United posts 2017 net-income 2.1 billion

flyguy84 · Tue Jan 23, 2018 9:27 pm

*UAL reported fourth-quarter net income of $580 million, diluted earnings per share of $1.99, pre-tax earnings of $600 million and pre-tax margin of 6.4 percent. Excluding special charges and income tax adjustments, UAL reported fourth-quarter net income of $408 million, diluted earnings per share of $1.40, pre-tax earnings of $631 million and pre-tax margin of 6.7 percent.

*UAL reported full-year net income of $2.1 billion, diluted earnings per share of $7.02, pre-tax earnings of $3.0 billion and pre-tax margin of 7.9 percent. Excluding special charges and income tax adjustments, UAL reported full-year net income of $2.1 billion, diluted earnings per share of $6.76, pre-tax earnings of $3.2 billion and pre-tax margin of 8.4 percent.

*UAL repurchased $553 million of its common shares in the fourth quarter, bringing the full-year share repurchases to $1.8 billion and completing the company's July 2016 $2 billion share repurchase program. The company's board of directors authorized a new $3 billion share repurchase program in December.

*During 2017, United consistently notched operational bests in on-time arrivals and completions while seeing the fewest cancellations and the best baggage performance in company history.

*Employees earned $349 million in profit sharing for 2017.

http://newsroom.united.com/2018-01-23-U ... erformance

Skywatcher · Tue Jan 23, 2018 9:43 pm

Nice to see strong earnings-I'm not a fan of share repurchases though. What else could UAL do with $2 billion of capital?

Vladex · Tue Jan 23, 2018 9:50 pm

I have no doubt that US3 are just financial institutions masquerading as airlines.

piedmontf284000 · Tue Jan 23, 2018 10:08 pm

They are definitely seeing rising costs along with increased debt. They have they 3rd highest debt-equity ratio of US airlines only behind AA and G4.

Total operating expense was $8.7 billion in the fourth quarter, up 8.2 percent year-over-year. CASM increased 4 percent compared to the fourth quarter of 2016 due largely to higher fuel and labor expense. 4th Qtr CASM increased 1.5 percent year-over-year, driven mainly by higher labor expense. For the full year, consolidated CASM increased 2.8 percent compared to full-year 2016 due largely to higher fuel and labor expense.

With rising oil prices, I imagine more cuts are to come.

flyguy84 · Tue Jan 23, 2018 10:14 pm

Scott Kirby forecasts growth 4-6% each year for the next three years. Wall Street hates that... stock was up 3.5% and is now down 3%.

Basic Economy passengers will now be able to select seat assignments for a small fee when they purchase their ticket.

United737MAX · Tue Jan 23, 2018 10:28 pm

I think that they should invest some of the money to buy a replacement for the Airbus A319's and A320's.

flyguy84 · Tue Jan 23, 2018 10:31 pm

3 used 767's coming on-line this year.

United737MAX · Tue Jan 23, 2018 10:38 pm

flyguy84 wrote:
3 used 767's coming on-line this year.

I've heard that Boeing is possibly considering a relaunch of the passenger variant of the 767, and United could be a possible customer.

d8s · Tue Jan 23, 2018 10:40 pm

United737MAX wrote:
I think that they should invest some of the money to buy a replacement for the Airbus A319's and A320's.

Agree 100%

KarelXWB · Tue Jan 23, 2018 10:40 pm

flyguy84 wrote:
3 used 767's coming on-line this year.

Reports on Twitter claim 3 used 767s from Hawaiian Airlines will join the UA fleet in 2018.

flyguy84 · Tue Jan 23, 2018 10:45 pm

There were also comments about a possible new narrow body order to replace the Airbus fleet, the response was "stay tuned." These comments were also in context of adding more large RJs.

LAXintl · Tue Jan 23, 2018 11:06 pm

Seems market is not thrilled - UA shares down 4% in after hours.

Its likely the forecast growth rate and creeping cost base that worry.

Regarding fleet, lots more used planes will be on the cards, along with looking again at 100-seater category plus potential scope relief on RJs.

deltal1011man · Tue Jan 23, 2018 11:16 pm

flyguy84 wrote:
Scott Kirby forecasts growth 4-6% each year for the next three years. Wall Street hates that... stock was up 3.5% and is now down 3%.

Basic Economy passengers will now be able to select seat assignments for a small fee when they purchase their ticket.

No wall street hates the cost growing. As long as United has the high cost growth without the numbers American/Delta are posting the stock is going to take a hit.

Delta forecasts around 3-5% and its stock didn't suffer at all from it. Wall street isn't dump, a zero growth industry would be terrible.

LAXintl · Tue Jan 23, 2018 11:21 pm

2018 Business plan priorities

1. Unlocking the full potential of network
o Growing network 4-6% in 2018, and at a similar rate through 2020
o Driving higher network connectivity at DEN, IAH and ORD
o Defending market share at international gateways
o Upgauging to larger aircraft

2. Continuing to invest in people and technology
o Empowering employees with new capabilities and processes
o Completing fight attendant integration and rolling out industry-leading hand-held technology for techops
o Improving united.com and releasing new version of mobile app

3. Developing new and exciting experiences for customers
o Launching Premium Plus on select international flights in 2018
o Introducing United Polaris business class in more aircraft
o Providing faster and more reliable infight Wi-Fi
o Opening United Polaris lounges in SFO, EWR, LAX, and IAH
o Refreshed or overhauled United Club locations in ORD, DFW, FLL, IAH, LGA and SFO

4. Focusing on efficiency and productivity to fuel growth
o Driving efficiency and productivity to improve results
o Targeting non-fuel CASM

janders · Tue Jan 23, 2018 11:28 pm

Frankly I think such aggressive growth (more than double US economy growth rate) is not a positive for UA or the industry long term.

There has been a fine balance between capacity restraint and profitability, and such aggressive growth will only end badly as peers are forced to respond and market cant absorb the capacity.
Additionally its likely sooner or later there will be an economic downturn again where such exuberant growth will leave airlines more exposed than they need to be.

kiowa · Tue Jan 23, 2018 11:51 pm

Well done United! It looks to me that UAL is heading in the correct direction and making good progress.

B737900ER · Tue Jan 23, 2018 11:52 pm

Vladex wrote:
I have no doubt that US3 are just financial institutions masquerading as airlines.

I suppose all those hundreds of millions of passengers transported is just a mirage.

MSPNWA · Wed Jan 24, 2018 12:25 am

flyguy84 wrote:
Basic Economy passengers will now be able to select seat assignments for a small fee when they purchase their ticket.

I would like that option. It's my only dislike of the basic economy.

deltal1011man wrote:
No wall street hates the cost growing. As long as United has the high cost growth without the numbers American/Delta are posting the stock is going to take a hit.

Delta forecasts around 3-5% and its stock didn't suffer at all from it. Wall street isn't dump, a zero growth industry would be terrible.

All the evidence points to the planned large capacity increases as the main culprit. AA and DL stock also tanked after hours which has little to nothing to do with UA's costs. UA is actually doing quite well in the cost department by comparison to DL. And finally UA's stock did very well when the results were in and they beat estimates - the same results that showed the cost side of the equation. Only after getting the news of long-run planned capacity increases did the stock drop.

ShinyAndChrome · Wed Jan 24, 2018 12:36 am

Some of the first media takes from the investor call have come out.

https://www.bloomberg.com/news/articles ... lump-fades

https://www.cnbc.com/2018/01/23/united- ... -2017.html

It’s solid enough performance on UA’s part, but I think they still struggle to sell their capacity and pricing story to investors. If you didn’t have the chance to listen earlier, Kirby sounded at several points like he was trying to rebut criticism aimed at him specifically.

B737900ER · Wed Jan 24, 2018 1:00 am

ShinyAndChrome wrote:
It’s solid enough performance on UA’s part, but I think they still struggle to sell their capacity and pricing story to investors. If you didn’t have the chance to listen earlier, Kirby sounded at several points like he was trying to rebut criticism aimed at him specifically.

If the investors don’t like it they can bring back Smisek. He said all the right things and they loved it. Two billion in cuts. Yes. Capacity cuts, aircraft retirements. Woohoo.

Look how good that turned out.

FlyHossD · Wed Jan 24, 2018 1:16 am

B737900ER wrote:
If the investors don’t like it they can bring back Smisek. He said all the right things and they loved it. Two billion in cuts. Yes. Capacity cuts, aircraft retirements. Woohoo.

Look how good that turned out.

It seems to me that UAL has been criticized for it's under-sized domestic route system when compared to DL and AA. Yet when UA tries to correct that, it's growing too much!

LAXintl · Wed Jan 24, 2018 1:34 am

Yes pretty obvious United is undersized if its going to fight AA-DL while maintaining existing hub footprint, so its needs lots of frames. However Kirby's aggressive capacity forecast which is far beyond GDP supported growth rate certainly is a gamble. Could end of real disaster especially if economy tanks in next several years.

n471wn · Wed Jan 24, 2018 2:11 am

kiowa wrote:
Well done United! It looks to me that UAL is heading in the correct direction and making good progress.

Yes I agree that what UAL needs is growth and that is capacity growth—-CEO’s that think they can shrink airlines to profitability win in the short run but the airline loses in the long run and UAL is the best example of that

TWA772LR · Wed Jan 24, 2018 4:02 am

LAXintl wrote:
Yes pretty obvious United is undersized if its going to fight AA-DL while maintaining existing hub footprint, so its needs lots of frames. However Kirby's aggressive capacity forecast which is far beyond GDP supported growth rate certainly is a gamble. Could end of real disaster especially if economy tanks in next several years.

That worries me too. Especially with a recession predicted to happen this year.

lightsaber · Wed Jan 24, 2018 4:17 am

United737MAX wrote:
I think that they should invest some of the money to buy a replacement for the Airbus A319's and A320's.

concur.

UA should be working on getting down cost base. Replacing older aircraft that have a higher variable cost is a more viable alternative in my opinion.

Lightsaber

ShinyAndChrome · Wed Jan 24, 2018 4:40 am

FlyHossD wrote:
B737900ER wrote:
If the investors don’t like it they can bring back Smisek. He said all the right things and they loved it. Two billion in cuts. Yes. Capacity cuts, aircraft retirements. Woohoo.

Look how good that turned out.

It seems to me that UAL has been criticized for it's under-sized domestic route system when compared to DL and AA. Yet when UA tries to correct that, it's growing too much!

n471wn wrote:
kiowa wrote:
Well done United! It looks to me that UAL is heading in the correct direction and making good progress.

Yes I agree that what UAL needs is growth and that is capacity growth—-CEO’s that think they can shrink airlines to profitability win in the short run but the airline loses in the long run and UAL is the best example of that

Something that I think Kirby did well on the call was emphasizing not just capacity growth but connectivity growth to bulk up their domestic market share. They even had a slide showing how AA/DL can generate a greater number of unique itineraries and derive better revenues from it. I didn’t get to hear all of the webcast but there was talk about changing some of their bank structures I believe.

Of course the capacity stuff will always be a sticking point from the Street, but I think Team UA did a better job explaining their MO than last quarter.

CALTECH · Wed Jan 24, 2018 5:02 am

deltal1011man wrote:
flyguy84 wrote:
Scott Kirby forecasts growth 4-6% each year for the next three years. Wall Street hates that... stock was up 3.5% and is now down 3%.

Basic Economy passengers will now be able to select seat assignments for a small fee when they purchase their ticket.

No wall street hates the cost growing. As long as United has the high cost growth without the numbers American/Delta are posting the stock is going to take a hit.

Delta forecasts around 3-5% and its stock didn't suffer at all from it. Wall street isn't dump, a zero growth industry would be terrible.

https://www.bing.com/search?q=delta+air ... 904a7e8f14

https://www.marketwatch.com/investing/stock/dal

Coalways · Wed Jan 24, 2018 1:59 pm

Nice job UA also look like there evaluating the 787-8 and A321neo for 757 & 767 replacement.

https://finance.yahoo.com/news/united-s ... 47359.html

Bricktop · Wed Jan 24, 2018 3:11 pm

TWA772LR wrote:
LAXintl wrote:
Yes pretty obvious United is undersized if its going to fight AA-DL while maintaining existing hub footprint, so its needs lots of frames. However Kirby's aggressive capacity forecast which is far beyond GDP supported growth rate certainly is a gamble. Could end of real disaster especially if economy tanks in next several years.

That worries me too. Especially with a recession predicted to happen this year.

There are always going to be people predicting "This is the year we go into a recession". Trying to make their bones for when the stopped clock is right. I personally don't see a recession in the US in 2018 and that is the way I will be investing. Recession = 2 consecutive quarters of negative growth. 2Q17 3.1%, 3Q17 3.2%. NY Fed says 4Q17 could be 4%. Barring something wacky happening, I really doubt there will be a recession.

So back to UA, screw Wall Street and what they think. They are probably not much more clued in than the average a.net armchair CEO. And that comment applies to more than just the airline industry.

flydude380 · Wed Jan 24, 2018 4:29 pm

Anybody know what AA made? Delta's 5.6 billion profit was superb!!

mcdu · Wed Jan 24, 2018 4:42 pm

flydude380 wrote:
Anybody know what AA made? Delta's 5.6 billion profit was superb!!

AA reports tomorrow on the 25th....

slider · Wed Jan 24, 2018 4:57 pm

LAXintl wrote:
2018 Business plan priorities

1. Unlocking the full potential of network
o Driving higher network connectivity at DEN, IAH and ORD

If this is the case, it's baffling then why these most recent domestic route announcements are largely hub overfly routes. That's aircraft intensive and does little to fortify hub connectivity.

o Completing fight attendant integration and rolling out industry-leading hand-held technology for techops

Would be about f'ing time.

SonomaFlyer · Wed Jan 24, 2018 5:19 pm

It's clear there is a performance difference between airlines. By that I mean the pre-tax margins compared between the airlines, particularly DL.

Perhaps an ANetter who is a Wall St whizkid can clue the rest of us in about the wisdom of such large scale share buy backs when that capital could be used in many other ways including debt reduction, investments in their people (training and/or increased staffing) and a host of other priorities an airline should view in trying to compete in the marketplace.

ShinyAndChrome · Wed Jan 24, 2018 5:47 pm

SonomaFlyer wrote:
It's clear there is a performance difference between airlines. By that I mean the pre-tax margins compared between the airlines, particularly DL.

Perhaps an ANetter who is a Wall St whizkid can clue the rest of us in about the wisdom of such large scale share buy backs when that capital could be used in many other ways including debt reduction, investments in their people (training and/or increased staffing) and a host of other priorities an airline should view in trying to compete in the marketplace.

While I’m no financial whiz by any means, buybacks can be kind of like an investment if you think you can reissue shares at a higher price down the road. Of course, when that might be is very much up in the air right now.

dc10co · Wed Jan 24, 2018 6:01 pm

SonomaFlyer wrote:
It's clear there is a performance difference between airlines. By that I mean the pre-tax margins compared between the airlines, particularly DL.

Perhaps an ANetter who is a Wall St whizkid can clue the rest of us in about the wisdom of such large scale share buy backs when that capital could be used in many other ways including debt reduction, investments in their people (training and/or increased staffing) and a host of other priorities an airline should view in trying to compete in the marketplace.

I don’t think it takes a Wall Street whiz to explain that...when Delta makes almost 3x the profit UA did in 2017 you gotta do something to keep Wall Street happy.

United has ALWAYS put the shareholders interests as #1 over other stakeholders (especially employees) and that’s still true today. While it’s not as bad as the Smisek “Project Quality” days, UA is very much in cost save mode and it feels pretty close to the Jeff days in that regard. The outstations have it particularly tough seeing staff & hour cuts for part time and overtime is almost non existent.

Inflight is also feeling the pressure, for instance the 77W holds almost the exact same amount of pax as the 747 but it is being staffed with far less flight attendants.

Any major cost saving benefits UA makes in 2018 will once again be had off the backs of the employees as it has been for much of United’s history. Not saying I want to go back to the Smisek days, but at least with he was straight forward when he screwed us & you knew what you were getting. Now the company blows smoke and puts on a show, hoping you don’t notice the fact that you’re getting raked over the coals.

sanjet · Wed Jan 24, 2018 6:05 pm

Am I right in reading the report that they have 0% yield on domestic flight?!

United1 · Wed Jan 24, 2018 7:48 pm

sanjet wrote:
Am I right in reading the report that they have 0% yield on domestic flight?!

No...pre tax margin for Q12018 is projected to be right around ~0%. UA and wall street have been projecting Q1 to break even for quite a few months....Q1 is typically UAs weakest quarter.

MSPNWA · Wed Jan 24, 2018 8:52 pm

flydude380 wrote:
Delta's 5.6 billion profit was superb!!

Keep in mind that DL is always touting pre-tax income, which is misleading when comparing between airlines. They bury the after-tax income figure. Their 2017 after-tax income was 3.57m (GAAP) or 3.56m (adjusted). UA's 2017 after-tax income was 2.1m. So DL's actual net income was about 70% more than UA.

dc10co wrote:
I don’t think it takes a Wall Street whiz to explain that...when Delta makes almost 3x the profit UA did in 2017 you gotta do something to keep Wall Street happy.

See above. DL was only about 70% more profitable in 2017 on even terms. If we switch to pre-tax income, DL was only 80% more profitable. Still a large gap, but nowhere near 300%.

cle757 · Wed Jan 24, 2018 9:02 pm

Most employees are getting about half the profit sharing this year compared to last year and UA made more money. Alot of unhappy people working at UA today!!

CriticalPoint · Wed Jan 24, 2018 9:11 pm

cle757 wrote:
Most employees are getting about half the profit sharing this year compared to last year and UA made more money. Alot of unhappy people working at UA today!!

United didn’t make more money........and no one Iv spoken too is unhappy about profit sharing half of last year is a hell of a lot better than nothing which is what we got in the not to distant past. I’m very happy.

B737900ER · Wed Jan 24, 2018 9:17 pm

cle757 wrote:
Most employees are getting about half the profit sharing this year compared to last year and UA made more money. Alot of unhappy people working at UA today!!

The unions, in all their infinite wisdom, allowed it to become a negotiated benefit. Then their high school educated negotiation teams where hustled into giving it up. I can’t blame UA for taking advantage of work groups who consistently fail to educate themselves on the contract they vote yes on.

B737900ER · Wed Jan 24, 2018 9:20 pm

CriticalPoint wrote:
cle757 wrote:
Most employees are getting about half the profit sharing this year compared to last year and UA made more money. Alot of unhappy people working at UA today!!

United didn’t make more money........and no one Iv spoken too is unhappy about profit sharing half of last year is a hell of a lot better than nothing which is what we got in the not to distant past. I’m very happy.

There’s more than a few thousand upset about 10k less this year. But it’s not like they didn’t know when they voted for it

bigjku · Wed Jan 24, 2018 9:21 pm

ShinyAndChrome wrote:
SonomaFlyer wrote:
It's clear there is a performance difference between airlines. By that I mean the pre-tax margins compared between the airlines, particularly DL.

Perhaps an ANetter who is a Wall St whizkid can clue the rest of us in about the wisdom of such large scale share buy backs when that capital could be used in many other ways including debt reduction, investments in their people (training and/or increased staffing) and a host of other priorities an airline should view in trying to compete in the marketplace.

While I’m no financial whiz by any means, buybacks can be kind of like an investment if you think you can reissue shares at a higher price down the road. Of course, when that might be is very much up in the air right now.

It is pretty much this combined with being able to obtain cash for other needs in other ways. The cost of financing equipment is historically cheap even with a few rate increases.

People should remember that cash can be used on just about anything. If you believe your stock is undervalued and the interest cost of financing operations and equipment purchases is low it makes senses to use cash in that manner. Spending cash to pay down financing that was likely on very good terms doesn’t make a lot of sense. So long as you can ovtain cheap operating financing it’s not an either or situation of buying back stock or investing in things and people.

And keep in mind it’s not that much money to spend...against total operating expense it’s like 6%.

TWA772LR · Wed Jan 24, 2018 9:24 pm

dc10co wrote:

United has ALWAYS put the shareholders interests as #1 over other stakeholders (especially employees) and that’s still true today. While it’s not as bad as the Smisek “Project Quality” days, UA is very much in cost save mode and it feels pretty close to the Jeff days in that regard. The outstations have it particularly tough seeing staff & hour cuts for part time and overtime is almost non existent.

All businesses do that, even Southwest. The investors are the ones giving you free money and expect a return to make money off of you so they can give you more free money. I bring up Southwest because they have mastered corporate psychology where building a happy work force is they key to making your investors happy and they only mastered that because they started out like that from day 1.

Think about it like this, if I pay you to have dinner with me, you're going to do that instead of paying someone to cook dinner for you.

TVNWZ · Wed Jan 24, 2018 9:29 pm

dc10co wrote:
The outstations have it particularly tough seeing staff & hour cuts for part time and overtime is almost non existent.

Inflight is also feeling the pressure, for instance the 77W holds almost the exact same amount of pax as the 747 but it is being staffed with far less flight attendants.

Any major cost saving benefits UA makes in 2018 will once again be had off the backs of the employees as it has been for much of United’s history. Not saying I want to go back to the Smisek days, but at least with he was straight forward when he screwed us & you knew what you were getting. Now the company blows smoke and puts on a show, hoping you don’t notice the fact that you’re getting raked over the coals.

Are you saying that the work is not getting done, bags are not loaded, planes are late at the outstations? Isn't staffing levels on the 77W within FAA rules and regs? If the work is getting accomplished within current CBAs and Federal rules and regs it seems like that is staffing just right.

ordbosewr · Wed Jan 24, 2018 10:11 pm

TVNWZ wrote:
dc10co wrote:
The outstations have it particularly tough seeing staff & hour cuts for part time and overtime is almost non existent.

Inflight is also feeling the pressure, for instance the 77W holds almost the exact same amount of pax as the 747 but it is being staffed with far less flight attendants.

Any major cost saving benefits UA makes in 2018 will once again be had off the backs of the employees as it has been for much of United’s history. Not saying I want to go back to the Smisek days, but at least with he was straight forward when he screwed us & you knew what you were getting. Now the company blows smoke and puts on a show, hoping you don’t notice the fact that you’re getting raked over the coals.

Are you saying that the work is not getting done, bags are not loaded, planes are late at the outstations? Isn't staffing levels on the 77W within FAA rules and regs? If the work is getting accomplished within current CBAs and Federal rules and regs it seems like that is staffing just right.

I don't think that is what they are saying. I think what they are saying is that these employees feel that the company is taking advantage of them, by not sharing earnings appropriately. That they are limiting overtime and other practices that limit the amount of money the employee can earn. While that may be what an employee feels and if you have worked a job and always gotten 10 hours of overtime a week, you become accustomed to it. I get it, but that is not an entitlement. I wish my company would continue to pay me overtime, but that does not happen anymore. Cost saving plans always are tough on the employees as we all feel like they come at the expense of things we may be used too. Simple things like getting access to what we need to do our jobs (that is different for all of us).

CHI2DFW · Wed Jan 24, 2018 10:48 pm

What will UA add / upgauge at ORD? Gates are limited for new flights. Perhaps some 787-10s and 77Ws.

LAXintl · Wed Jan 24, 2018 11:51 pm

The market really does not like UA's plan or guidance.

Shares down 11% on Wednesday.

As CNBC put it:
The plan's unveiling backfired, raising concerns about how it would contribute to rising costs and a industry wide fare war. United shares sunk more than 11 percent on Wednesday in a rout that nearly erased the stock's rally over the last year.

winginit · Wed Jan 24, 2018 11:52 pm

TWA772LR wrote:
Especially with a recession predicted to happen this year.

According to who now? I think almost every respectable economist that I've seen has said that while they think it'll blow a hole in the federal debt and question whether or not it will equate to notably higher wages, Trump's tax plan will do the exactly opposite of spurring a recession this year. Very large growth projections virtually across the board.

winginit · Wed Jan 24, 2018 11:57 pm

janders wrote:
Frankly I think such aggressive growth (more than double US economy growth rate) is not a positive for UA or the industry long term..

The market agreed with you today, and you could almost hear the shift on the call the second Scott opened his mouth about 4-6%. The stock and obviously the entire sector were punished as a result in today's trading.

Leave it to United to find a way to screw up otherwise great earnings with an absurd growth plan. I'd be livid if I were a shareholder. Their ability to erase market cap with a single comment is baffling and now more than just a one-off event.

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