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2010, United Continental

Holdings
Strategic Management Case Study
Carter Vaillancourt, Megan Land, Emily Michaud
UMFK

Overview
Company Overview
A brief history of United
Continental Holdings
Existing Mission and Vision
Statements
New Mission and Vision Statements
External Audit
Industry Analysis
Opportunities and Threats
EFE Matrix
CPM Matrix
Internal Assessment
Organizational chart
Strengths and Weaknesses
Financial Condition
IFE Matrix

Strategy Formation
SWOT Matrix
Space Matrix
Grand Strategy Matrix
Matrix Analysis
QSPM Matrix
3 year-goals
Implementation Strategies
EPS/EBIT
Projected Financials
Projected Ratios
United Update

History

United Airlines History


Originating in Boise, Idaho, the carrier flew
the first Contract Air Mail flight in the U.S. on
April 6, 1926
In 1933, United began operating the Boeing 247
193 the first all-metal airliner. It was able to fly a
transcontinental flight in 20 hours, which at the
3
time was very fast.
United merged with Capital Airlines in 1961
1961 and regained its position as the United
States' largest airline. In 1968, the company
1968 reorganized, creating UAL Corporation, with
United Airlines as a wholly owned subsidiary
In 1982, United became the first carrier to
198 operate the Boeing 767, taking its first delivery
2
of 767-200s on August 19
192
6

198
5

In 1985, United expanded dramatically by


purchasing Pan Am's entire Pacific Division,
giving it a hub at Tokyo's Narita International
Airport, and in 1991 purchased routes to London
Heathrow Airport from ailing Pan Am, making it

United Airlines History


In 1995, United became the first airline to
1995 introduce the Boeing 777 in commercial
service

200
1

200
5

During the September 11, 2001 terrorist attacks,


two of the four airplanes hijacked and crashed by alQaeda terrorists were United Airlines aircraft which
created an airline industry downturn

In 2005, United announced it had raised


US$3billion in financing to exit bankruptcy
and filed its Plan of Reorganization, as
announced, on September 7, 2005

Continental Airlines History

1934

Continental Airlines' history dates back to 1934, when


the carrier was operated under the name of Varney
Speed Lines by its owners Walter Varney and Louis
Mueller. They were operated out of El Paso, Texas.

In July 1937, Robert Six changed the name of Varney


Speed Lines to Continental Airlines and the carrier
1937 moved its headquarters to Denver, Colorado
During the 1940' and 50's, Continental Airlines was able
1940
to expand its fleet of aircraft and profits through its
participation in World War II by providing air
1950
transportation to the military
In 1983, Continental filed bankruptcy with losses of
1983 ($218,000,000.)
198 By the end of 1984 Continental was able to turn a profit.
4
In 1986 Continental took over Frontier Airlines and
began flying its routes.
198

United Continental Holdings

Early in February 2008,United Airlines


andContinentalbegan advanced stages of
merger negotiations
In June 2008,CEOsof both United Airlines
andContinental Airlines signed an alliance
pact presaging their eventual merger
On October 1, 2010, UAL Corporation
completed its acquisition of Continental
Airlines and changed its name to United
Continental Holdings, Inc

Serving 1,290 destinations in 63


countries

Major Hubs Located in San Francisco,


Chicago, Cleveland, Denver, Houston,
Los Angeles, Newark, Washington
Dulles, and Guam

Combining these two companies is the best way to


position ourselvesto thrive in the changing and
competitive airline industry. Continental is strong where
United is weak; United is strong where Continental is weak.
Putting these two carriers together is a match made in
heaven Jeff Smisek

Aircraft

Existing Mission and Vision


Statement

New Mission and Vision

Vision (proposed)

United Continental
Holdings vision is to be
the Worlds number one
choice for airline travel.

Mission (Proposed)
With great people, the worlds most comprehensive global
route network(3), the best current aircraft order book
among U.S. network carriers(4, 7) and the industry-leading
loyalty program(2), United is well positioned to deliver
meaningful profitability and sustainable long-term value for
our customers, the communities we serve, our shareholders
and our co-workers around the world(6). As we strive to
meet the needs of travelers (1), we continue to grow as a
company and increase our financial standings in the
industry (5). Through our continued growth and valued
employees, United Continental Holdings will continue to
1. Customer
reach out to the communities
in which we operate and
2. Products or services
3. customers
Markets
meet the concerns of our
(9).
5.

4. Technology
Concern for survival, profitability,
growth
6. Philosophy
7. Self-concept
8. Concern for public image

External Audit

Domestic Market Share in Airline Industry

Revenue % of Cash
Cash as a Percentage of Revenue: 12 months ended
31-Mar-2010

Source: United Airlines

SWOT

Opportunities
With over 100 open skies agreements in effect, more access to
international airports is allowed
Maintenance operation center at SFO occupies 120 acres of
land, 2.9 mil square feet of floor space, and nine aircraft hangar
bays, lease up for renewal in 2013 and able to renew through
2023
Growing use of websites, alternative distribution systems, and
new global distribution systems (GDS) entrants leads to a
predicted 87% for online air ticket sales in 2011
Global penetration, in areas such as the pacific which accounts
for only 17% of total revenue.
The aviation industry is growing by a projected amount of 11.0
billion which will ultimately enable more people to fly.
United Continental will be affected by the growth in the tourism
industry expected to grow 3.2% in 2011.
The merging of the two corporations, United and Continental is
expected to deliver $1.0 billion to $1.2 billion in net annual
synergies on a run-rate basis by 2013, and between $800
million and $900 million in incremental annual revenues.
United Continental Holdings Inc. establishes a joint venture with
Air Canada will likely result in a substantial lessening of
competition on 19 trans-border city pair routes.
After merging and earning the extra percentage in revenue s by
1.0 billion, United Continental will show strong liquidity give the
new company a flexibility to pay down its debt.
United Continental made plans to increase WIFI capabilities in
200 domestic Boeing 737 and 757 aircraft equipped with
DIRECTV(R), providing onboard connectivity and more than 95
channels of live television programming to customers in late
2010.

Threats

Unstable fuel prices and availability can cause large


expenses, accounting for 31% of total operating costs
in 2010
With 72% of employees under labor organizations,
union disputes, employee strikes, and other labor
disputes are likely to occur.
100% of United employees and 53% of Continental
employees are covered by collective bargaining
agreements (CBA), significant increases in pay and
benefits from new CBAs could financially harm the
company
New open skies agreements decrease value of routes,
caused United $29 million impairment charge in 2010
for indefinite-lived Brazil route
With an aging fleet, UAL will have to soon start
replacing or fixing their planes. With a large amount
of planes this will become very costly.
Illnesses could affect travel and decrease the amount
of passengers flying, UAL reported that H1N1 cost
them roughly $50 Million in related revenue.
The airline industry is vulnerable to terrorist attacks
and other related security threats. The new threats
have resulted in new security measures which will
increase the security related costs adding to the
already high number of operating costs at $22,253.
Customer prior dissatisfaction with either United or
Continental may inflict buyers decision to choose new
merged company while United standing at 12th in
customer dissatisfaction and Continental standing at
8th in 2010.
ARM Corp is trailing United Continental Holdings co.
by just 1059 million standing in third place for top
revenue for airlines 2010.
The company faces stiff competition from national and
international airline companies which can affect

competitive pressures and ultimately lowering


$3billion market cap.

Key External Factors

Opportunities

With over 100 open skies agreements in effect, more access to international
airports is allowed
Maintenance operation center at SFO occupies 120 acres of land, 2.9 mil
square feet of floor space, and nine aircraft hangar bays, lease up for renewal
in 2013 and able to renew through 2023
Growing use of websites, alternative distribution systems, and new global
distribution systems (GDS) entrants leads to a predicted 87% for online air
ticket sales in 2011
Global penetration, in areas such as the pacific which accounts for only 17%
of total revenue
The aviation industry is growing by a projected amount of 11.0 billion which
will ultimately unable more people to fly.
United Continental will be affected by the growth in the tourism industry
expected to grow 3.2% in 2011
The merging of the two corporations, United and Continental is expected to
deliver $1.0 billion to $1.2 billion in net annual synergies on a run-rate basis
by 2013, and between $800 million and $900 million in incremental annual
revenues
United Continental Holdings Inc. establishes a joint venture with Air Canada
will likely result in a substantial lessening of competition on 19 trans-border
city pair routes.
After merging and earning the extra percentage in revenue s by 1.0 billion,
United Continental will show strong liquidity give the new company a
flexibility to pay down its debt.
United Continental made plans to increase WIFI capabilities in 200 domestic
Boeing 737 and 757 aircraft equipped with DIRECTV(R), providing onboard
connectivity and more than 95 channels of live television programming to
customers in late 2010
Threats

Unstable fuel prices and availability can cause large expenses, accounting for
31% of total operating costs in 2010
With 72% of employees under labor organizations, union disputes, employee
strikes, and other labor disputes are likely to occur.
100% of United employees and 53% of Continental employees are covered
by collective bargaining agreements (CBA), significant increases in pay and
benefits from new CBAs could financially harm the company
New open skies agreements decrease value of routes, caused United $29
million impairment charge in 2010 for indefinite-lived Brazil route
With an aging fleet, UAL will have to soon start replacing or fixing their
planes. With roughly 409 planes this will become very costly.
Illnesses could affect travel and decrease the amount of passengers flying,
UAL reported that H1N1 cost them roughly $50 Million in related revenue.
The airline industry is vulnerable to terrorist attacks and other related
security threats. The new threats have resulted in new security measures
which will increase the security related costs adding to the already high
number of operating costs at $22,253.
Customer prior dissatisfaction with either United or Continental may inflict

Weights

Rating

0.0 to 1.0

1 to 4

Weighted Score

0.04

0.12

0.05

0.1

0.06

0.24

0.04

0.16

0.06

0.12

0.04

0.08

0.05

0.1

0.04

0.12

0.03

0.09

0.2

0.05

0.04

0.12

0.07

0.07

0.04

0.08

0.04

0.08

0.06

0.18

0.03

0.06

0.05

0.1

CPM
UAL
Critical Success factors

Weights

Rating

0.0 to 1.0

1 to 4

DAL

Weighted Score

Rating

AAMRQ

Weighted Score

Rating

1 to 4

Weighted Score

1 to 4

Advertising

0.08

0.32

0.32

0.24

Product Quality

0.10

0.40

0.30

0.30

Price Competitiveness

0.08

0.16

0.24

0.24

Financial Position

0.10

0.40

0.30

0.30

Customer Loyalty

0.14

0.42

0.56

0.42

Global Expansion

0.12

0.48

0.36

0.36

Market Share

0.07

0.21

0.28

0.14

Organization Structure

0.06

0.24

0.18

0.18

Customer Service

0.10

0.30

0.40

0.30

Production Capacity

0.10

0.30

0.30

0.40

Employee Dedication

0.05

0.15

0.20

0.15

Totals

1.00

3.38

3.44

3.03

Internal Audit

Organizational Chart
Jeff Smisek
President and
CEO
Mike
Bonds
Executiv
e Vice
President
, Human
Resource
s and
Labor
Relations

Jim
Compto
n Vice
President
and
Chief
Revenue
Officer

Jeff
Foland
Executi
ve Vice
Presiden
t and
Mileage
Plus
Holdings
LLC

Nene
Foxhall
Executive
Vice
President
Communic
ations and
Governme
nt Affairs

Keith
Halbert
Executive
Vice
President
and Chief
Informati
on Officer

Brett
Hart
Senior
Vice
Presiden
t,
General
Counsel
and
Secretar
y

Pete
McDona
ld
Executiv
e Vice
President
and
Chief
Operatio
ns
Officers

Zane
Rowe
Executi
ve Vice
Preside
nt and
Chief
Financia
l Officer

SWOT
Strengths

Weaknesses

Passenger revenue increased 43% in 2010


Unrestricted cash and cash equivalents hit a record
$8.7 billion
Aircraft rent expense decreased by 6% in 2010
They employ roughly 85,000 employees, the highest
among their competitors.
UAL offers premium seating with spacious
accommodations for those who seek a more
comfortable trip.
The U.S. and Canada market account for 61.7% of
total revenue.
Net income grew 38% from a loss in 2009 to a profit
in 2010.
United Continental has strong strategic
collaborations. The company has a number of
bilateral and multilateral alliances with other airlines
such as the largest alliance which is the Star Alliance
who serves approximately 1,290 destinations in 189
countries.
Because of United Continental Holdings flight
completion factors of 98.5% and 99%, it has a very
strong brand utilization and trustworthiness.
United is the largest of 2 U.S carrier to the Peoples
Republic of China and maintains a large operation
throughout Asia.

Operating expenses increased $2.2 billion in 2010


Interest expense increased by 23% in 2010
Removal of Boeing 737 fleet and some Boeing 747 aircraft
caused impairment charges of $165 million in 2010
In relation with salaries and related costs increasing,
Pension liability increased by $1,380,000 in 2010
They are behind Delta Airlines (DAL) in market cap by over
$3Billion.
From the income statement it appears that they have no
money spent on research and development for the past 3
years.
At 16.0 cents, UAL has the highest cost per available seat
mile in their industry compared to AirTran Holdings at 11.0
cents.
UAL has assets of $20.1 Billion, liabilities of $22.9 Billion
and equity of -$2.76 Billion. This may make it hard for
them to get loans when their assets are currently less
than their liabilities.
United Continental puts heavy dependence on third party
providers, many of the operations such as customer care,
aircraft maintenance, aircraft fueling are outsourced,
which adds to the overall expense amount of $22,253
million.
The overall age of aircrafts totals about 14.3 years old,
which gives higher expense to the operating costs
because they are less fuel efficient and require more
maintenance.

Income Statement

Balance Sheet

Balance Sheet (2)

Net Worth
United Continental Worth Analysis for
2010 (in millions)
Shareholder's equity - Goodwill Intangibles
(7,713)
Net Income * 5

1,265

(Stock Price/EPS) * NI

4,940

# of Shares Out * Stock Price

7,813

Financial Ratios 2010


Ratio (2010)
Liquidity Ratios
Current
Quick
Leverage Ratios
Debt to total assets
Debt to equity
Long-term debt to
equity
Times-interest-earned
ratio
Activity Ratios
Fixed Assets Turnover
Total Assets Turnover
Inventory Turnover
Profitability Ratios
Gross Profit Margin %
EBT Margin %
Net Profit Margin %
Return on total assets
%
Return on
Stockholder's equity
Price-earnings ratio
Growth Ratios

United
Continental
Holdings

Delta

0.95
0.92

0.64
0.61

0.96
21.93

0.98
47.15

7.22

14.69

1.34

2.21

1.73
0.80
49.8

1.56
0.73
48.65

4.2
1.08
1.09

6.98
1.91
1.87

0.87

1.37

0.15
19.52

0.66
17.75

IFE
Key Internal Factors
Internal Strengths

Weights
Rating
0.0 to 1.0 1, 2, 3 or 4
3 or 4

Weighted Score

Passenger revenue increased 43% in


2010

0.05

0.2

Unrestricted cash and cash


equivalents hit a record $8.7 billion

0.04

0.12

0.03

0.09

0.04

0.12

They lead among the industry in


revenue by roughly $.48 Billion.

0.06

0.24

The U.S. and Canada market account


for 61.7% of total revenue

0.07

0.28

Net income grew 38% from a loss in


2009 to a profit in 2010.

0.07

0.28

Aircraft rent expense decreased by


6% in 2010
They employ roughly 85,000
employees, the highest among their
competitors.

United Continental has strong


strategic collaborations. The company
has a number of bilateral and
multilateral alliances with other
airlines such as the largest alliance
which is the Star Alliance who serves
approximately 1,290 destinations in
189 countries

0.05

0.15

Because of United Continental


Holdings flight completion factors of
98.5% and 99%, it has a very strong
brand utilization and trustworthiness.

0.05

0.15

United is the largest of 2 U.S carrier


to the Peoples Republic of China and
maintains a large operation
throughout Asia.

0.06

0.18

Internal Weaknesses
Operating expenses increased $2.2
billion in 2010
Interest expense increased by 23%
in 2010
Removal of Boeing 737 fleet and
some Boeing 747 aircraft caused
impairment charges of $165 million
in 2010
In relation with salaries and related
costs increasing, Pension liability
increased by $1,380,000 in 2010
They are behind Delta Airlines (DAL)
in market cap by over $3Billion
From the income statement it
appears that they have no money
spent on research and development
for the past 3 years.
At 16.0 cents, UAL has the highest
cost per available seat mile in their
industry compared to AirTran
Holdings at 11.0 cents.
UAL has assets of $20.1 Billion,
liabilities of $22.9 Billion and equity
of -$2.76 Billion. This may make it
hard for them to get loans when
their assets are currently less than
their liabilities.
United Continental puts heavy
dependence on third party
providers, many of the operations
such as customer care, aircraft
maintenance, aircraft fueling are
outsourced, which adds to the
overall expense amount of $22,253
million
The overall age of aircrafts totals
about 14.3 years old, which gives
higher expense to the operating
costs because they are less fuel
efficient and require more
maintenance
Totals

1 or 2
0.06

0.12

0.03

0.06

0.06

0.12

0.03

0.06

0.08

0.08

0.02

0.04

0.03

0.06

0.06

0.06

0.05

0.05

0.06

0.06

2.52

Strategic Formulation

SWOT Matrix
SO

1. Increase marketing in foreign


countries to take advantage of the
over 100 open skies agreements and
increase global penetration in china,
Asia, and the pacific. (S8, S10, O1,
O4)
2. Increase premium seating and
flatbed seats to enhance travel
experience and increase customer
satisfaction on long flights. (S5, O5,
O8)

ST
1. Utilize unrestricted cash and
equivalents of roughly $8.7 billion to
replace aging fleet with more fuel
efficient airplanes. (S2,S3,T1,T5)
2. Utilize unrestricted cash and
equivalents to lease or purchase new
aircrafts equipped with state of the art
air purification and filtration systems.
(S2, T5, T6, T8, T10)

Strengths
Weaknesses
Opportunitie
Threats
s

WO

1. Increase R&D spending to


take advantage of aviation and
tourism growth through the
production of new global
distribution systems. (W6, O3,
O5, O6)
2. Utilize extra percentage in
revenue, obtained through
merging, to pay down
liabilities. (W8, O2)
3. Renew Maintenance lease at
SFO to ultimately decrease the
dependence on outsourced
aircraft maintenance. (W9, O2)

WT
1. Require employees to
participate in stock ownership to
decrease or prevent pension
liability increases and to increase
employee work satisfaction. (W4,
T2, T3)
2. Increase R&D to research
methods that would increase the
gap between competitive airlines
both nationally and

Financial Strength
1 Cash Flow
2 Price Earnings Ratio
3 Earnings per Share
4 Working Capital
5 Liquidity
6 Net Income
7 Return on Assets

Ratings
6.0
5.0
4.0
4.0
5.0
4.0
2.0

4.29
Rating
Industry Strength
s
1 Profit Potential
4.0
2 Financial Stability
4.0
3 Resource Utilization
2.0
4 Productivity, capacity utilization
3.0
5 Market Entry
3.0
6 Growth Potential
5.0
7 Extent Leveraged
3.0

Space Matrix
Environmental Stability
1 Rate of Inflation
2 Barriers to Enter the Market
3 Competitive Pressure
4 Price Elasticity
5 Demand Variability
Price Range of Competing
6 Products
7 Ease of Exit from Market

28.3
-5.0
-3.0
-6.0
-5.0
-5.0

Evironmental
Competitive
advantage Stability Total
1 Market Share
2 Product Quality
3 Costomer Loyalty
4 Capacity Utilization
5 Technologically Advanced
6 Global Expansion
7 Product Life Cycle

-4.86
23.4
-3.0
-3.0
-4.0
-3.0
-2.0
-2.0
-4.0

-4.0
-6.0

Financial Strength Total

Industry Strength Total

3.43

Competitive Advantage

-3.00

F
5 S
6

Conser
vative

Aggre
ssive

4
3
2
1

C
S

Defen
sive

1
2
3
4
5
6

Comp
etitive

I
S

GSM

Quadrant II
1.
2.
3.
4.
5.
6.

Quadrant I

Market development
Market penetration
Product development
Horizontal integration
Divestiture
Liquidation

1.
2.
3.
4.
5.
6.
7.

Market development
Market penetration
Product development
Forward integration
Backward integration
Horizontal integration
Related diversification

Quadrant III

Quadrant IV

1. Retrenchment
2. Related diversification
3. Unrelated
diversification
4. Divestiture
5. Liquidation

1. Related diversification
2. Unrelated diversification
3. Joint ventures

Strong
Competitive
Position

Matrix Analysis
Alternative Strategies

SPACE

GRAND

Forward Integration

Backward Integration

Horizontal Integration

Market Penetration

Market Development

Product Development

Related Diversification
Unrelated Diversification
Retrenchment
Divestiture
Liquidation

IE

BCG

COUNT

Possible Strategies
Market
Development

Increase marketing in foreign countries


to take advantage of the over 100 open
skies agreements and increase global
penetration in china, Asia, and the
pacific. (S8, S10, O1, O4)

Backward
Integration

Renew Maintenance lease at SFO


to ultimately decrease the
dependence on outsourced aircraft
maintenance. (W9, O2)

Horizontal Integration
Increase R&D to research
methods that would increase the
gap between competitive airlines
both nationally and
internationally. (W6, T9, T10).

Retrenchment
Require employees to participate in stock
ownership to decrease or prevent pension
liability increases and to increase
employee work satisfaction. (W4, T2, T3)
Utilize extra percentage in revenue,
obtained through merging, to pay down
liabilities. (W8, O2)

Product Development

Increase premium seating and flatbed


seats to enhance travel experience and
increase customer satisfaction on long
flights.unrestricted
(S5, O5, O8)cash and equivalents of
Utilize
roughly $8.7 billion to replace aging fleet
with more fuel efficient airplanes.
(S2,S3,T1,T5)
Utilize unrestricted cash and
equivalents of roughly $8.7 billion to
replace aging fleet with more fuel
efficient
(S2,S3,T1,T5)
Increaseairplanes.
R&D spending
to take
advantage of aviation and tourism
growth through the production of new
global distribution systems. (W6, O3,
O5, O6)

QSPM
Increase marketing in
foreign countries and
increase global
penetration in China,
Asia, and the Pacific

Lease or purchase new


aircraft equipped with state
of the art air purification and
filtration systems

Weight

AS
1 to 4

AS
1 to 4

Quantitative Strategic Planning Matrix-QSPM

Key factors
External
Opportunities

TAS

1.Withover100openskiesagreementsineffect,moreaccesstointernationalairportsisallowed

0.04

2.MaintenanceoperationcenteratSFOoccupies120acresofland,2.9milsquarefeetoffloorspace,andnineaircrafthangarbays,
leaseupforrenewalin2013andabletorenewthrough2023

0.05-

3.Growinguseofwebsites,alternativedistributionsystems,andnewglobaldistributionsystems(GDS)entrantsleadstoapredicted
87%foronlineairticketsalesin2011

0.06

0.24

0.06

4.Globalpenetration,inareassuchasthepacificwhichaccountsforonly17%oftotalrevenue.

0.04

0.16

0.04

5.Theaviationindustryisgrowingbyaprojectedamountof11.0billionwhichwillultimatelyunablemorepeopletofly.

0.06

0.24

0.18

6.UnitedContinentalwillbeaffectedbythegrowthinthetourismindustryexpectedtogrow3.2%in2011.

0.04

0.16

0.12

7.Themergingofthetwocorporations,UnitedandContinentalisexpectedtodeliver$1.0billionto$1.2billioninnetannual
synergiesonarun-ratebasisby2013,andbetween$800millionand$900millioninincrementalannualrevenues.

0.05-

8.UnitedContinentalHoldingsInc.establishesajointventurewithAirCanadawilllikelyresultinasubstantiallesseningof
competitionon19transbordercitypairroutes.

0.04

9.Aftermergingandearningtheextrapercentageinrevenuesby1.0billion,UnitedContinentalwillshowstrongliquiditygivethe
newcompanyaflexibilitytopaydownitsdebt.

0.03-

10.UnitedContinentalmadeplanstoincreaseWIFIcapabilitiesin200domesticBoeing737and757aircraftequippedwith
DIRECTV(R),providingonboardconnectivityandmorethan95channelsoflivetelevisionprogrammingtocustomersinlate2010.

0.05

0.2

0.16

0.04

0.04

0.1

1.Unstablefuelpricesandavailabilitycancauselargeexpenses,accountingfor31%oftotaloperatingcostsin2010

0.04-

2.With72%ofemployeesunderlabororganizations,uniondisputes,employeestrikes,andotherlabordisputesarelikelytooccur.

0.07-

Threats

0.16

TAS

Internal

QSPM Continued

1 to 4

1 to 4

1.Passengerrevenueincreased43%in2010

0.05 -

2.Unrestrictedcashandcashequivalentshitarecord$8.7billion

0.04

0.08

0.16

3.Aircraftrentexpensedecreasedby6%in2010

0.03

0.03

0.12

4.Theyemployroughly85,000employees,thehighestamongtheircompetitors.

0.04 -

5.UALofferspremiumseatingwithspaciousaccommodationsforthosewhoseekamore
comfortabletrip.

0.06

6.U.S.andCanadamarketaccountfor61.7%oftotalrevenue.

0.07 -

7.Netincomegrew38%fromalossin2009toaprofitin2010.
8.UnitedContinentalhasstrongstrategiccollaborations.Thecompanyhasanumberof
bilateralandmultilateralallianceswithotherairlinessuchasthelargestalliancewhichistheStar
Alliancewhoservesapproximately1,290destinationsin189countries.

0.07 -

Strengths

0.12

0.18

0.05

0.2

0.05

9.BecauseofUnitedContinentalHoldingsflightcompletionfactorsof98.5%and99%,ithasa
verystrongbrandutilizationandtrustworthiness.

0.05

0.2

0.1

10.Unitedisthelargestof2U.ScarriertothePeoplesRepublicofChinaandmaintainsalarge
operationthroughoutAsia.

0.06

0.24

0.18

1.Operatingexpensesincreased$2.2billionin2010

0.06 -

2.Interestexpenseincreasedby23%in2010

0.03 -

3.RemovalofBoeing737fleetandsomeBoeing747aircraftcausedimpairmentchargesof
$165millionin2010

0.06 -

4.Inrelationwithsalariesandrelatedcostsincreasing,Pensionliabilityincreasedby
$1,380,000in2010

0.03 -

Weaknesses

3 Year Goals
Year 1-Expand further into China
Year 2-Expand throughout Asia to
regions such as South Asia and
India
Year 3-Expand into Russia

Strategy Implementation

EPS/EBIT Analysis
Assumptions

Capital Needed

EBIT Range
Interest Rate
Tax Rate
Stock Price (Sep. 30, 2010-year
end)
Current Shares Outstanding
CS Shares needed
Common Stock
Financing

Recession

Normal

Boom

EBIT

500,000,000

900,000,000

Interest
EBT

(100,000,000)
(100,000,000)

750,000,000
($100mil.) $900mil.
5%
25%
23.82
327,922,565
31,486,146
Debt Financing

Recession

EAT
# of
Shares
EPS

(100,000,000)

Boom

EBIT

(100,000,000) 500,000,000

900,000,000

Interest

37,500,000

37,500,000

EBT

(137,500,000) 462,500,000

37,500,000

500,000,000

900,000,000

125,000,000

225,000,000

375,000,000

675,000,000

Taxes
Taxes

Normal

359,408,711
359,408,711
359,408,711
-0.28
1.04
1.88

EAT
# of
Shares
EPS

862,500,000

115,625,000

215,625,000

(137,500,000) 346,875,000

646,875,000

327,922,565
327,922,565
327,922,565
-0.42
1.06
1.97

EPS/EBIT Cont.
Assumptions

Assumptions
Stock needed

675,000,000

Stock needed

75,000,000

Debt needed

75,000,000

Debt needed

675,000,000

Interest

3,750,000

Interest

33,750,000

CS shares needed
90% Stock - 10% Debt
Financing

Recession
Normal

28,337,531

Boom

CS shares needed
10% Stock - 90% Debt
Financing

Recession

3,148,615

Normal

Boom

EBIT

(100,000,000)

500,000,000

900,000,000

EBIT

(100,000,000)

500,000,000

900,000,000

Interest

3,750,000

3,750,000

3,750,000

Interest

33,750,000

33,750,000

33,750,000

EBT

(103,750,000)

496,250,000

896,250,000

EBT

(133,750,000)

466,250,000

866,250,000

124,062,500

224,062,500

Taxes

116,562,500

216,562,500

372,187,500

672,187,500

EAT
# of
Shares
EPS

349,687,500

649,687,500

Taxes
EAT
# of
Shares
EPS

(103,750,000)

356,260,096
356,260,096
356,260,096
-0.29
1.04
1.89

(133,750,000)

331,071,179.61 331,071,179.61 331,071,179.61


-0.40
1.06
1.96

Projected Financial
Assumptions

Capital needed

750,000,000

Debt needed

750,000,000

Interest (estimate)
Stock Price (Dec. 31, 2010 - year
end)
Shares Outstanding
Additional Interest

5%
23.82
327,922,565
37,500,000

Projected Financials 2011


Income Statement
Projected Income Statement (in
millions)
Total Revenues
Cost of Revenue
Gross Profit

2009

2010

2011

16,335 23,229 30,198 Increase by 30%


Percentage of total
6,526 9,609 12,492 revenue
9,809 13,620 17,706

Operating expenses

1,856

Research and Development


Selling General and
Administrative

188

Increase by 188 mil (1/4 of 750 mil)

8,679 10,896 11,458 Increase by 562 mil (3/4 of 750 mil)

Nonrecurring

374 669

Others

917 1,079 1,403

Total Operating Expenses

Operating Income or Loss

Estimated
increase

(161)

903

35% increase
Percentage of total
revenue

976 1,898

Income from Continuing


Operations
Total Other Income/Expense Net
Earnings Before Interest and
Taxes
Interest Expense

56 57

57 Same as previous year

(105)
1,033 1,955
567
783
820 Increase from additional interest for expansion

Balance Sheet 2011


Projected
Projected Balance Sheet (in millions)

2009

2010

2011

Assets
Current Assets
Cash and Cash Equivalents

3,170
-

Short-term Investments

8,106
6,111

3,258
5%
6,416
increase
10%
2,424 increase
4%
485 increase

Net Receivables

806

2,204

Inventory

472

466

Other Current Assets

657

658

5,105

12,045 13,241

Long-Term Investments

88

103

Property Plant and Equipment

9,840

16,945 19,825

Total Current Assets

Goodwill
Intangible Assets
Accumulated Amortization
Other Assets

2,455
1,196

658 Same

118

4,523

4,523

4,917

5,261

1,065

15%
increase
17%
increase
Same
7%
increase

1,065

Same

Balance Sheet Cont.


Liabilities
Current Liabilities
Accounts Payable
Short/Current Long-term Debt
Other Current Liabilities
Total Current Liabilities

2,996

6,273

971
2,506

2,663
3,709

7,528 20% Increase


Add 30% of 750 mil.
2,888 Debt
4,265 15% Increase

6,473

12,645

14,681

7,572
4,179

12,470
7,680

Remaining 70% of
12,995 750 mil. Debt
8,678 13% increase

Deferred LT Liability Changes

3,271

5,076

5,076 Same

Minority Interest

Negative Goodwill

Long-Term Debt
Other Liabilities

Total Liabilities

21,495

37,871

41,430

Stockholder's Equity
Common Stock
Retained Earnings
Treasury Stock

33

(5,956)

(5,703)

(28)

(31)

Same
Increased from net
(4,827) income
(31) Same

Projected Ratios
2011
2010

2011

Current Ratio

0.95

0.9

Quick Ratio

0.92

0.86

Debt to Total Assets

0.96

0.94

21.93

16.48

0.8

0.69

0.15

0.34

Debt to Equity
Total Asset Turnover
Return on Stockholders' Equity

Update

United Continental Holdings Update


In 2012, United and United Express carried more passenger
traffic than any other airline in the world and operated nearly
two million flights carrying 140 million customers
United is investing in upgrading its onboard products and now
offers more flat-bed seats in its premium cabins and more extralegroom economy-class seating than any airline in North America

In 2013, United became the first U.S.-based


international carrier to offer satellite-based
Wi-Fi on long-haul overseas routes

The company expanded its industry-leading global


route network in 2012, launching nine new
international and 18 new domestic routes.

The airline also features DIRECTV on


nearly 200 aircraft, offering customers more
live television access than any other airline
in the
world

Business Traveler magazine awarded United Best Airline for


North American Travel for 2012, and readers of Global
Traveler magazine have voted Uniteds Mileage Plus
program the best frequent flyer program for nine
consecutive years.

Stock Price

Measured Revenue

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