Attached files

file filename
8-K - 8-K - US AIRWAYS GROUP INCd607449d8k.htm

Exhibit 99.1

 

LOGO

INVESTOR RELATIONS UPDATE

October 3, 2013

General Comments

 

  2013 Capacity Guidance—2013 total system capacity is expected to be up approximately 3.5% vs. 2012 primarily due to larger gauge aircraft replacing smaller gauge legacy 737 aircraft and more long-haul international flying. Domestic capacity is expected to be up approximately 3.5% and international is expected to be up approximately 3.4% percent vs. 2012.

 

  Cash—As of June 30, 2013, the Company had $3.97 billion in total cash and investments, of which $350 million was restricted.

In July, the Company repaid in full the Barclays prepaid miles at their face amount of $200 million. The Company expects to end the third quarter with approximately $3.85 billion in total cash and investments of which approximately $350 million is restricted.

 

  Fuel—For the third quarter 2013, the Company expects to pay an average of between $3.00 and $3.05 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—Historically, utilization of NOLs to offset book taxable income reduced our net deferred tax asset and in turn resulted in the release of our valuation allowance, which offset the tax provision on our income statement dollar for dollar. Our second quarter 2013 pre-tax income resulted in the utilization of NOLs and our remaining valuation allowance associated with federal income taxes. Accordingly, in the second quarter of 2013, we began to record non-cash federal income tax expense for financial reporting purposes.

At June 30, 2013, NOLs available for use by the Company were approximately $1.1 billion for federal income tax purposes. To the extent profitable in 2013, the Company expects to continue to record federal non-cash income tax expense for financial reporting purposes. The Company currently estimates that its effective tax rate on future earnings excluding special items will approximate 36% for the third quarter, and 38% for the fourth quarter and beyond. This effective tax rate includes federal and state income taxes and takes into account the permanent differences between book income and taxable income. Notwithstanding such a book provision for federal income taxes, the income tax NOL described above is expected to be available to avoid the obligation to pay cash federal income taxes until it is fully consumed.

The Company may be obligated to record and pay state income tax related to certain states where NOLs may be limited or not available to be used. The Company recorded $2 million of state income tax expense in the second quarter of 2013. Additionally, when profitable the Company is ordinarily subject to AMT. However as the result of a special tax election made in 2009, the Company expects to be able to utilize AMT NOLs to offset AMT taxable income, if profitable in 2013.

As previously announced, in conjunction with execution of the Merger Agreement with AMR Corporation, US Airways Group adopted a tax benefit preservation plan designed to help preserve the value of the net operating losses and other deferred tax benefits of US Airways Group and the combined enterprise resulting from the merger with AMR. US Airways Group shareholders with ownership positions near or above the 4.9% threshold specified in the tax benefit preservation plan are urged to review its terms carefully. Further details about the plan are contained in a Form 8-K filed on February 14, 2013 by US Airways Group with the Securities and Exchange Commission.

Please refer to the footnotes and the forward looking statements page of this document for additional information


LOGO

 

MAINLINE UPDATE

October 3, 2013

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.

 

  As previously announced, in July the Company repaid in full the Barclays prepaid miles at their face amount of $200 million. This pre-payment is reflected in the third quarter net-other cash flow adjustments and other guidance below.

 

Mainline Guidance

  1Q13A   2Q13A   3Q13E   4Q13E   FY13E

Available Seat Miles (ASMs) (bil)

  18.0   20.2   ~20.5   ~18.7   ~77.4

CASM ex fuel, special items and profit sharing (YOY % change)1

  8.77   8.21   +1% to +3%   -1% to -3%   -1% to +1%

Cargo Revenues ($ mil)

  41   36   ~35   ~40   ~150

Other Revenues

  384   381   ~360   ~345   ~1,470

Percent Hedged

  —     —     —     —     —  

Average Fuel Price (incl. taxes) ($/gal) (as of 09/30/2013)

  3.24   2.92   3.00 to 3.05   2.99 to 3.04   3.02 to 3.07

Fuel Gallons Consumed (mil)

  266   299   ~305   ~275   ~1,145

Interest Income ($ mil)

  —     (1)   ~(1)   ~0   ~(2)

Interest Expense ($ mil)

  84   90   ~90   ~90   ~355

Other Non-Operating (Income)/Expense ex special items ($ mil)2

  5   7   ~(3)   ~0   ~9

Cash Flow/Capital Update ($ mil) Inflow/(Outflow)

  1Q13A   2Q13A   3Q13E   4Q13E   FY13E

Cash Capex (non-aircraft)

  (43)   (55)   ~(40)   ~(43)   ~(180)

Net aircraft Capex and PDPs

  (48)   (23)   ~(25)   ~(27)   ~(123)

Net Other Cash Flow Adjustments3

  (119)   683   ~(244)   ~(108)   ~212

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 issuances net of principal repayments, 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


LOGO

 

EXPRESS UPDATE

October 3, 2013

Express Comments

 

  US Airways Express is a network of seven 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 CASM is expected to be up 2% to 4% in 2013, primarily due to contractual rate increases and also scheduled aircraft maintenance at the Company’s wholly owned carrier PSA.

Express Guidance

 

     1Q13A    2Q13A    3Q13E    4Q13E    FY13E

Available Seat Miles (ASMs) (bil)

   3.46    3.64    ~3.63    ~3.48    ~14.20

CASM ex fuel and special items (YOY % change) 1

   15.12    14.34    +2% to +4%    +6% to +8%    +2% to +4%

Average Fuel Price (incl. taxes) ($/gal)

   3.23    2.96    2.98 to 3.03    3.00 to 3.05    3.03 to 3.08

Fuel Gallons Consumed (mil)

   84    88    ~88    ~85    ~345

Express Carriers

 

Air Wisconsin Airlines Corporation   Republic Airline, Inc.
Mesa Airlines, Inc.3   SkyWest Airlines, Inc.
Piedmont Airlines, Inc. 2   Trans States Airlines, Inc.4
PSA Airlines, Inc.2  

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


LOGO

 

FLEET UPDATE

October 3, 2013

Fleet Comments

 

  The Company expects to take delivery of 21 new Airbus aircraft in 2013 (16 A321 aircraft, 13 of which have been delivered, and five A330-200 aircraft, three of which have been delivered) and expects to retire 18 737-400 aircraft and two A320 aircraft.

 

  As previously announced, the Company also reached an agreement with SkyWest Airlines to up-gauge 4 of its CRJ-200 aircraft to CRJ-900 aircraft which began in the third quarter.

 

Mainline Fleet Update (End of Period)

 

     YE12A    1Q13A    2Q13A    3Q13A    4Q13E

Mainline

              

EMB-190

   18    20    20    20    20

B737-400

   32    32    26    18    14

A319

   93    93    93    93    93

A320

   72    72    72    72    70

A321

   75    79    83    88    91

A330-200

   7    7    9    10    12

A330-300

   9    9    9    9    9

B757

   24    24    24    24    24

B767

   10    10    10    10    10
  

 

  

 

  

 

  

 

  

 

Total

   340    346    346    344    343

Express Fleet Update (End of Period)

 

     YE12A    1Q13A    2Q13A    3Q13A    4Q13E

Express

              

DH8

   44    44    43    43    40

CRJ-200

   119    119    119    115    115

CRJ-700

   14    14    14    14    14

CRJ-900

   38    38    45    51    51

EMB-170

   20    20    20    20    20

ERJ-145

   9    9    2    —      —  

EMB-175

   38    38    38    38    38
  

 

  

 

  

 

  

 

  

 

Total

   282    282    281    281    278
 

 

Please refer to the footnotes and the forward looking statements page of this document for additional information


LOGO

 

SHARES OUTSTANDING

October 3, 2013

 

  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 and tax effects.

 

  The Company has exchanged or converted approximately $149 million principal amount of its 7.25% convertible bonds. These transactions resulted in an increase of approximately 32.6 million basic shares. This increase is reflected in the table below.

 

2013 Shares Outstanding ($ and shares mil)1

   Basic      Diluted      Interest Addback  

For Q3 2013

        

Earnings above $32

     193.4         208.3       $ 1   

Earnings up to $32

     193.4         199.7         —     

Net loss

     193.4         193.4         —     

For Q4 2013

        

Earnings above $35

     196.9         208.7       $ 1   

Earnings up to $35

     196.9         203.5         —     

Net loss

     196.9         196.9         —     

For FY 2013 (Average)

        

Earnings above $193

     181.6         208.0       $ 12   

Earnings between $115 and $193

     181.6         207.9       $ 12   

Earnings up to $115

     181.6         187.9         —     

Net loss

     181.6         181.6         —     

 

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


LOGO

 

2013 GAAP to Non-GAAP RECONCILIATION

October 3, 2013

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)  
     1Q13     2Q13      3Q13 Range     4Q13 Range      FY13 Range  
     Actual     Actual      Low     High     Low      High      Low      High  

Mainline

                    

Mainline operating expenses1

   $ 2,482      $ 2,601       $ 2,561      $ 2,609      $ 2,406       $ 2,452       $ 10,015       $ 10,174   

Less mainline fuel

     861        872         915        930        822         836         3,470         3,499   

Less special items

     39        24         —          —          —           —           63         63   

Less profit sharing

     6        47         —          —          —           —           53         53   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Mainline operating expense excluding fuel, special items and profit sharing

     1,576        1,658         1,646        1,679        1,584         1,616         6,429         6,559   

Mainline CASM (cts)1

     13.82        12.88         12.49        12.73        12.87         13.11         12.94         13.14   

Mainline CASM excluding fuel, special items and profit sharing (Non-GAAP) (cts)

     8.77        8.21         8.03        8.19        8.47         8.64         8.31         8.47   

Mainline ASMs (bil)

     18.0        20.2         20.5        20.5        18.7         18.7         77.4         77.4   

Express

                    

Express operating expenses

   $ 795      $ 783       $ 779      $ 794      $ 791       $ 806       $ 3,150       $ 3,200   

Less express fuel expense

     271        261         262        267        255         259         1,049         1,058   

Less special items

     2        —           —          —          —           —           2         2   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Express operating expenses excluding fuel and special items

     522        522         517        527        536         546         2,099         2,142   

Express CASM (cts)

     23.00        21.52         21.47        21.87        22.74         23.15         22.18         22.53   

Express CASM excluding fuel and special items (Non-GAAP) (cts)

     15.12        14.34         14.25        14.53        15.41         15.70         14.78         15.07   

Express ASMs (bil)

     3.46        3.64         3.63        3.63        3.48         3.48         14.20         14.20   

Other Non-Operating (Income)/Expense

                    

Reported other non-operating (income)/expense

   $ (25   $ 38       $ 1      $ 1      $ —         $ —         $ 14       $ 14   

Less special items

   $ (30   $ 31       $ 4      $ 4      $ —         $ —         $ 5       $ 5   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Other non-operating (income)/expense excluding special items

   $ 5      $ 7       $ (3   $ (3   $ —         $ —         $ 9       $ 9   

Notes: Amounts may not recalculate due to rounding.

(1)   Forecasted mainline operating expenses exclude profit sharing and special items.

 

Please refer to the footnotes and the forward looking statements page of this document for additional information


LOGO

 

FORWARD LOOKING STATEMENTS

October 3, 2013

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 that adversely affect our business; the impact of the price and availability of fuel and significant disruptions in the supply of aircraft fuel; competitive practices in the industry, including the impact of industry consolidation; increased costs of financing, a reduction in the availability of financing and fluctuations in interest rates; 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; 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; the impact of extensive government regulation; the impact of heavy taxation; the impact of changes to the Company’s business model; 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 impact of changing economic and other conditions and seasonality of the Company’s business; 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; risks relating to the Company’s anticipated merger with AMR Corporation; 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. Any forward-looking statements speak only as of the date hereof or as of the dates indicated in the statements. Additional factors that may affect the future results of the Company are set forth in the section entitled “Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 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