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8-K - FORM 8-K - US AIRWAYS GROUP INC | c06619e8vk.htm |
EXHIBIT 99.1
INVESTOR RELATIONS UPDATE
October 5, 2010
October 5, 2010
General Comments
| 2010 Capacity Guidance For 2010, total system capacity is expected to be up slightly. Mainline is forecast to be up approximately one percent, with domestic down approximately one percent and international up approximately eight percent. Express is expected to be down approximately one percent. |
| Cash As of June 30, 2010, the Company had approximately $2.49 billion in total cash and investments, of which $0.44 billion was restricted. In addition, as of June 30, 2010, the Companys auction rate securities had a book value of $59 million ($93 million par value). While these securities are held as investments in non-current marketable securities on our balance sheet, they are included in our unrestricted cash calculation. | |
Pursuant to the terms of the indenture governing the Companys 7% Senior convertible notes due 2020 and the Companys Put Right Purchase Offer to Holders of the Securities dated September 1, 2010, on September 30, 2010, the Company accepted for purchase all outstanding securities that were validly tendered and not withdrawn as of the expiration date. Approximately $68.7 million aggregate principal amount of the notes, representing approximately 93% of the aggregate principal amount of the outstanding notes prior to the Put Option, were validly tendered and accepted for purchase in the Put Option, at a price of $1,000 per $1,000 of principal amount. After giving effect to the purchase of the tendered notes, approximately $4.8 million principal amount of the notes remain outstanding. | ||
The Company expects to end the third quarter with approximately $2.37 billion in total cash and investments, of which approximately $0.38 billion is restricted. |
| Fuel For the third quarter 2010, the Company anticipates paying between $2.15 and $2.20 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 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 Cargo revenue, ticket change fees, excess / overweight baggage fees, first and second bag fees, contract services, simulator rental, airport clubs, Materials Services Company (MSC), and inflight service revenues. The Companys a la carte revenue initiatives are expected to generate in excess of $500 million in revenue in 2010. |
| Taxes / NOL Taxes / NOL As of December 31, 2009, net operating losses (NOL) available for use by the Company is approximately $2.1 billion, all of which is expected to be available for use in 2010. The Companys net deferred tax asset, which includes the NOL, is subject to a full valuation allowance. As of December 31, 2009, the valuation allowances associated with Federal and state NOL are $546 million and $77 million, respectively |
The Company reported income for the six months ended June 30, 2010 and utilized NOL to reduce its
income tax obligation. In accordance with generally accepted accounting principles, utilization
of NOL results in a corresponding decrease in the valuation allowance and offsets the Companys
tax provision dollar for dollar. As a result, income tax expense is not recognized in the
Companys statement of operations.
For the full year 2010, the Company expects to be profitable and will use NOL to reduce federal
and state taxable income. The Company does not expect to be subject to AMT Liability in 2010 as a
result of certain elections the Company made under the Worker, Homeownership, and Business
Assistance Act of 2009.
The Company could be obligated to record and pay state income tax related to certain states where
NOL may be limited or not available to be used. Current estimates of the Companys obligations
for certain state income tax are less than $1 million for the year.
Please refer to the footnotes and the forward looking statements page of this document for additional information
MAINLINE UPDATE
October 5, 2010
October 5, 2010
Mainline Comments
| Mainline data includes US Airways operated flights and all operating expenses are for mainline operated flights only. Please refer to the following page for information pertaining to Express. |
| Mainline CASM excluding fuel, special items and profit sharing changed slightly from previous guidance in the third and fourth quarter primarily due to a shift in the timing of expenses and ASMs between the third quarter and the fourth quarter. Guidance for the full year remains unchanged. |
Mainline Guidance | 1Q10A | 2Q10A | 3Q10E | 4Q10E | FY10E | |||||||||||||||
Available Seat Miles (ASMs) (bil) |
16.6 | 18.4 | ~19.1 | ~17.4 | ~71.5 | |||||||||||||||
CASM ex fuel, special items & profit sharing (YOY % change)1 |
8.88 | 8.08 | -2% to -0 | % | -1% to +1 | % | -1% to +1 | % | ||||||||||||
Cargo Revenues ($ mil) |
33 | 37 | ~35 | ~35 | ~140 | |||||||||||||||
Other Revenues |
319 | 331 | ~335 | ~315 | ~1,300 | |||||||||||||||
Fuel Price (incl hedges and taxes) ($/gal) (as of 10/01/10) |
2.17 | 2.23 | 2.15 - 2.20 | 2.35 - 2.40 | 2.21 - 2.26 | |||||||||||||||
Fuel Gallons Consumed (mil) |
247 | 276 | ~290 | ~268 | ~1,080 | |||||||||||||||
Percent Hedged |
| | | |||||||||||||||||
Weighted Avg. Heating Oil Collar Range ($/gal) |
| | | |||||||||||||||||
Weighted Avg. Jet Fuel Equivalent (incl, transport, and refining margin)
($/gal) |
| | | |||||||||||||||||
Weighted Avg. Estimated Crude Oil Equivalent ($/bbl) |
| | | |||||||||||||||||
Estimated Jet Fuel Price Assumption (unhedged, incl transport) ($/gal) |
~2.11 | ~2.30 | ~2.16 | |||||||||||||||||
Impact of Fuel Hedges (Gains)/Losses ($/gal) |
| | | | | |||||||||||||||
Interest Expense ($ mil) |
82 | 86 | ~85 | ~80 | ~333 | |||||||||||||||
Interest Income ($ mil) |
(5 | ) | (3 | ) | ~(2 | ) | ~(2 | ) | ~(13 | ) | ||||||||||
Other Non-Operating (Income)/Expense ex special items ($ mil)2 |
7 | 13 | ~(5 | ) | ~1 | ~16 |
Cash Flow/Capital Update ($ mil) Inflow/(Outflow) | 1Q10A | 2Q10A | 3Q10E | 4Q10E | FY10E | |||||||||||||||
Cash Capex (non-aircraft) |
(13 | ) | (19 | ) | ~(32 | ) | ~(56 | ) | ~(120 | ) | ||||||||||
Net aircraft Capex and PDPs (A320/A330 Acquisition) |
6 | (23 | ) | ~(29 | ) | ~(33 | ) | ~(79 | ) | |||||||||||
Net Other Cash Flow Adjustments3 |
(114 | ) | (43 | ) | ~(98 | ) | ~(81 | ) | ~(336 | ) |
Notes: | ||
1. | CASM ex fuel, special items & 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 include primarily gains and losses from foreign currency and the disposition of assets | |
3. | Includes equity issuance, debt issuance, debt principal repayment, 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
October 5, 2010
October 5, 2010
Express Comments
| US Airways Express is a network of eight 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 | 1Q10A | 2Q10A | 3Q10E | 4Q10E | FY10E | |||||||||||||||
Available Seat Miles (ASMs) (bil) |
3.28 | 3.63 | ~3.73 | ~3.58 | ~14.22 | |||||||||||||||
CASM ex fuel and special items
(YOY % change) 1 |
14.62 | 13.49 | +4% to +6 | % | +2% to +0 | % | +3% to +5 | % | ||||||||||||
Fuel Price (incl taxes) ($/gal) |
2.20 | 2.28 | 2.22 - 2.27 | 2.40 - 2.45 | 2.27 - 2.32 | |||||||||||||||
Fuel Gallons Consumed (mil) |
77 | 86 | ~88 | ~86 | ~337 |
Express Carriers
Air Wisconsin Airlines Corporation
|
Piedmont Airlines, Inc. 2 | |
Chautauqua Airlines, Inc.
|
PSA Airlines, Inc 2 | |
Colgan Air, Inc. 4
|
Republic Airways | |
Mesa Airlines 3
|
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
October 5, 2010
October 5, 2010
Fleet Comments
| During the first quarter, the Company took delivery of two A320 and two A330 aircraft. The Company expects to take delivery of an additional 24 A320 family aircraft in 2011 and 2012 (12 in the second half of 2011 and 12 in the second half of 2012). The Company has financing commitments in place for these aircraft. |
Mainline Fleet Update (End of Period) | YE09A | 1Q10A | 2Q10A | 3Q10A | 4Q10E | |||||||||||||||
Mainline |
||||||||||||||||||||
EMB-190 |
19 | 17 | 15 | 15 | 15 | |||||||||||||||
737-300 |
24 | 24 | 24 | 19 | 19 | |||||||||||||||
737-400 |
40 | 40 | 40 | 40 | 40 | |||||||||||||||
A319 |
93 | 93 | 93 | 93 | 93 | |||||||||||||||
A320 |
70 | 72 | 72 | 72 | 72 | |||||||||||||||
A321 |
51 | 51 | 51 | 51 | 51 | |||||||||||||||
A330 |
14 | 16 | 16 | 16 | 16 | |||||||||||||||
B757 |
28 | 24 | 24 | 23 | 23 | |||||||||||||||
B767 |
10 | 10 | 10 | 10 | 10 | |||||||||||||||
Total |
349 | 347 | 345 | 339 | 339 | |||||||||||||||
Express Fleet Update (End of Period) | YE09A | 1Q10A | 2Q10A | 3Q10A | 4Q10E | |||||||||||||||
Express |
||||||||||||||||||||
DH8 |
50 | 50 | 50 | 50 | 50 | |||||||||||||||
CRJ-200 |
114 | 113 | 113 | 112 | 112 | |||||||||||||||
CRJ-700 |
14 | 14 | 14 | 14 | 14 | |||||||||||||||
CRJ-900 |
38 | 38 | 38 | 38 | 38 | |||||||||||||||
EMB-170 |
20 | 20 | 20 | 20 | 20 | |||||||||||||||
ERJ-145 |
9 | 9 | 9 | 9 | 9 | |||||||||||||||
EMB-175 |
38 | 38 | 38 | 38 | 38 | |||||||||||||||
Total |
283 | 282 | 282 | 281 | 281 | |||||||||||||||
Please refer to the footnotes and the forward looking statements page of this document for additional information
SHARES OUTSTANDING
October 5, 2010
October 5, 2010
| 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. | |
| On September 30, 2010 the Company purchased approximately $68.7 million of its 7% Senior convertible note due 2020 for cash. After the transaction, there were approximately $4.8 million of these securities outstanding. The shares outstanding in the table below have been adjusted to reflect this change. |
Shares Outstanding ($ and shares mil)1 | Basic | Diluted | Interest Addback | |||||||||
For Q3 |
||||||||||||
Earnings above $177 million |
161.5 | 204.6 | $ | 8.6 | ||||||||
Earnings between $25 million and $177 million |
161.5 | 201.6 | $ | 5.8 | ||||||||
Earnings up to $25 million |
161.5 | 163.8 | | |||||||||
Net Loss |
161.5 | 161.5 | | |||||||||
For Q4 |
||||||||||||
Earnings above $71 million |
161.5 | 201.9 | $ | 6.1 | ||||||||
Earnings between $26 million and $71 million |
161.5 | 201.7 | $ | 6.1 | ||||||||
Earnings up to $26 million |
161.5 | 163.8 | | |||||||||
Net Loss |
161.5 | 161.5 | | |||||||||
For FY 2010 (Average) |
||||||||||||
Earnings above $683 million |
161.4 | 203.4 | $ | 31.2 | ||||||||
Earnings between $100 million and $683 million |
161.4 | 201.0 | $ | 23.0 | ||||||||
Earnings up to $100 million |
161.4 | 163.3 | | |||||||||
Net Loss |
161.4 | 161.4 | |
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
October 5, 2010
October 5, 2010
Reconciliation of GAAP to Non-GAAP Financial Information
US Airways Group, Inc. (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 Companys
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 is useful to investors as both the cost and availability of
fuel are subject to many economic and political factors beyond the Companys control.
This update contains forward-looking statements that are not limited to historical facts, but
reflect the Companys current beliefs, expectations or intentions regarding future events. All
forward-looking statements involve risks and uncertainties that could cause actual results to
differ materially from those in the forward-looking statements. For examples of such risks and
uncertainties, please see the risk factors set forth in the Companys Form 10-Q for the quarter
ended June 30, 2010, and its other securities filings, including any amendments thereto, which
identify important matters such as the consequences of fuel costs, labor costs, competition, and
industry conditions, including the demand for air travel, the airline pricing environment and
industry capacity decisions, regulatory matters and the seasonal nature of the airline business.
The Company undertakes no obligation to publicly update or revise any forward-looking statements to
reflect events or circumstances that may arise after the date of this update.
GAAP to Non-GAAP Reconciliation ($mil except ASM and CASM data) | ||||||||||||||||||||||||||||||||
1Q10 | 2Q10 | 3Q10 Range* | 4Q10 Range* | FY10 Range | ||||||||||||||||||||||||||||
Actual | Actual | Low | High | Low | High | Low | High | |||||||||||||||||||||||||
Mainline |
||||||||||||||||||||||||||||||||
Mainline Operating Expenses |
$ | 2,011 | $ | 2,117 | $ | 2,132 | $ | 2,177 | $ | 2,104 | $ | 2,148 | $ | 8,325 | $ | 8,472 | ||||||||||||||||
Less Mainline Fuel (net of (gains)/losses from fuel hedges) |
534 | 616 | 624 | 638 | 630 | 643 | 2,403 | 2,431 | ||||||||||||||||||||||||
Less Special Items |
5 | (9 | ) | | | | | (4 | ) | (4 | ) | |||||||||||||||||||||
Less Profit Sharing |
| 18 | | | | | 18 | 18 | ||||||||||||||||||||||||
Mainline Operating Expense excluding fuel, special items, and profit sharing |
1,472 | 1,492 | 1,509 | 1,539 | 1,475 | 1,504 | 5,907 | 6,027 | ||||||||||||||||||||||||
Mainline CASM (GAAP) (cts) |
12.13 | 11.48 | 11.16 | 11.40 | 12.09 | 12.34 | 11.64 | 11.85 | ||||||||||||||||||||||||
Mainline CASM excluding fuel, special items, and profit sharing (Non-GAAP)
(cts) |
8.88 | 8.08 | 7.90 | 8.06 | 8.47 | 8.65 | 8.26 | 8.42 | ||||||||||||||||||||||||
Mainline ASMs (bil) |
16.6 | 18.4 | 19.1 | 19.1 | 17.4 | 17.4 | 71.5 | 71.5 | ||||||||||||||||||||||||
Express |
||||||||||||||||||||||||||||||||
Express Operating Expenses |
$ | 650 | $ | 683 | $ | 690 | $ | 704 | $ | 686 | $ | 700 | $ | 2,710 | $ | 2,757 | ||||||||||||||||
Less Express Fuel Expense |
170 | 195 | 195 | 200 | 206 | 211 | 767 | 775 | ||||||||||||||||||||||||
Less Special Items |
| (1 | ) | | | | | (1 | ) | (1 | ) | |||||||||||||||||||||
Express Operating Expenses excluding fuel and special items |
480 | 489 | 495 | 505 | 480 | 489 | 1,945 | 1,981 | ||||||||||||||||||||||||
Express CASM (GAAP) (cts) |
19.80 | 18.83 | 18.51 | 18.88 | 19.17 | 19.55 | 19.06 | 19.39 | ||||||||||||||||||||||||
Express CASM Excluding Fuel and Special Items (Non-GAAP) (cts) |
14.62 | 13.49 | 13.27 | 13.53 | 13.40 | 13.67 | 13.67 | 13.93 | ||||||||||||||||||||||||
Express ASMs (bil) |
3.28 | 3.63 | 3.73 | 3.73 | 3.58 | 3.58 | 14.22 | 14.22 | ||||||||||||||||||||||||
Other Non Operating (Income)/Expense |
||||||||||||||||||||||||||||||||
Reported Other Non-Operating (Income)/Expense |
$ | (42 | ) | $ | 9 | $ | (5 | ) | $ | (5 | ) | $ | 1 | $ | 1 | $ | (37 | ) | $ | (37 | ) | |||||||||||
Less Special Items |
(49 | ) | (4 | ) | | | | | (53 | ) | (53 | ) | ||||||||||||||||||||
Other Non-Operating (Income)/Expense excluding special items |
7 | 13 | (5 | ) | (5 | ) | 1 | 1 | 16 | 16 |
Note: | Amounts may not recalculate due to rounding. | |
* | For 3Q10 and 4Q10, 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
October 5, 2010
October 5, 2010
FORWARD-LOOKING STATEMENTS
Certain of the statements contained or referred to herein should be considered 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, and 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 US Airways Group (the Company). Such statements include, but are not limited to,
statements about future financial and operating results, the Companys 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 Companys management and are subject to
significant risks and uncertainties that could cause the Companys 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 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 Companys high level of fixed obligations and its ability to fund general corporate
requirements, obtain additional financing and respond to competitive developments; any failure to
comply with the liquidity covenants contained in the Companys financing arrangements; provisions
in the Companys credit card processing and other commercial agreements that may affect its
liquidity; the impact of union disputes, employee strikes and other labor-related disruptions; the
Companys inability to maintain labor costs at competitive levels; the Companys reliance on third
party regional operators or third party service providers; the Companys reliance on automated
systems and the impact of any failure or disruption of these systems; the impact of changes to the
Companys business model; competitive practices in the industry, including the impact of industry
consolidation; the loss of key personnel or the Companys ability to attract and retain qualified
personnel; the impact of conflicts overseas or terrorist attacks, and the impact of ongoing
security concerns; changes in government legislation and regulation; the Companys ability to
operate and grow its route network; the impact of environmental laws and regulations; costs of
ongoing data security compliance requirements and the impact of any data security breach;
interruptions or disruptions in service at one or more of the Companys hub airports; the impact of
any accident involving the Companys aircraft or the aircraft of its regional operators; delays in
scheduled aircraft deliveries or other loss of anticipated fleet capacity; the impact of weather
conditions and seasonality of airline travel; the impact of possible future increases in insurance
costs and disruptions to insurance markets; 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 Companys ability to use NOLs and certain other tax attributes; and other risks
and uncertainties listed from time to time in the Companys reports to and filings with the 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 Companys Report on Form 10-Q for the quarter ended June 30, 2010 and in the
Companys 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