net unrealized investment losses were $40 million, versus $147 million in gains in Q2 2021.
- For Q3 2022 versus Q3 2019, management expected scheduled capacity to be down about 11%, operating revenue up about 11%, TRASM up 24%–26%, CASM-ex up 16%–17%, and adjusted operating margin of about 10%. These are forward-looking, non-GAAP measures where noted; the company did not provide reconciliations to GAAP projections.
- Management said it delayed some planned capacity increases for 2022 and 2023 amid operational challenges and other pressures, while maintaining a positive long-term demand outlook and continuing its United Next plan. It expected approximately $5.2 billion of adjusted capital expenditures in 2022.
- Key uncertainties include COVID-19 effects and travel demand, inflation and volatile fuel prices, labor and supply-chain constraints, third-party operational disruptions, aircraft delivery delays, Russia-Ukraine conflict impacts, competition, and the company’s substantial fixed obligations. Boeing notified United that seven 737 MAX and three 787 aircraft scheduled for 2022 were expected to arrive in 2023.
Most important facts for investors to verify
- Whether demand, fares, and capacity recovery support the Q3 outlook and a return to sustained profitability.
- How fuel prices, labor costs, operational disruptions, and delivery delays affect margins and capacity plans.
- Liquidity and refinancing capacity relative to $4.5 billion of obligations due within 12 months, long-term debt, and $34.6 billion of disclosed capital commitments.
- The nature and potential financial exposure of the legal matters behind the $94 million Q2 charge, and any subsequent developments.
- How management’s non-GAAP outlook compares with subsequent GAAP results; the filing cautions that actual results may differ materially from forward-looking measures.