United Airlines Holdings, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. The combined filing covers United Airlines Holdings, Inc. (UAL) and its wholly owned operating subsidiary, United Airlines, Inc. (United); their results are substantially aligned.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Operating revenue | $14.484B | $12.877B | $40.091B | $32.555B |
| Operating income | $1.739B | $1.458B | $3.213B | $0.960B |
| Net income (loss) | $1.137B | $0.942B | $2.018B | $(0.106)B |
| Diluted EPS | $3.42 | $2.86 | $6.08 | $(0.33) |
| Operating margin | 12.0% | 11.3% | 8.0% | 2.9% |
| Operating cash flow | Not stated quarterly | $7.821B | $4.908B |
Q3 passenger revenue rose 14.6% to $13.349B, while cargo revenue fell 33.1% to $333M. Passenger traffic increased 14.6% and capacity increased 15.7%; load factor eased 0.9 percentage points to 86.4%. Nine-month passenger revenue increased 27.0%, supported by higher capacity, yield and load factor.
Q3 operating expenses increased 11.6% to $12.745B. Lower fuel expense—down 11.0%, as average fuel price fell 22.6%—partly offset higher labor, airport, maintenance and other costs. CASM-ex, a non-GAAP measure, increased 2.6% in Q3 to 11.51 cents and 1.7% for the nine months to 11.94 cents.
Balance sheet, debt and liquidity
- At September 30, 2023, UAL reported $7.478B cash and equivalents, $9.608B short-term investments and $17.1B in unrestricted cash, equivalents and short-term investments. Cash, equivalents and restricted cash totaled $8.110B.
- Book long-term debt was $29.581B, including $3.649B of current maturities. Management reported approximately $36.7B of debt, finance and operating lease and other financial liabilities, with $4.6B due within 12 months.
- Current assets were $21.912B versus current liabilities of $24.756B. The $1.75B revolving credit facility was undrawn and available; the company reported compliance with debt covenants.
- Nine-month capital expenditures, net of aircraft deposit returns, were $5.105B. Net cash used in investing activities was $5.363B and net cash used in financing activities was $1.769B.
Material changes and unusual items
- Q3 revenue rose 12.5% year over year; operating income increased 19.3% and net income increased 20.7%. For the first nine months, revenue increased 23.1%, and results turned from a $106M loss to $2.018B net income.
- Labor and related costs rose 37.7% in Q3 and 29.3% year to date, reflecting more employees, wage increases and profit sharing. Headcount was 102,000, up 12.3% from a year earlier.
- The company recorded $902M of operating special charges in the first nine months, including $814M for labor contract ratification bonuses. The pilot agreement included a one-time $765M payment; IAM agreement ratification included a one-time $48M expense.
- In Q2, United prepaid $1.0B of a term loan and recorded $11M of debt extinguishment and modification fees for the nine-month period. It also issued $1.3B of 5.80% equipment notes to finance 39 Boeing aircraft.
- UAL reported approximately $62.1B of firm capital commitments across aircraft, spare engines, improvements and other capital items, including $29.6B after 2027. United exercised purchase rights for 50 Boeing 787-9s and 60 Airbus A321neos, with deliveries scheduled from 2028 onward.
Outlook, commentary and risks
Management said available liquidity and expected operating cash generation should meet anticipated needs over the next 12 months; long-term needs are expected to be met through operating cash flow and capital-market access. The filing does not provide a specific numerical earnings or revenue forecast. Management noted typical seasonality, with the second and third quarters historically stronger.
Key risks cited include volatile fuel prices, inflation and labor costs, aircraft delivery delays and supply constraints, operational disruptions at third parties and airports, competition and changes in travel demand, geopolitical conflicts and airspace restrictions, regulation, and substantial fixed obligations. The company had $11.4B of floating-rate debt subject to increased-cost provisions and $8.2B of financing obligations exposed to potential non-U.S. withholding-tax changes. Its credit ratings were below investment grade.
Investor verification priorities
- Track whether passenger demand, fares and load factors sustain revenue growth as capacity expands, particularly in international markets.
- Assess ongoing labor, maintenance and other operating-cost inflation, and the effect of labor agreements and profit sharing on margins.
- Review liquidity against $4.6B of obligations due within 12 months, debt maturities and large aircraft and other capital commitments.
- Monitor aircraft delivery schedules, including disclosed manufacturer adjustments, and the execution and financing of United Next fleet plans.
- Evaluate exposure to fuel-price volatility, floating interest rates, geopolitical disruptions, regulation and credit-rating changes.