United Air Lines says strong cash flow to be used to pay down debt, implement new investor initiatives

By Jennifer Lanning Drey

Portland, Ore., Dec. 4 - UAL Corp., the parent of United Air Lines, will use the majority of its free cash flow to pay down debt but is also considering implementing investor initiatives including a dividend or stock buyback, Jake Brace, United's chief financial officer, said Tuesday at the Calyon Securities Airline Conference in New York.

"Our intent is to round up at the end of every year and see what the cash situation is and take what cash we don't need to keep in our core liquidity balance and then do something smart with it," Brace said.

United is seeking credit facility amendments that are necessary before it can move forward with a dividend or share buyback, he said.

If the company is not able to gain the amendments, it may consider buying back some of its outstanding convertibles, he said.

Since exiting bankruptcy, United has paid down $2.7 billion of debt, $1.6 billion of which occurred in 2007.

With modest capital spending, no planned capital expenditures for new aircraft and limited fixed obligations and debt maturities in 2008, Brace called cash flow "a strong suit" for United.

"We're head and shoulders ahead of the rest of the industry in terms of generating free cash flow, and that is our focus," he said.

United generated operating cash flow of $342 million in the third quarter and had a cash and short-term investments balance of $5 billion at Sept. 30, according to its earnings release.

United is a Chicago-based passenger air carrier.

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