United Airlines Holdings, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing is an annual report, not a standalone fourth-quarter report; figures below generally compare full-year 2023 with 2022. UAL is a holding company whose wholly owned subsidiary, United Airlines, accounts for nearly all consolidated operating activity.
Business context and financial performance
United operates a global passenger and cargo airline through a hub-and-spoke network, regional carriers, alliances and its MileagePlus loyalty program. Its United Next strategy targets fleet and network growth, a larger average aircraft gauge and an improved customer experience.
| Metric | 2023 | 2022 |
|---|---|---|
| Operating revenue | $53.7 billion | $45.0 billion |
| Operating income | $4.2 billion | $2.3 billion |
| Operating margin | 7.8% | 5.2% |
| Net income | $2.6 billion | $737 million |
| Diluted EPS | $7.89 | $2.23 |
| Cash from operations | $6.9 billion | $6.1 billion |
Operating revenue rose 19.5%; passenger revenue increased 22.5%, while cargo revenue fell 31.1%. Passenger capacity (ASMs) grew 17.5%, passengers rose 14.3% and load factor increased to 83.9% from 83.4%. Total revenue per available seat mile was 18.44 cents, versus 18.14 cents; cost per available seat mile declined to 16.99 cents from 17.19 cents.
Cash, debt and liquidity
- Unrestricted cash, cash equivalents and short-term investments were $14.4 billion at year-end, down from $16.4 billion. Management said available liquidity and expected operating cash flows should meet anticipated needs for the next 12 months.
- Operating cash flow was $6.9 billion and capital expenditures, net of flight-equipment deposit returns, were $7.2 billion. Thus, operating cash flow was approximately $260 million below that capital spending measure.
- Long-term debt had $29.4 billion of principal outstanding ($29.1 billion carrying value before current maturities are separated); $4.0 billion of principal was due in 2024. Total debt, finance leases, operating leases and other financial liabilities were approximately $36.7 billion.
- Debt ratings were below investment grade: BB- from S&P and Fitch and Ba2 from Moody’s for UAL. The company reported covenant compliance at year-end. A $1.75 billion revolving facility was undrawn at year-end; subsequent February 2024 financing amendments increased revolving capacity and refinanced term loans.
- Current assets of $18.5 billion were below current liabilities of $22.2 billion. The company pays no cash dividend and reported no share repurchases in fourth-quarter 2023.
Material changes and unusual items
- Operating expenses increased 16.2%, less than revenue growth. Salaries and related costs rose 29.0% to $14.8 billion, reflecting higher headcount, wage increases, new labor agreements and higher profit sharing.
- Fuel expense declined 3.5% to $12.7 billion as the average price per gallon fell 17.1% to $3.01, partially offset by 16.5% higher fuel consumption. United does not currently hedge fuel prices.
- Special charges were $949 million, including $814 million of labor-contract ratification bonuses and $135 million of other net charges. The pilots’ agreement included a $765 million one-time ratification payment; the filing also reports a $48 million expense for IAM agreements.
- Interest expense increased 10.0% to $2.0 billion, partly due to higher variable rates and new debt, while interest income rose to $827 million. Net nonoperating expense improved to $824 million from $1.3 billion.
- Cash and short-term investments fell by about $2.0 billion. Investing cash use decreased substantially year over year, mainly because of lower net purchases of short-term and other investments; capital expenditures increased to $7.2 billion from $4.8 billion.
Outlook, management commentary and key risks
- United expects approximately $8 billion of adjusted capital expenditures in 2024, a non-GAAP measure that the company did not reconcile to GAAP capital expenditures. It expects more than 700 new narrow- and widebody aircraft deliveries by the end of 2033; management cautions that aircraft delivery and certification delays could alter fleet plans and spending.
- United Next includes substantial aircraft commitments and plans to hire more than 50,000 employees. Management identifies execution, labor and supply-chain costs, aircraft availability, fuel prices, maintenance costs, interest rates and economic conditions as material uncertainties.
- After year-end, the January 2024 FAA grounding of United’s 79 Boeing 737 MAX 9 aircraft negatively affected first-quarter 2024 performance. The filing also cites reduced expected Boeing deliveries and the delayed certification of the 737 MAX 10.
- Other significant exposures include intense fare competition, operational disruption at congested hubs, regional-carrier pilot availability, labor negotiations, geopolitical conflicts affecting routes, cybersecurity and third-party technology risks, and volatile fuel prices.
- Climate commitments include net-zero greenhouse-gas emissions by 2050 and a 50% reduction in carbon-emissions intensity by 2035 versus 2019. SAF supply remains constrained and was less than 0.1% of 2023 fuel use. Regulatory mandates, SAF premiums and potential CORSIA offset costs could raise expenses; the company says future compliance costs remain uncertain.
- Contingencies include ongoing antitrust class-action litigation alleging airline capacity coordination and environmental liabilities, including potential PFAS-related remediation. Management does not expect pending matters to materially affect results, but notes outcomes are inherently uncertain.
Important facts for investors to verify
- Whether passenger demand, yields and load factors can support revenue growth as capacity expands, and whether labor and other costs constrain margins.
- Actual 2024 aircraft delivery timing, the MAX 10 certification schedule and the financial and operational effects of the MAX 9 grounding.
- Liquidity, debt maturities, variable-rate exposure and covenant headroom; the filing estimates a $77 million increase in projected annual interest expense from a 100-basis-point rate increase on variable-rate debt.
- Whether planned aircraft spending and other commitments remain consistent with cash generation; firm capital and other purchase commitments totaled $60.1 billion at year-end, before considering possible changes.
- Progress and costs toward climate targets, including SAF availability and applicable CORSIA, SAF-blending and environmental rules; the filing reports an approximately $1.0 billion carrying value for the China route-authority intangible, a key audit matter involving valuation assumptions.
- Developments in pending legal matters, labor agreements and regional-carrier capacity. The financial statements received an unqualified audit opinion; UAL’s internal control over financial reporting was reported effective.