UAL’s Flush Finances

UAL Corp, parent company of United Airlines, is not only sitting on a large pile of cash, but is also currently facing a great deal of upside potential in future cash flow. The company’s cash flow has been estimated at $1.6 billion for 2007, with $1 billion of that representing cash that can be immediately used to increase the company’s value for shareholders. UAL also has over $4 billion in cash on its books at the moment, enough to buy about 75 percent of its own shares at current prices[1]. This bodes well for UAL Corp shareholders, who stand a good chance of being handsomely rewarded through either a share buyback by the company, which will increase the stock price, or a special dividend which will return cash directly to them.

Meanwhile, UAL Corp continues to consider still more options for increasing its cash on hand, such as spinning off its mileage plan and MRO unit. The mileage plan is estimated to be worth roughly $7.5 billion,[2] while the MRO unit is worth approximately $330 million. The Mileage plan generated about $600 million in revenues last year, and United Services, 75 percent of which is the MRO, brought in $280 million in revenue.

[1] Based on stock price of $45.88 with 115.74 million shares outstanding as of 10-15-07

[1] Frank Boroch, Bear Stearns report dated 7-17-07