CHICAGO, May 17 /PRNewswire-FirstCall/ -- UAL Corporation , the holding company whose primary subsidiary is United Airlines, announced today it has reduced 2007 mainline domestic capacity growth by approximately 2.0 percent from previously planned levels. This reduction in domestic capacity enables the company to meet increasing international demand and optimize its revenue performance.
On a system basis, the domestic capacity reduction will be partially offset by an increase in international capacity of approximately 0.5 percent. In the fall, United will add service between Los Angeles and Hong Kong and between Washington D.C., and Rio De Janeiro, Brazil. Consolidated system capacity will be reduced approximately 0.5 percent from previous expectations.
"Given the domestic market's slow revenue growth and excess capacity, we believe that removing marginal domestic capacity is the appropriate response," said John Tague, executive vice president and Chief Revenue Officer. "Some capacity will move internationally to meet the service needs of our customers and extend United's market-leading position at Los Angeles International and Washington-Dulles airports."
The company now expects 2007 capacity to change as follows: 2007 Planned Capacity Growth (Available Seat Miles) Percent Higher/(Lower) Than 2006 2Q 2007 3Q 2007 4Q 2007 FY 2007 Mainline (1.0) - (0.5) (1.5) - (0.5) (0.5) - 0.5 (1.0) - 0.0 International 3.0 - 3.5 4.0 - 5.0 5.0 - 6.0 3.0 - 4.0 Domestic (3.5) - (3.0) (5.0) - (4.0) (4.0) - (3.0) (3.0) - (2.0) Express 7.5 - 8.0 3.0 - 4.0 1.5 - 2.5 4.0 - 5.0 Consolidated Flat (1.5) - (0.5) (0.5) - 0.5 (0.5) - 0.5
Due to the planned capacity reduction, the company is also updating the cost guidance it provided in its 2007 first quarter earnings release. The company now estimates that mainline operating cost per available seat mile (CASM) excluding fuel, severance and special items will increase by about 1 percent for the second quarter of 2007 and for the full year 2007 will increase by 1.5 to 2.0 percent versus the comparable periods in 2006. Despite the reduction in available seat miles, full-year CASM excluding fuel guidance remains largely unchanged reflecting the company's execution of its performance agenda.
About United
United Airlines operates more than 3,600* flights a day on United, United Express and Ted to more than 210 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 855 destinations in 155 countries worldwide. United's 55,000 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company's Web site at united.com.
*Based on the flight schedule between Jan. 1, 2007 and Dec. 31, 2007.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements included in this press release are forward- looking and thus reflect the company's current expectations and beliefs with respect to certain current and future events and financial performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to the operations and business environment of the company that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Factors that could significantly affect net earnings, revenues, expenses, costs, load factor and capacity include, without limitation, the following: the company's ability to comply with the terms of its credit facility; the costs and availability of financing; the company's ability to execute its business plan; the company's ability to attract, motivate and/or retain key employees; the company's ability to attract and retain customers; demand for transportation in the markets in which the company operates; general economic conditions (including interest rates, foreign currency exchange rates, crude oil prices and refining capacity in relevant markets); the effects of any hostilities or act of war or any terrorist attack; the ability of other air carriers with whom the company has alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; the costs and availability of aircraft insurance; the costs of jet fuel; our ability to cost-effectively hedge against increases in the price of jet fuel; the costs associated with security measures and practices; labor costs; competitive pressures on pricing and on demand; capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation and other actions; the ability of the company to maintain satisfactory labor relations and our ability to avoid any disruptions to operations due to any potential actions by our labor groups; weather conditions; and other risks and uncertainties set forth from time to time in UAL's reports to the United States Securities and Exchange Commission. Consequently, the forward-looking statements should not be regarded as representations or warranties by the company that such matters will be realized. The company disclaims any intent or obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise.
NON-GAAP TO GAAP RECONCILIATIONS
Pursuant to SEC Regulation G, the Company has included the following reconciliation of reported non-GAAP financial measures to comparable financial measures reported on a GAAP basis. The Company's consolidated financial statements for the periods prior to exit are not comparable to the statements presented after exit. Further, the Company believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management's performance excluding the effects of a significant cost item over which management has limited influence. The Company also believes that adjusting for special items and the severance charge is useful to investors because they are non-recurring charges not indicative of the Company's on-going performance. The forecasted fuel amounts shown below were estimated based on an assumed jet fuel price of $2.15 per gallon for the second quarter and the forward curve for the third and fourth quarters.
Three Months Ending
June 30,
2007 2006 YOY
Operating expense per ASM - CASM
(cents) Estimate Actual % Change
Mainline operating expense 11.26 11.43 (1.5)
Less: fuel expense & cost of
third party sales - UAFC (3.54) (3.73) (5.1)
Mainline excluding fuel & UAFC 7.72 7.70 0.3
Add: income from special items - - -
Less: severance charge - (0.06) -
Mainline excluding fuel, UAFC,
special items and severance
charge 7.72 7.64 1.0
Twelve Months Ending
December 31,
2007 Estimate 2006 YOY
Operating expense per ASM - CASM
(cents) Low High Actual % Change
Mainline operating expense 11.25 11.29 11.23 0.2 0.5
Less: fuel expense & cost of third
party sales - UAFC (3.53) (3.53) (3.61) (2.2) (2.2)
Mainline excluding fuel & UAFC 7.72 7.76 7.62 1.3 1.8
Add: income from special items 0.02 0.02 0.03 (33.3) (33.3)
Less: severance charge - - (0.02) - -
Mainline excluding fuel, UAFC,
special items and severance charge 7.74 7.78 7.63 1.5 2.0
Worldwide Press Office:
Tel: 312.997.8640
