United Airlines Holdings Inc. (NASDAQ:UAL)

The carrying amount of total long-term debt, finance leases, and other financial liabilities demonstrates a consistent, albeit decelerating, decline over the five-year period. This trend is supported by observations in both the current and non-current portions of the debt structure.

Overall Total Debt Trend

The total debt balance began at US$35,355 million in 2021 and decreased to US$24,988 million by 2025. The largest absolute decrease occurred between 2021 and 2022, amounting to US$3,075 million. Subsequent annual decreases were smaller, indicating a slowing rate of debt reduction.

Current Maturities

Current maturities of long-term debt exhibited fluctuations throughout the period. Starting at US$3,912 million in 2021, it decreased to US$3,038 million in 2022, then increased to US$4,247 million in 2023, followed by a decrease to US$3,453 million in 2024, and finally rose again to US$4,426 million in 2025. This suggests active management of short-term debt obligations, potentially through refinancing or rescheduling.

Long-Term Debt (Less Current Portion)

The long-term portion of the debt, excluding current maturities, showed a more consistent downward trend. It decreased from US$31,443 million in 2021 to US$20,562 million in 2025. The rate of decline was most pronounced between 2021 and 2023, decreasing by US$4,030 million, and then slowed in subsequent years. This indicates a deliberate strategy to reduce long-term financial obligations.

The combined effect of managing current maturities and reducing long-term debt suggests a focused effort to improve the company’s financial leverage. The decelerating rate of decline in total debt towards the end of the period may reflect a shift in capital allocation priorities or a reaching of desired debt levels.

Interest expense exhibited an initial increasing trend followed by a decline over the five-year period. Net interest expense, after accounting for capitalized interest, rose from US$1,577 million in 2021 to US$1,774 million in 2023 before decreasing to US$1,167 million in 2025. Interest capitalized also demonstrated an increasing pattern, though at a slower rate, rising from US$80 million in 2021 to US$206 million in 2025. Total interest expense mirrored the trend of net interest expense, increasing from US$1,657 million in 2021 to US$1,956 million in 2023, and subsequently falling to US$1,373 million in 2025.

Overall Trend

The period began with increasing interest costs, peaking in 2023. A subsequent decline in both net and total interest expense is observed in the years 2024 and 2025, suggesting potential benefits from debt restructuring, refinancing, or a reduction in overall debt levels. The consistent increase in interest capitalized indicates a growing proportion of borrowing costs are being added to the value of assets under construction.

Interest Capitalization

Interest capitalized increased consistently throughout the period, from US$80 million to US$206 million. This suggests a growing level of qualifying asset construction activity. The increase in capitalized interest partially offsets the rise in total interest expense, but the net effect still resulted in higher overall interest costs until 2023.

Net Interest Expense

Net interest expense increased by approximately 12.4% from 2021 to 2022, and a further 5.7% from 2022 to 2023. However, a significant decrease of 16.7% occurred between 2023 and 2024, and a further 15.1% decrease between 2024 and 2025. This reduction in net interest expense is a positive development, potentially improving profitability.

Total Interest Expense

Total interest expense followed a similar pattern to net interest expense, increasing from US$1,657 million in 2021 to US$1,956 million in 2023, and then decreasing to US$1,373 million in 2025. The magnitude of the decrease in 2024 and 2025 suggests a deliberate effort to manage interest-bearing liabilities.

The interest coverage ratios demonstrate a significant improvement over the observed period. Initially, both the standard and adjusted ratios were negative, indicating an inability to cover interest expense with earnings. However, subsequent years show a clear positive trend, with both ratios increasing consistently.

Interest Coverage Ratio (without capitalized interest)

This ratio began at -0.62 in 2021, signifying that earnings before interest and taxes were insufficient to cover interest expense. A substantial increase to 1.59 was recorded in 2022, indicating the company’s ability to cover its interest obligations. This positive trend continued through 2023 (2.91), 2024 (3.97), and 2025 (4.69), demonstrating a strengthening capacity to meet interest payments from operating income. The rate of increase appears to decelerate slightly from 2022 to 2025.

Adjusted Interest Coverage Ratio (with capitalized interest)

Similar to the standard ratio, the adjusted interest coverage ratio was negative in 2021 (-0.59). Improvement was observed in 2022, reaching 1.50. Subsequent increases were noted in 2023 (2.64), 2024 (3.42), and 2025 (3.99). While consistently lower than the ratio excluding capitalized interest, the adjusted ratio mirrors the overall positive trend. The difference between the two ratios narrows over time, suggesting a decreasing impact from capitalized interest on the company’s ability to cover interest expense.

The consistent improvement in both ratios suggests a strengthening financial position regarding debt servicing capabilities. The movement from negative values to positive and increasing ratios indicates a reduced risk associated with the company’s debt obligations. The inclusion of capitalized interest results in a lower coverage ratio, but the trend remains positive and the gap between the two ratios diminishes over the period.