Smurf: The airliner reported income of $403 million or $3.34 a share, down 98% from $22 billion or $196.6 a share in the prior year due to the absence of net reorganization income of $22.9 billion realised in 2006. The firm was however, able to produce solid cost performance despite inflationary pressures and a reduction in mainline capacity. This performance drove strong gains in cash flows which was used to delever the balance sheet.

This summary is based on the fourth quarter fiscal 2007 earnings call conducted by UAL Corp. (UAUA) on January 22, 2008.

Management:

- VP, IR: Kathryn A. Mikells
- Chairman, President and CEO UAL Corporation and United Airlines: Glenn F. Tilton
- EVP and CFO: Frederic F. Brace
- EVP and Chief Revenue Officer: John P. Tague
- EVP and COO: Peter D. McDonald

Key Investors Issues

- Revenues increased 4% from $19.3 billion in the prior year to $20.14 billion
- Net income of $403 million or $3.34 a share was down 98% from $22 billion or $196.6 a share in 2006.
- The firm strengthened its balance sheet by reducing on and off balance sheet
debt by $2.3 billion.

Fourth Quarter Highlights:

- The firm recorded a net loss of $53 million for the quarter, $10 million better then a year ago, resulting in a loss of 47 cents per share.
- Revenues increased 10% to $5 billion, driven by cargo.
- Cash and cash equivalents decreased 67% to $1.3 billion.

Full Year Highlights

Revenues increased 4% from $19.3 billion in the prior year to $20.14 billion driven by growth in passenger traffic, notably in regional operations.

- Operating margin more than doubled to 4.7% despite fuel costs rising $260 million.
- Annual mainline passenger unit revenue increased year over year by 7.1% for the year as international performance was strong leveraging the network and unmatched alliances.
- As oil hit $100 a barrel, strong revenue performance alone was not enough to counter the impact of that increase in margins, and consolidated fuel costs increased by $359 million, more than 25% from the year-ago period.

It also invested over $450 million in capital projects and launched new international first and business class cabins.

- Mileage Plus accounting change decreased consolidated passenger revenue by $31 million, as $246 million increase in revenue related to the expiration policy was more than offset by $277 million decrease to passenger revenue due to adopting the deferred revenue method.
- Cargo and other revenue was about $1.8 billion, down from $2.1 billion in 2006 reflecting lower United Aviation Fuels Corp sales of $307 million and lower domestic mail revenue.

The firm reported income of $403 million or $3.34 a share down 98% from $22 billion or $196. 6 a share due to a net reorganization income of $22.9 billion realised in 2006.

- Operating expenses increased 1.3% to $19.1 billion as mainline CASM, excluding fuel, severance and specials came in 3.1% higher year over year and the firm experienced inflationary pressures from the V2500 engine maintenance contracts.
- Purchased service expense was $366 million, up 14.7% year over year, as the corporation invested $20 million on information technology deployment and also made investments of about $15 million in efficiency and revenue improvement initiatives.

Salaries and related expense line grew 5.7% year over year driven by accruals for profit sharing which increased by $45 million along with $5 million in increased labor costs related to the December storms.

- Other operating expense was $56 million higher year over year reflecting both tough comparables from 2006 and storm related costs.
- Winter storms in both Chicago and Denver, lowered ASMs, higher staffing, glycol and other storm related costs added about 0.7% to CASM.
- The firm generated strong cash flow with operating cash flow increasing 37% to $2.1 billion and free cash flow, excluding the effect of aircraft re-financings increasing 39% to $1.7 billion.
- Action was taken to strengthen the balance sheet, including debt restructuring and lowering financing costs, including refinancing and paying down the credit facility by $1 billion in February.
- The firm was able to reduce on and off balance sheet debt by $2.3 billion and still ended the period with $3.6 billion in unrestricted cash and short-term investments.

Passenger Revenue Performance:

- First quarter domestic results were disappointing, and coming off of that performance, the firm took definitive action to realign capacity with current market demand, setting the stage for a substantial turnaround in domestic performance.
- The Atlantic region was a standout performer with some of the highest unit revenue growth in the industry, despite significant capacity growth, PRASM was up 13.8% on a 6.8% increase in capacity.
- Pacific PRASM was up 12.7% on a 4.8% growth in capacity, while capacity in Latin America declined modestly by 1.4%.
- PRASM increased 2% year over year on capacity growth of 3.6% and 4.9% increase in stage length.

Operational Perspective:

- The year was challenging with bad weather compounding issues from the constrained ATC environment impacting the industry''s ability to meet customers’ expectations.
- The firm focused on improving operational reliability, by using standard work practices thereby improving operating efficiency and the department of transportation rankings.
- It ranked third among the six network carriers in on-time Arrival, moving up from the fifth position last year.
- It also improved from fourth place to third place in mishandled baggage and had the fewest involuntary denied boardings of any network carrier.

Employees in the field will share on the results of their work and will soon be paid $110 million in profit sharing having already earned some $40 million throughout the year from success-sharing payments.