Attached files
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| 8-K - FORM 8-K - US AIRWAYS GROUP INC | d375064d8k.htm |
Exhibit 99.1
INVESTOR RELATIONS UPDATE
July 5, 2012
General Comments
| • | 2012 Capacity Guidance—2012 total system capacity is expected to be up approximately two percent vs. 2011. Domestic capacity is expected to be up approximately two percent and international up approximately one percent. Higher completion factor significantly contributed to the increase in system capacity versus previous guidance. |
| • | Cash—As of March 31, 2012, the Company had $2.54 billion in total cash and cash equivalents, of which $347 million was restricted. |
In April 2012, the Company entered into a loan agreement, pursuant to which US Airways borrowed an aggregate principal amount of $100 million. The net proceeds after fees were approximately $98 million. The loan is collateralized by certain airport take-off and landing slots.
The Company expects to end the second quarter with approximately $2.9 billion in total cash and cash equivalents, of which approximately $390 million is restricted.
| • | Fuel—For the second quarter 2012, the Company anticipates paying an average of between $3.15 and $3.20 per gallon of mainline jet fuel (including taxes). Forecasted volume and fuel prices are provided in the table below. |
| • | Profit Sharing / CASM—Profit sharing equals approximately 10% of pre-tax earnings excluding special items up to a 10% pre-tax margin and 15% above the 10% margin. Profit sharing is excluded in the CASM guidance given below. |
| • | Cargo / Other Revenue — Includes cargo revenue, ticket change fees, excess / overweight baggage fees, first and second bag fees, contract services, simulator rental, airport clubs, and inflight service revenues. |
| • | Taxes / NOL—As of December 31, 2011, net operating losses (NOL) available for use by the Company are approximately $1.9 billion, all of which are expected to be available for use in 2012. The Company’s net deferred tax asset, which includes the NOL, is subject to a full valuation allowance. As of December 31, 2011, the valuation allowances associated with federal and state NOL approximate $347 million and $61 million, respectively. In accordance with generally accepted accounting principles, future utilization of the NOL will result in a corresponding decrease in the valuation allowance and should offset the Company’s tax provision dollar for dollar. |
To the extent profitable, the Company will use NOL to reduce its federal and state taxable income in 2012. The Company also may be subject to AMT liability and may be obligated to record and pay state income tax related to certain states where NOL may be limited or not available to be used.
| • | Slot Transaction Special Item—In December 2011, the Company closed its agreement with Delta Air Lines, Inc. (“Delta”) to transfer certain takeoff and landing rights at New York’s LaGuardia and Washington D.C.’s Reagan National airports. Under the agreement, Delta received 132 slot pairs at LaGuardia from US Airways and US Airways received from Delta 42 slot pairs at Reagan National. In addition, the Company received the rights to operate additional daily service to Sao Paulo, Brazil in 2015 and a cash payment of $66.5 million. To allow other airlines who purchased divested slots from Delta to establish competitive service, the DOT prohibited US Airways and Delta from operating any of the newly acquired slots until March 2012 and from operating more than 50 percent of the total number of slots between March and July 2012. |
The transaction resulted in a gain of approximately $147 million, which the Company fully deferred as of December 31, 2011 due to the DOT operating restrictions. The gain on the transaction is being recognized as the DOT restrictions lapse (March 2012 and July 2012). The Company recognized $73 million of the gain in the first quarter of 2012 and will recognize the remaining gain (expected to approximate $74 million) in the third quarter of 2012. The gain is classified as a special item/credit.
Please refer to the footnotes and the forward looking statements page of this document for additional information
MAINLINE UPDATE
July 5, 2012
Mainline Comments
| • | Mainline data includes US Airways operated flights and all operating expenses are for mainline operated flights only. Please refer to the following page for information pertaining to Express. |
| Mainline Guidance |
1Q12A | 2Q12E | 3Q12E | 4Q12E | FY12E | |||||||||||||||
| Available Seat Miles (ASMs) (bil) |
17.7 | ~19.4 | ~19.4 | ~17.5 | ~74.0 | |||||||||||||||
| CASM ex fuel, special items and profit sharing (YOY % change)1 |
8.71 | +0% to +2% | +1% to +3% | +1% to +3% | +0% to +2% | |||||||||||||||
| Cargo Revenues ($ mil) |
40 | ~40 | ~35 | ~40 | ~155 | |||||||||||||||
| Other Revenues |
345 | ~350 | ~330 | ~320 | ~1,345 | |||||||||||||||
| Percent Hedged |
— | — | — | — | — | |||||||||||||||
| Average Fuel Price (incl. taxes) ($/gal) (as of 07/02/2012) |
3.26 | 3.15 to 3.20 | 2.84 to 2.89 | 2.83 to 2.88 | 3.00 to 3.05 | |||||||||||||||
| Fuel Gallons Consumed (mil) |
264 | ~289 | ~290 | ~265 | ~1,110 | |||||||||||||||
| Interest Income ($ mil) |
— | ~(0.5) | ~(0.5) | ~(0.5) | ~(2.0) | |||||||||||||||
| Interest Expense ($ mil) |
82 | ~85 | ~89 | ~88 | ~345 | |||||||||||||||
| Other Non-Operating (Income)/Expense ex special items ($ mil)2 |
2 | ~11 | — | — | ~13 | |||||||||||||||
| Cash Flow/Capital Update ($ mil) Inflow/(Outflow) |
1Q12A | 2Q12E | 3Q12E | 4Q12E | FY12E | |||||||||||||||
| Cash Capex (non-aircraft) |
(40 | ) | ~(31 | ) | ~(45 | ) | ~(53 | ) | ~(170 | ) | ||||||||||
| Net new aircraft Capex and PDPs |
(47 | ) | ~(45 | ) | ~(17 | ) | ~(26 | ) | ~(135 | ) | ||||||||||
| Net Other Cash Flow Adjustments3 |
(85 | ) | ~31 | ~(87 | ) | ~(102 | ) | ~(244 | ) | |||||||||||
Notes:
| 1. | CASM ex fuel, special items and profit sharing is a non-GAAP financial measure. Please see the GAAP to non-GAAP reconciliation at the end of this document |
| 2. | Other Non-Operating (Income)/Expense ex special items includes primarily gains and losses from foreign currency and the disposition of assets |
| 3. | Debt principal repayment, aircraft refinancing, non-cash bond discount amortization/interest deferrals (included in interest expense), and other non-cash items |
Please refer to the footnotes and the forward looking statements page of this document for additional information
EXPRESS UPDATE
July 5, 2012
Express Comments
| • | US Airways Express is a network of nine regional airlines (2 wholly owned) operating under code share and service agreements with US Airways. All operating expenses (including purchase agreements) associated with US Airways Express are included within the Express Non-Fuel Operating Expense line item on our income statement. |
Express Guidance
| 1Q12A | 2Q12E | 3Q12E | 4Q12E | FY12E | ||||||
| Available Seat Miles (ASMs) (bil) |
3.43 | ~3.65 | ~3.64 | ~3.50 | ~14.22 | |||||
| CASM ex fuel and special items (YOY % change) 1 |
15.33 | -1% to +1% | -3% to -5% | -0% to -2% | 0% to -2% | |||||
| Average Fuel Price (incl. taxes) ($/gal) |
3.29 | 3.20 to 3.25 | 2.88 to 2.93 | 2.85 to 2.90 | 3.05 to 3.10 | |||||
| Fuel Gallons Consumed (mil) |
84 | ~89 | ~87 | ~84 | ~345 | |||||
Express Carriers
| Air Wisconsin Airlines Corporation |
PSA Airlines, Inc. 2 | |
| Chautauqua Airlines, Inc. |
Republic Airline Inc. | |
| Mesa Airlines, Inc. 3 |
SkyWest Airlines, Inc. | |
| Piedmont Airlines, Inc. 2 |
Trans States Airlines, Inc. 4 | |
Notes:
| 1. | CASM ex fuel expense and special items is a non-GAAP financial measure. Please see the GAAP to non-GAAP reconciliation at the end of this document. |
| 2. | Wholly owned subsidiary of US Airways Group, Inc. |
| 3. | Subsidiary of Mesa Air Group, Inc. |
| 4. | Pro-rate agreement. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
FLEET UPDATE
July 5, 2012
Fleet Comments
| • | The Company expects to take delivery of 12 A321 aircraft in 2012. These 12 aircraft will be used to replace legacy Boeing 737 aircraft, including retiring the 737-300 fleet. The Company has financing commitments secured for these aircraft. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
SHARES OUTSTANDING
July 5, 2012
| • | The estimated weighted average shares outstanding for the remainder of the year are listed below. The interest addback to net income for purposes of computing diluted earnings per share is net of the related effect of profit sharing. |
| Shares Outstanding ($ and shares mil) 1 |
Basic | Diluted | Interest Addback | |||||||||
| For Q2 2012 |
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| Earnings above $70 million |
162.3 | 204.0 | $ | 8 | ||||||||
| Earnings between $34 million and $70 million |
162.3 | 203.8 | 8 | |||||||||
| Earnings up to $34 million |
162.3 | 166.0 | — | |||||||||
| Net Loss |
162.3 | 162.3 | — | |||||||||
| For Q3 – Q4 2012 (Average) |
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| Earnings above $70 million |
162.4 | 204.4 | $ | 8 | ||||||||
| Earnings between $36 million and $70 million |
162.4 | 204.2 | 8 | |||||||||
| Earnings up to $36 million |
162.4 | 166.4 | — | |||||||||
| Net Loss |
162.4 | 162.4 | — | |||||||||
| For FY 2012 (Average) |
||||||||||||
| Earnings above $278 million |
162.3 | 203.7 | $ | 32 | ||||||||
| Earnings between $137 million and $278 million |
162.3 | 203.5 | 31 | |||||||||
| Earnings up to $137 million |
162.3 | 165.8 | — | |||||||||
| Net Loss |
162.3 | 162.3 | — | |||||||||
| Notes: 1. | Shares outstanding are based upon several estimates and assumptions, including average per share stock price, stock options, stock appreciation rights, restricted stock unit award activity, and conversion of outstanding senior convertible notes. The number of shares in the actual calculation of earnings per share will likely be different from those set forth above. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
GAAP to Non-GAAP RECONCILIATION
July 5, 2012
Reconciliation of GAAP to Non-GAAP Financial Information
The Company is providing disclosure of the reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis. The Company believes that the non-GAAP financial measures provide investors the ability to measure financial performance excluding special items and profit sharing, which is more indicative of the Company’s ongoing performance and is more comparable to measures reported by other major airlines. The Company believes that the presentation of mainline CASM excluding fuel, special items & profit sharing and Express CASM excluding fuel and special items is useful to investors as both the cost and availability of fuel are subject to many economic and political factors beyond the Company’s control.
| GAAP to Non-GAAP Reconciliation ($ mil except ASM and CASM data) | ||||||||||||||||||||||||||||||||||||
| 1Q12 | 2Q12 Range | 3Q12 Range | 4Q12 Range | FY12 Range | ||||||||||||||||||||||||||||||||
| Actual | Low | High | Low | High | Low | High | Low | High | ||||||||||||||||||||||||||||
| Mainline |
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| Mainline operating expenses* |
$ | 2,405 | $ | 2,494 | $ | 2,540 | $ | 2,404 | $ | 2,449 | $ | 2,250 | $ | 2,293 | $ | 9,524 | $ | 9,690 | ||||||||||||||||||
| Less mainline fuel (net of (gains)/losses from fuel hedges) |
859 | 910 | 925 | 824 | 838 | 750 | 763 | 3,343 | 3,385 | |||||||||||||||||||||||||||
| Less special items |
3 | — | — | — | — | — | — | 3 | 3 | |||||||||||||||||||||||||||
| Less Profit Sharing |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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| Mainline operating expense excluding fuel, special items and profit sharing |
1,543 | 1,583 | 1,615 | 1,580 | 1,611 | 1,500 | 1,529 | 6,179 | 6,302 | |||||||||||||||||||||||||||
| Mainline CASM (cts) |
13.57 | 12.85 | 13.09 | 12.39 | 12.63 | 12.86 | 13.10 | 12.87 | 13.09 | |||||||||||||||||||||||||||
| Mainline CASM excluding fuel, special items and profit sharing (Non-GAAP) (cts) |
8.71 | 8.16 | 8.32 | 8.14 | 8.31 | 8.57 | 8.74 | 8.35 | 8.52 | |||||||||||||||||||||||||||
| Mainline ASMs (bil) |
17.7 | 19.4 | 19.4 | 19.4 | 19.4 | 17.5 | 17.5 | 74.0 | 74.0 | |||||||||||||||||||||||||||
| Express |
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| Express operating expenses |
$ | 802 | $ | 798 | $ | 813 | $ | 756 | $ | 771 | $ | 752 | $ | 767 | $ | 3,102 | $ | 3,156 | ||||||||||||||||||
| Less express fuel expense |
277 | 285 | 289 | 251 | 255 | 239 | 244 | 1,052 | 1,065 | |||||||||||||||||||||||||||
| Less special items |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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| Express operating expenses excluding fuel and special items |
525 | 514 | 524 | 506 | 516 | 513 | 523 | 2,050 | 2,092 | |||||||||||||||||||||||||||
| Express CASM (cts) |
23.39 | 21.87 | 22.28 | 20.78 | 21.19 | 21.48 | 21.90 | 21.81 | 22.20 | |||||||||||||||||||||||||||
| Express CASM excluding fuel and special items (Non-GAAP) (cts) |
15.33 | 14.07 | 14.35 | 13.89 | 14.19 | 14.64 | 14.94 | 14.41 | 14.71 | |||||||||||||||||||||||||||
| Express ASMs (bil) |
3.43 | 3.65 | 3.65 | 3.64 | 3.64 | 3.50 | 3.50 | 14.22 | 14.22 | |||||||||||||||||||||||||||
| Other Non Operating (Income)/Expense |
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| Reported other non-operating (income)/expense |
$ | (71 | ) | $ | 11 | $ | 11 | $ | (74 | ) | $ | (74 | ) | $ | — | $ | — | (134 | ) | $ | (134 | ) | ||||||||||||||
| Less special items |
$ | (73 | ) | $ | — | $ | — | $ | (74 | ) | $ | (74 | ) | $ | — | $ | — | $ | (147 | ) | $ | (147 | ) | |||||||||||||
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| Other non-operating (income)/expense excluding special items |
$ | 2 | $ | 11 | $ | 11 | $ | — | $ | — | $ | — | $ | — | $ | 13 | $ | 13 | ||||||||||||||||||
Note: Amounts may not recalculate due to rounding.
| * | Forecasted mainline operating expenses exclude profit sharing. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
FORWARD LOOKING STATEMENTS
July 5, 2012
FORWARD-LOOKING STATEMENTS
Certain of the statements contained or referred to herein are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “would,” “continue” and similar terms used in connection with statements regarding, among others, the outlook, expected fuel costs, revenue and pricing environment, and expected financial performance and liquidity position of the Company. Such statements include, but are not limited to, statements about future financial and operating results, the Company's plans, objectives, expectations and intentions, and other statements that are not historical facts. These statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties that could cause the Company's actual results and financial position to differ materially from these statements. Such risks and uncertainties include, but are not limited to, the following: the impact of significant operating losses in the future; downturns in economic conditions and their impact on passenger demand, booking practices and related revenues; increased costs of financing, a reduction in the availability of financing and fluctuations in interest rates; the impact of the price and availability of fuel and significant disruptions in the supply of aircraft fuel; the Company’s high level of fixed obligations and ability to fund general corporate requirements, obtain additional financing and respond to competitive developments; any failure to comply with the liquidity covenants contained in financing arrangements; provisions in credit card processing and other commercial agreements that may affect the Company’s liquidity; the impact of union disputes, employee strikes and other labor-related disruptions; the inability to maintain labor costs at competitive levels; interruptions or disruptions in service at one or more of the Company’s hub airports or focus city; regulatory changes affecting the allocation of slots; the Company’s reliance on third-party regional operators or third-party service providers; the Company’s reliance on and costs, rights and functionality of third-party distribution channels, including those provided by global distribution systems, conventional travel agents and online travel agents; changes in government regulation; the impact of changes to the Company’s business model; competitive practices in the industry, including the impact of industry consolidation; the loss of key personnel or inability to attract and retain qualified personnel; the impact of conflicts overseas or terrorist attacks, and the impact of ongoing security concerns; the Company’s ability to operate and grow its route network; the impact of environmental regulation; the Company’s reliance on technology and automated systems and the impact of any failure or disruption of, or delay in, these technologies or systems; costs of ongoing data security compliance requirements and the impact of any significant data security breach; the impact of any accident involving the Company’s aircraft or the aircraft of its regional operators; delays in scheduled aircraft deliveries or other loss of anticipated fleet capacity; the Company’s dependence on a limited number of suppliers for aircraft, aircraft engines and parts; the Company’s ability to operate profitably out of Philadelphia International Airport; the impact of weather conditions and seasonality of airline travel; the impact of possible future increases in insurance costs or reductions in available insurance coverage; the impact of global events that affect travel behavior, such as an outbreak of a contagious disease; the impact of foreign currency exchange rate fluctuations; the Company’s ability to use NOLs and certain other tax attributes; and other risks and uncertainties listed from time to time in the Company’s reports to and filings with the Securities and Exchange Commission (“SEC”). There may be other factors not identified above of which the Company is not currently aware that may affect matters discussed in the forward-looking statements, and may also cause actual results to differ materially from those discussed. The Company assumes no obligation to publicly update or supplement any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting such estimates other than as required by law. Additional factors that may affect the future results of the Company are set forth in the section entitled "Risk Factors" in the Company's Report on Form 10-Q for the quarter ended March 31, 2012 and in the Company's other filings with the SEC, which are available at www.usairways.com.
Please refer to the footnotes and the forward looking statements page of this document for additional information