Filed by UAL
Corporation
Pursuant to Rule
425 under the Securities Act of 1933
and deemed filed
pursuant to Rule 14a-12
under the
Securities Exchange Act of 1934
Subject Company:
Continental Airlines, Inc.
Commission File
No.: 1-10323
Let’s
Fly Together
May 3,
2010
2
Important
Information For Investors And Stockholders
This
communication does not constitute an offer to sell or the solicitation of an
offer to buy any securities or a solicitation of any vote or approval.
The proposed merger of equals transaction between UAL Corporation (“UAL”) and Continental Airlines, Inc. (“Continental”) will be submitted to the
respective stockholders of UAL and Continental for their consideration. UAL will file with the Securities and Exchange Commission (“SEC”) a
registration statement on Form S-4 that will include a joint proxy statement of Continental and UAL that also constitutes a prospectus of UAL. UAL
and Continental also plan to file other documents with the SEC regarding the proposed transaction. INVESTORS AND SECURITY HOLDERS OF
CONTINENTAL ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS THAT WILL
BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and stockholders will be able to obtain free copies of the joint
proxy statement/prospectus and other documents containing important information about UAL and Continental, once such documents are filed with
the SEC, through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by UAL will be available
free of charge on UAL’s website at www.united.com under the tab “Investor Relations” or by contacting UAL’s Investor Relations Department at
(312) 997-8610. Copies of the documents filed with the SEC by Continental will be available free of charge on Continental’s website at
www.continental.com under the tab “About Continental” and then under the tab “Investor Relations” or by contacting Continental’s Investor
Relations Department at (713) 324-5152.
The proposed merger of equals transaction between UAL Corporation (“UAL”) and Continental Airlines, Inc. (“Continental”) will be submitted to the
respective stockholders of UAL and Continental for their consideration. UAL will file with the Securities and Exchange Commission (“SEC”) a
registration statement on Form S-4 that will include a joint proxy statement of Continental and UAL that also constitutes a prospectus of UAL. UAL
and Continental also plan to file other documents with the SEC regarding the proposed transaction. INVESTORS AND SECURITY HOLDERS OF
CONTINENTAL ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS THAT WILL
BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and stockholders will be able to obtain free copies of the joint
proxy statement/prospectus and other documents containing important information about UAL and Continental, once such documents are filed with
the SEC, through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by UAL will be available
free of charge on UAL’s website at www.united.com under the tab “Investor Relations” or by contacting UAL’s Investor Relations Department at
(312) 997-8610. Copies of the documents filed with the SEC by Continental will be available free of charge on Continental’s website at
www.continental.com under the tab “About Continental” and then under the tab “Investor Relations” or by contacting Continental’s Investor
Relations Department at (713) 324-5152.
UAL,
Continental and certain of their respective directors and executive officers may
be deemed to be participants in the solicitation of proxies from
the stockholders of Continental in connection with the proposed transaction. Information about the directors and executive officers of Continental is
set forth in its proxy statement for its 2010 annual meeting of stockholders, which was filed with the SEC on April 23, 2010. Information about the
directors and executive officers of UAL is set forth in its proxy statement for its 2010 annual meeting of stockholders, which was filed with the SEC
on April 30, 2010. These documents can be obtained free of charge from the sources indicated above. Other information regarding the
participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the
joint proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.
the stockholders of Continental in connection with the proposed transaction. Information about the directors and executive officers of Continental is
set forth in its proxy statement for its 2010 annual meeting of stockholders, which was filed with the SEC on April 23, 2010. Information about the
directors and executive officers of UAL is set forth in its proxy statement for its 2010 annual meeting of stockholders, which was filed with the SEC
on April 30, 2010. These documents can be obtained free of charge from the sources indicated above. Other information regarding the
participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the
joint proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.
Reconciliation of
Non-GAAP Financial Measures
Financial measures
highlighted in this presentation may be considered non-GAAP financial measures
such as Earnings Before Income Tax,
Depreciation, Amortization, and Rent (“EBITDAR”) Margin excluding special items. Comparable GAAP financial measures and a reconciliation of
GAAP financial measures to non-GAAP financial measures are available in the Appendix to this presentation.
Depreciation, Amortization, and Rent (“EBITDAR”) Margin excluding special items. Comparable GAAP financial measures and a reconciliation of
GAAP financial measures to non-GAAP financial measures are available in the Appendix to this presentation.
3
Forward-Looking
Statements
Cautionary
Statement Regarding Forward-Looking Statements
This
communication contains “forward-looking statements” within the meaning of the
safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 that are not limited to historical facts, but reflect Continental’s and UAL’s current beliefs, expectations or intentions regarding
future events. Words such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,”
“potential,” “pursue,” “target,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking
statements include, without limitation, Continental’s and UAL’s expectations with respect to the synergies, costs and other anticipated financial
impacts of the proposed transaction; future financial and operating results of the combined company; the combined company’s plans, objectives,
expectations and intentions with respect to future operations and services; approval of the proposed transaction by stockholders and by
governmental regulatory authorities; the satisfaction of the closing conditions to the proposed transaction; and the timing of the completion of the
proposed transaction.
Reform Act of 1995 that are not limited to historical facts, but reflect Continental’s and UAL’s current beliefs, expectations or intentions regarding
future events. Words such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,”
“potential,” “pursue,” “target,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking
statements include, without limitation, Continental’s and UAL’s expectations with respect to the synergies, costs and other anticipated financial
impacts of the proposed transaction; future financial and operating results of the combined company; the combined company’s plans, objectives,
expectations and intentions with respect to future operations and services; approval of the proposed transaction by stockholders and by
governmental regulatory authorities; the satisfaction of the closing conditions to the proposed transaction; and the timing of the completion of the
proposed transaction.
All
forward-looking statements involve significant risks and uncertainties that
could cause actual results to differ materially from those in the
forward
-looking statements, many of which are generally outside the control of Continental and UAL and are difficult to predict. Examples of such risks
and uncertainties include, but are not limited to, (1) the possibility that the proposed transaction is delayed or does not close, including due to the
failure to receive required stockholder or regulatory approvals, the taking of governmental action (including the passage of legislation) to block the
transaction, or the failure of other closing conditions, and (2) the possibility that the expected synergies will not be realized, or will not be realized
within the expected time period, because of, among other things, significant volatility in the cost of aircraft fuel, the high leverage and other
significant capital commitments of Continental and UAL, the ability to obtain financing and to refinance the combined company’s debt, the ability of
Continental and UAL to maintain and utilize their respective net operating losses, the impact of labor relations, global economic conditions,
fluctuations in exchange rates, competitive actions taken by other airlines, terrorist attacks, natural disasters, difficulties in integrating the two
airlines, the willingness of customers to travel by air, actions taken or conditions imposed by the U.S. and foreign governments or other regulatory
matters, excessive taxation, further industry consolidation and changes in airlines alliances, the availability and cost of insurance and public health
threats.
-looking statements, many of which are generally outside the control of Continental and UAL and are difficult to predict. Examples of such risks
and uncertainties include, but are not limited to, (1) the possibility that the proposed transaction is delayed or does not close, including due to the
failure to receive required stockholder or regulatory approvals, the taking of governmental action (including the passage of legislation) to block the
transaction, or the failure of other closing conditions, and (2) the possibility that the expected synergies will not be realized, or will not be realized
within the expected time period, because of, among other things, significant volatility in the cost of aircraft fuel, the high leverage and other
significant capital commitments of Continental and UAL, the ability to obtain financing and to refinance the combined company’s debt, the ability of
Continental and UAL to maintain and utilize their respective net operating losses, the impact of labor relations, global economic conditions,
fluctuations in exchange rates, competitive actions taken by other airlines, terrorist attacks, natural disasters, difficulties in integrating the two
airlines, the willingness of customers to travel by air, actions taken or conditions imposed by the U.S. and foreign governments or other regulatory
matters, excessive taxation, further industry consolidation and changes in airlines alliances, the availability and cost of insurance and public health
threats.
UAL and
Continental caution that the foregoing list of factors is not exclusive.
Additional information concerning these and other risk factors is
contained in Continental’s and UAL’s most recently filed Annual Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent
Current Reports on Form 8-K, and other SEC filings. All subsequent written and oral forward-looking statements concerning Continental, UAL, the
proposed transaction or other matters and attributable to Continental or UAL or any person acting on their behalf are expressly qualified in their
entirety by the cautionary statements above. Neither Continental nor UAL undertakes any obligation to publicly update any of these forward-
looking statements to reflect events or circumstances that may arise after the date hereof.
contained in Continental’s and UAL’s most recently filed Annual Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent
Current Reports on Form 8-K, and other SEC filings. All subsequent written and oral forward-looking statements concerning Continental, UAL, the
proposed transaction or other matters and attributable to Continental or UAL or any person acting on their behalf are expressly qualified in their
entirety by the cautionary statements above. Neither Continental nor UAL undertakes any obligation to publicly update any of these forward-
looking statements to reflect events or circumstances that may arise after the date hereof.
Glenn
Tilton
Chairman, President
& CEO
UAL Corporation
UAL Corporation
5
Today
We’re Proud to Introduce…
6
• Creates the world’s
most
comprehensive global network
comprehensive global network
• Carriers of choice
for business and
premium travelers
premium travelers
• Superior products
and services
• Highly collaborative
partnership built on
strong alliance relationship
strong alliance relationship
• Merger is
pro-consumer and pro-
competitive
competitive
• Shared commitment to
safety and
excellence in customer service and
operational performance
excellence in customer service and
operational performance
Combines The
U.S. Industry’s Two
Most Complementary Networks
Most Complementary Networks
The
Right Deal
Hawaii
Latin
America
America
Caribbean
7
• Platform for
sustainable profitability for our
customers, our shareholders, our
employees, and the communities we
serve
customers, our shareholders, our
employees, and the communities we
serve
• Current conditions
provide the platform for
structural change
structural change
• Economic recovery
taking hold
• Competitive
landscape has fundamentally
changed over the last 10 years
changed over the last 10 years
• Consolidation
reshaping the global
competitive landscape
competitive landscape
• Consumers have a low
cost carrier
choice in 80% of all domestic markets
choice in 80% of all domestic markets
Unrestricted
Liquidity*
Percent of
Revenue
*
As of 3/31/2010; UAUA includes proceeds from Secured Note Financing
The
Right Time
25.0%
24.8%
24.6%
22.6%
19.8%
14.4%
0%
5%
10%
15%
20%
25%
30%
8
• Providing customers
and communities
with access to an unparalleled network
serving 370 destinations worldwide
with access to an unparalleled network
serving 370 destinations worldwide
• Award-winning
customer service
combining with industry-leading on-time
performance
combining with industry-leading on-time
performance
• Employees benefit
from a stronger
global competitor and improved long-
term career prospects
global competitor and improved long-
term career prospects
• Platform for
improved profitability and
sustainable long-term value for
shareholders
sustainable long-term value for
shareholders
• Targeted annual net
synergies of
$1.0 billion to $1.2 billion
$1.0 billion to $1.2 billion
• Flexibility to adapt
to industry
dynamics as conditions change
dynamics as conditions change
World-Class Global
Airline Brings Together the Best of Both
9
A True
Merger of Equals
Transaction
Corporate
Structure
Corporate
Headquarters
Management and Board
Structure
• All-stock
transaction with a combined equity value of
over $8 billion
over $8 billion
• CAL shareholders
receive 1.05 UAUA shares per
CAL share
CAL share
• Ownership*
• 45% CAL
shareholders
• 55% UAUA
shareholders
• Holding Company:
United Continental Holdings, Inc.
• Airline name: United
Airlines
• Marketing brand:
Combination of Continental livery and
logo and United name
logo and United name
• Corporate and
operational headquarters in Chicago
• Significant presence
maintained in Houston
• CEO to maintain
offices in both Chicago and Houston
*
Measured as of April 30, 2010
• Glenn Tilton:
Non-executive Chairman of the Board for
two years
two years
• Jeff Smisek: CEO; to
become executive Chairman in two
years
years
• Equitable and
balanced selection of executives from
both companies of roughly equal numbers
both companies of roughly equal numbers
• Board consists of 6
independent directors from both
companies, Glenn Tilton, Jeff Smisek, and 2 union
representatives
companies, Glenn Tilton, Jeff Smisek, and 2 union
representatives
Jeff
Smisek
Chairman, President
& CEO
Continental Airlines, Inc.
Continental Airlines, Inc.
12
Substantial Benefits
to All Stakeholders
Customers
Expanded global
network and
superior product and service
superior product and service
>>>
Communities
Enhanced service and
single-carrier
access to best global network
through strategically located hubs
access to best global network
through strategically located hubs
>>>
Employees
Improved long-term
career
opportunities and enhanced job stability
opportunities and enhanced job stability
>>>
Shareholders
Platform for
increased profitability and
sustainable long-term value
sustainable long-term value
>>>
13
World-Class Global
Network
31
Destinations
14
Countries
62 Daily
Departures
Trans-Pacific
Service
72
Destinations
24
Countries
156 Daily
Departures
Latin American
& Caribbean Service
34
Destinations
21
Countries
74 Daily
Departures
Trans-Atlantic
Service
Source:
OAG, Full Year 2010
14
Comprehensive
Domestic Network
Los
Angeles
San
Francisco
Denver
Chicago
Cleveland
New
York
Washington
D.C.
Houston
14
Source:
OAG, Full Year 2010
Guam
15
Superior Products
and Services
• Continued commitment
to award-
winning customer service and
industry-leading on-time
performance
winning customer service and
industry-leading on-time
performance
• Award-winning
international
premium seat products
premium seat products
• 69 lounges around
the world
• Financial strength
to invest in on-
board product and state-of-the-art
technology
board product and state-of-the-art
technology
Combines
best-in-class products and services from both companies
16
Industry-Leading
Loyalty Program
Source:
Based on data from public sources including 10-Ks
2009
Frequent Flyer Program Total Members
(millions)
(millions)
*
Subject to overlap between current programs
17
Working
Together
18
Significant
Synergies
• Improves
efficiencies and eliminates redundancies
• Enhanced products
and services will drive revenues
$1.0
- $1.2 Billion of Expected Net Annual Synergies by 2013
|
Synergies
|
Value
|
|
Revenue
Synergies
|
$0.8 - 0.9
billion
|
|
Net Cost
Synergies
|
$0.2 - 0.3
billion
|
|
|
|
|
Total Expected
Net Annual Synergies
|
$1.0 - 1.2
billion
|
19
Significant Revenue
and Cost Synergies
• Greater ability to
match capacity with demand, improve aircraft utilization and optimize
connectivity
connectivity
• Improved access from
Continental’s hubs to United’s Asia network
• Improved access from
United’s hubs to Continental’s Latin America and European
networks
networks
• Single-carrier
network is very attractive to corporate customers
• Streamlined
corporate overhead
• Efficiencies of
combined marketing, sales and advertising functions
• Efficiencies of
common IT platforms
• Facilities and
service integration due to larger scale
• 75% of synergies
expected to be achieved in second year, with full run-rate expected
to be achieved in year three
to be achieved in year three
20
Transition to Be
Completed by 2013
Operational
Transition
Transition
Target
single operating certificate by
first half of 2012;
network optimization; airport co-locations
first half of 2012;
network optimization; airport co-locations
Corporate
& Other
Eliminate
redundancies;
streamline
management
Technology
Transition
Transition
Common
technology
platform
platform
• Expected one-time
consolidation costs of $1.2 billion over 3 years
21
Fleet
Optimization
Range
B757
B777
B747
B737
&
A320
Families
|
Aircraft
|
|
|
|
|
Boeing
747
|
24
|
--
|
24
|
|
Boeing
777
|
52
|
20
|
72
|
|
Boeing
767
|
35
|
26
|
61
|
|
Boeing
757
|
96
|
61
|
157
|
|
Boeing
737
|
--
|
226
|
226
|
|
Airbus
320
Family |
152
|
--
|
152
|
|
Total
|
359
|
333
|
692
|
• Utilizing right
aircraft in the right markets
• Aircraft size and
range offer flexibility to optimize gauge on routes to meet market
demand
demand
Aircraft Range and
Capacity
Current Mainline Fleet
Current Mainline Fleet
As
of 3/31/10
22
Youngest Fleet Among
Major U.S. Network Carriers
Average
Mainline Fleet Age
(Years)
(Years)
|
Fuel
Efficiency
Gallons/1,000
ASM
|
15.2
|
15.1
|
16.5
|
15.9
|
As
of 12/31/09
23
Merger
Creates Flexibility and Fleet Efficiency
• Combined fleet and
best new order book in industry allow for maximum flexibility to better
match
aircraft capacity to network demand and to accelerate replacement of older aircraft with more fuel
efficient aircraft with lower operating costs and less environmental impact
aircraft capacity to network demand and to accelerate replacement of older aircraft with more fuel
efficient aircraft with lower operating costs and less environmental impact
Maximum
Retirements
Maximum
Options
Mainline Fleet
Flexibility
24
Industry-Leading
RASM
* LOH
adjusted; See Appendix
** Industry
consists of all carriers shown
25
25
Industry-Leading
Margin Performance
EBITDAR
Margin*
Excluding Special Items - Non-GAAP
Excluding Special Items - Non-GAAP
Twelve
Months Ended First Quarter
2010
2010
First
Quarter 2010
Delta shading
represents $700MM annual synergy reported in 4Q09
earnings release
earnings release
* See
Appendix
26
Industry-Leading
Liquidity
United
Airlines cash balances include proceeds of $700MM from secured debt financing
issued in 1Q10
Cash
balances include unrestricted cash, cash equivalents, and short-term
investments. Excludes
restricted cash
27
Target:
Complete Transaction by Year End
May
2010
File
HSR notice
May
June
July
August
September
October
November
December
2011
May
3, 2010
Sign
Merger Agreement
September
2010
Shareholder
approvals
November/December
2010
Closing
May
2010 to Closing
Integration
planning
First
Half 2012
Single
Operating
Certificate
Certificate
2012
28
World’s
Leading Airline and Strong Global Competitor
• World-class global
airline, with expanded reach and superior service
• Great employees
committed to Working Together culture, operational excellence and
customer service
customer service
• Strong competitor
within U.S. and from U.S. to Asia, Europe, Latin America, Middle
East and Canada
East and Canada
• Strategically
located international gateways and well-placed domestic hubs in East,
West, South and Midwest
West, South and Midwest
• Complementary route
networks with minimal domestic and no international route
overlap
overlap
• Fuel efficient,
modern fleet and best new aircraft order book among major U.S.
network carriers
network carriers
• Expected net annual
synergies of $1.0 billion to $1.2 billion
Platform
for Increased Profitability and Sustainable Long-Term
Value
Questions &
Answers
Appendix
31
Improved Benefits
for Customers and Communities
World-Class
Global Network
• Broad coverage in
Asia, Europe, Latin America and the Middle East from 10 hubs
Comprehensive
Domestic Network
• Strategically
positioned hubs provide convenient access to U.S. travelers
• Enhanced service to
small and medium sized communities
Complementary
Networks Enhance Industry Competition
• Combining the two
most complementary U.S. networks, with minimal overlap, is
pro-consumer and pro-competitive
pro-consumer and pro-competitive
Superior
Products and Services
• Award-winning
products and services from both companies
• Committed to
continued operational excellence and customer service
Industry-Leading
Loyalty Program
• Enhanced
opportunities to earn and redeem miles
• Industry-leading
elite benefits
32
Comprehensive Global
Network
Source:
OAG, Full Year 2010
International
Network | 96
Unique Continental Destinations | 17
Unique United Destinations
Singapore
Bangkok
Ho
Chi Minh City
Kuwait
City
Winnipeg
Victoria
CO
Unique Cities - Asia and South Pacific
Cairns,
Australia
Delhi,
India
Fukuoka,
Japan
Hiroshima,
Japan
Koror,
Palau
Kosrae,
Micronesia
Kwajalein,
Marshall Islands
Majuro,
Marshall Islands
Manila,
Philippines
Mumbai/Bombay,
India
Nadi,
Fiji
Nagoya,
Japan
Niigata,
Japan
Okayama,
Japan
Ponape,
Micronesia
Sapporo,
Japan
Sendai,
Japan
Truk,
Micronesia
Yap,
Micronesia
Acapulco,
Mexico
Aguascalientes,
Mexico
Andros
Town, Bahamas
Antigua,
Antigua And Barbuda
Belize
City, Belize
Bimini,
Bahamas
Bogota,
Colombia
Bonaire,
Netherlands Antilles
Caracas,
Venezuela
Chihuahua,
Mexico
Ciudad
Del Carmen, Mexico
Curacao,
Netherlands Antilles
Durango,
Mexico
Freeport,
Bahamas
Georgetown,
Bahamas
Governors
Harbour, Bahamas
Grand
Cayman Isl, Cayman Islands
Guadalajara,
Mexico
Guatemala,
Guatemala
Hamilton,
Bermuda
Queretaro,
Mexico
Quito,
Ecuador
Roatan,
Honduras
Saltillo,
Mexico
San
Jose, Costa Rica
San
Luis Potosi, Mexico
San
Pedro Sula, Honduras
San
Salvador, El Salvador
Santo
Domingo, Dominican Republic
St.
Johns, Canada
Tampico,
Mexico
Tegucigalpa,
Honduras
The
Bight, Bahamas
Toluca,
Mexico
Torreon,
Mexico
Treasure
Key, Bahamas
Tuxtla
Gutierrez, Mexico
Veracruz,
Mexico
Villahermosa,
Mexico
Huatulco,
Mexico
Ixtapa,
Mexico
Leon/Guanajuato,
Mexico
Lima,
Peru
Managua,
Nicaragua
Manzanillo,
Mexico
Marsh
Harbour, Bahamas
Mazatlan,
Mexico
Merida,
Mexico
Moncton,
Canada
Mont
Tremblant, Canada
Monterrey,
Mexico
Morelia,
Mexico
Nassau,
Bahamas
North
Eleuthera, Bahamas
Oaxaca,
Mexico
Panama
City, Panama
Port
Of Spain, Trinidad And Tobago
Puebla,
Mexico
Puerto
Plata, Dominican Republic
CO
Unique Cities - North, Central and South America
Athens,
Greece
Barcelona,
Spain
Belfast,
United Kingdom
Berlin,
Germany
Birmingham,
United Kingdom
Copenhagen,
Denmark
Dublin,
Ireland
Edinburgh,
United Kingdom
Glasgow,
United Kingdom
Hamburg,
Germany
Lisbon,
Portugal
Madrid,
Spain
Manchester,
United Kingdom
Milan,
Italy
Oslo,
Norway
Shannon,
Ireland
Stockholm,
Sweden
Tel
Aviv, Israel
CO
Unique Cities - Europe and Middle East
Taipei
Saskatoon
London
Dubai
Moscow
Accra
Sydney
Melbourne
Continental
Airports Not Served By United
United
Airports Not Served By Continental
33
Source:
OAG, Full Year 2010
The
Most Complementary Networks with Minimal Overlap
Continental
Airports Not Served By United
United
Airports Not Served By Continental
Domestic
Network | 42
Unique Continental Destinations | 81
Unique United Destinations
Victoria
Tyler
Beaumont
Gulfport/Biloxi
Alexandria
Flint
Brownsville
Fargo
Bakersfield
Redding
Crescent
City
Springfield
Charlottesville
Clarksburg
Yuma
Fresno
Helena
Idaho
Falls
Altoona
Grand
Junction
Gunnison
Burbank
Eugene
West
Palm Beach
Fort
Lauderdale
Key
West
Valparaiso
Bradford
Fort
Wayne
Morgantown
Muskegon
Palm
Springs
Clearfield
Staunton
Guam
Aguadilla
Rota
Saipan
34
The
Most Complementary Networks with Minimal Overlap
• No international
route overlaps
• Minimal domestic
overlap (only 14 domestic overlaps)
• Hubs all subject to
strong competition, with 76% of all domestic markets
subject to low cost carrier competition
subject to low cost carrier competition
• Merger sustains and
improves service to small communities and offsets risk
to further reductions
to further reductions
• Enables new online
destinations and connections and positions us to
compete in new communities and routes
compete in new communities and routes
• Poses no significant
competitive issues
35
Breadth
of Service Benefits Small Communities
Source:
OAG Full Year 2010;
*Small
communities defined by the FAA as a non-metropolitan city that has been served
by a low cost or legacy carrier between 1989 and 2009
Provides
access to more destinations, enhances choice and convenience
3
6
11
1
129
142
154
168
205
237
37
58
64
66
Small
Communities in the U.S.*
Large,
Medium, and Small Metro Areas in the U.S.
36
Industry-Leading
Loyalty Program
• Industry-
Leading Frequent Flyer Program
• Complimentary
space-available domestic elite
upgrades
upgrades
• System-wide upgrades
for top elites
• Priority check-in,
pre-boarding and baggage benefits
• Elite recognition
across Star Alliance
• World’s
largest frequent flyer earnings and
redemption network
redemption network
• Flights to 370
destinations
• Access to Star
Alliance network with unparalleled
global coverage
global coverage
• Extensive mileage
upgrade award opportunities
• Vast array of travel
and retail partners for earning and
redemption
redemption
• Earn
miles and other benefits with an unmatched
choice of affinity cards
choice of affinity cards
• Card products
include premium, debit and small
business
business
Combined Networks
Serve Leisure
Destinations Customers Value
Destinations Customers Value
Europe 27
Asia 31
Florida 11
Latin
America 47
Caribbean 25
Mountain West 62
Hawaii 4
37
Investors Benefit
From Significant Synergies
Expected
annual steady state synergies of $1.0 - $1.2B
• Merger-enabled gains
beyond what standalone companies or alliance can deliver
• Full synergy ramp-up
expected by 2013
Optimized
network, fleet and loyalty program
• Expanded network
presence and connecting opportunities will drive incremental traffic
and revenue
and revenue
• Right aircraft in
the right market improves economics by better matching capacity with
demand
demand
• Unmatched loyalty
program is more attractive to customers, retailers and partners
More
efficient, more competitive carrier
• Synergies strengthen
CASM performance and competitiveness versus peers
• Builds on strong
standalone track records of operational excellence
38
Investors Benefit
From Significant Synergies
Greater
financial flexibility
• Larger cash balance
helps combined carrier to better withstand macro volatility
• Combined carrier has
low fixed obligations compared to peers
Combined
carrier more attractive to corporate customers
• Increased
frequencies
• Wider selection of
destinations
• Loyalty program of
choice in metro areas
Combined
network creates nearly 1,000 new online connection
options
GAAP to
Non-GAAP
Reconciliations
Reconciliations
40
Non-GAAP to GAAP
Reconciliation
• Twelve Months Ending
March 31, 2010 Length of Haul Adjusted Revenue per Available Seat Mile
(RASM)
• RASM
formula: Yield * Load Factor
• Length
of Haul (LOH) formula: (Revenue
Passenger Miles (RPMs) / Enplanements) * 1000
• LOH
Adjusted RASM formula: RASM * (Carrier’s LOH / CAL+UAUA’s LOH) ^0.5
|
|
CAL
+ UAUA
|
AMR
|
DAL
|
LCC
|
Industry**
|
|
LTM1Q10
|
|
|
|
|
|
|
Yield
(cents)
|
11.91
|
12.40
|
11.43
|
11.87
|
11.87
|
|
Load
Factor
|
83.1%
|
81.2%
|
83.4%
|
82.0%
|
82.6%
|
|
RASM
(cents)
|
9.89
|
10.07
|
9.53
|
9.73
|
9.81
|
|
LTM4Q09
|
|
|
|
|
|
|
RPMs
(millions)
|
180,139
|
122,366
|
162,711
|
57,854
|
523,131
|
|
Enplanements
(thousands)
|
101,143
|
85,719
|
108,584
|
50,975
|
346,420
|
|
LOH
|
1,781
|
1,428
|
1,499
|
1,135
|
1,510
|
|
|
|
|
|
|
|
|
Adjusted
RASM*
|
9.89
|
9.01
|
8.74
|
7.77
|
9.03
|
*These financial
measures provide management and investors the ability to measure and monitor the
industry’s performance on a comparable basis
LOH
adjustment of LTM 1Q10 RASM uses weighted average LOH of combined company based
on LTM 4Q09 results (RPMs and enplanements)
**Industry includes
LCC, DAL, AMR, and the pro forma combined CAL/UAUA
Source:
Company reports, Form 41, and ATA Monthly Traffic
Report
41
Non-GAAP to GAAP
Reconciliation
• Twelve Months Ended
March 31, 2010 Earnings Before Interest, Taxes, Depreciation, Amortization, and
Rent
(EBITDAR) Margin:
(EBITDAR) Margin:
• EBITDAR
Margin formula: EBITDAR/Operating Revenue
1 See next page for
detailed list of items excluded
2 These financial
measures provide management and investors the ability to measure and monitor the
industry’s
performance on a comparable basis
performance on a comparable basis
|
($
Millions)
|
DL
|
CAL
+ UAUA
|
US
|
AA
|
|
|
|
|
|
|
|
Operating
Revenue
|
28,227
|
29,679
|
10,654
|
20,146
|
|
|
|
|
|
|
|
Net
Income
|
(699)
|
(647)
|
(146)
|
(1,598)
|
|
Add Back Tax
Expense/(Credit)
|
(334)
|
(144)
|
(38)
|
(284)
|
|
Add Back
Interest Expense
|
1,259
|
926
|
292
|
697
|
|
Add Back
Depreciation Expense
|
1,537
|
1,399
|
243
|
1,099
|
|
Add Back
Aircraft Rent Expense
|
471
|
1,265
|
689
|
510
|
|
EBITDAR -
Non-GAAP
|
2,234
|
2,799
|
1,040
|
424
|
|
Excludes
Special and One-Time Items1
|
455
|
476
|
62
|
394
|
|
Excludes
Non-cash MTM Hedge (Gains)/Losses
|
0
|
(633)
|
(205)
|
0
|
|
EBITDAR
Excluding Special Items and MTM Hedge Impact - Non-GAAP
|
2,689
|
2,642
|
897
|
818
|
|
|
|
|
|
|
|
EBITDAR Margin
- Non-GAAP2
|
7.9%
|
9.4%
|
9.8%
|
2.1%
|
|
EBITDAR Margin
Excluding Special Items and MTM Hedge Impact - Non-GAAP
|
9.5%
|
8.9%
|
8.4%
|
4.1%
|
Company
reports; mark-to-market (MTM) gains are treated
as special items
42
Non-GAAP to GAAP
Reconciliation
• Three Months Ended
March 31, 2010 Earnings Before Interest, Taxes, Depreciation, Amortization, and
Rent
(EBITDAR) Margin:
(EBITDAR) Margin:
• EBITDAR
Margin formula: EBITDAR/Operating Revenue
1 See next page for
detailed list of items excluded
2 These financial
measures provide management and investors the ability to measure and monitor the
industry’s
performance on a comparable basis
performance on a comparable basis
|
($
Millions)
|
CAL
+ UAUA
|
DL
|
US
|
AA
|
|
|
|
|
|
|
|
Operating
Revenue
|
7,410
|
6,848
|
2,651
|
5,068
|
|
|
|
|
|
|
|
Net
Income
|
(229)
|
(256)
|
(45)
|
(505)
|
|
Add Back Tax
Expense/(Credit)
|
1
|
10
|
0
|
0
|
|
Add Back
Interest Expense
|
260
|
306
|
77
|
194
|
|
Add Back
Depreciation Expense
|
347
|
385
|
61
|
267
|
|
Add Back
Aircraft Rent Expense
|
310
|
112
|
171
|
129
|
|
EBITDAR -
Non-GAAP
|
689
|
557
|
264
|
85
|
|
Exclude
Specials and One-Time Items1
|
30
|
64
|
(44)
|
53
|
|
Exclude
Non-cash MTM Hedge (Gains)/Losses
|
(31)
|
0
|
0
|
0
|
|
EBITDAR
Excluding Special Items and MTM Hedge Impact - Non-GAAP
|
688
|
621
|
220
|
138
|
|
|
|
|
|
|
|
EBITDAR Margin
- Non-GAAP2
|
9.3%
|
8.1%
|
10.0%
|
1.7%
|
|
EBITDAR Margin
Excluding Special Items and MTM Hedge Impact - Non-GAAP
|
9.3%
|
9.1%
|
8.3%
|
2.7%
|
Company
reports; mark-to-market (MTM) gains are treated
as special items
43
EBITDAR
- Special Items Excluded
AMERICAN:
1Q10: $53MM
loss related to the devaluation of the Venezuelan currency
4Q09: $177MM
primarily from Latin America routes impairment, ERJ-135 aircraft write down, and
charges related to A300 aircraft retirement
3Q09: $94MM
charge related to sale of certain aircraft and the grounding of leased A300
aircraft prior to lease expiration
2Q09: $70MM
charge related to sale of certain aircraft and the grounding of leased A300
aircraft prior to lease expiration
CONTINENTAL:
1Q10: $6MM
aircraft related charge and $4MM severance charge
4Q09: $36MM
aircraft related charge, $29MM pension settlement charge, and $12MM route
impairment
3Q09: $9MM
charge related to unused facilities, $6MM aircraft related charge, and $5MM
severance charge
2Q09: $44MM
aircraft related charges
DELTA:
1Q10: $8MM
severance charge, $46MM in merger related expenses, and $10MM charge related to
the devaluation of the Venezuelan currency
4Q09: $121MM
in merger related expenses
3Q09: $51MM
severance charge, $78MM in merger related expenses, and $83MM loss in
extinguishment of debt
2Q09: $58MM in
merger related expenses
UNITED:
1Q10: $17MM
aircraft and spare part impairment, $1MM lease termination charge, $4MM
accelerated depreciation related to aircraft groundings, and $2MM
benefit related to a severance adjustment
benefit related to a severance adjustment
4Q09: $74MM
aircraft deposit impairment, $50MM lease termination charge, $10MM accelerated
depreciation related to aircraft groundings, $10MM
severance charge, and $2MM employee benefit obligation adjustment
severance charge, and $2MM employee benefit obligation adjustment
3Q09: $19MM
charge related to aircraft and deposit impairments, $24MM lease termination
charge, $6MM accelerated depreciation related to aircraft
groundings, $22MM severance charge, and $11MM gain on asset sales
groundings, $22MM severance charge, and $11MM gain on asset sales
2Q09: $40MM
intangible impairment charge, $27MM LAX municipal bond secured interest, $21MM
lease termination charge, $10MM accelerated
depreciation related to aircraft groundings, $6MM severance charge, and $1MM employee benefit
depreciation related to aircraft groundings, $6MM severance charge, and $1MM employee benefit
US
AIRWAYS:
1Q10: $5MM
aircraft charge related to capacity reductions and $49MM gain related to the
sale of auction rate securities
4Q09: $19MM
international routes impairment, $6MM
severance charge, $6MM in
liquidity improvement program expenses, $5MM aircraft charge related
to capacity reductions, and $49MM in non-cash charges associated with sale of aircraft and write off of related debt discount
to capacity reductions, and $49MM in non-cash charges associated with sale of aircraft and write off of related debt discount
3Q09: $10MM
aircraft charge related to capacity reductions, $5MM severance and other
charges, and $3MM charge related to auction rate securities
2Q09: $1MM
lease return charge and $2MM impairment charge