Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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United Airlines Holdings Inc. pages available for free this week:
- Statement of Comprehensive Income
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Revenues
- Aggregate Accruals
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Economic Profit
United Airlines Holdings Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The period under review demonstrates a significant fluctuation in economic profit. Initially, the company experienced substantial economic losses, followed by a period of improvement, and then a return to negative economic profit in the most recent year.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a strong recovery from a substantial loss of US$7,141 million in 2020 to a profit of US$2,682 million in 2022. This positive trend continued with further increases to US$4,823 million in 2023 and US$5,148 million in 2024. The initial loss in 2020 suggests significant operational challenges, while subsequent years indicate a successful turnaround and increasing profitability.
- Cost of Capital
- The cost of capital varied over the period. It decreased from 11.11% in 2020 to 9.20% in 2021, then increased to 10.36% in 2022 and 10.22% in 2023. A notable increase to 13.02% occurred in 2024. This suggests changing market conditions and potentially increased risk perception associated with the company’s financing.
- Invested Capital
- Invested capital increased from US$46,438 million in 2020 to US$52,534 million in 2021. A decrease was then observed in 2022 to US$41,357 million, followed by increases to US$45,532 million in 2023 and US$49,435 million in 2024. These fluctuations may reflect strategic capital allocation decisions, asset sales, or changes in working capital requirements.
- Economic Profit
- Economic profit mirrored the NOPAT trend, starting with a significant loss of US$12,300 million in 2020. Losses decreased to US$5,633 million in 2021 and US$1,602 million in 2022. The company achieved a modest economic profit of US$170 million in 2023, but experienced a return to negative economic profit of US$1,290 million in 2024. The shift to negative economic profit in 2024, despite increased NOPAT, is attributable to the substantial rise in the cost of capital.
In summary, while the company demonstrated improvements in operational profitability as measured by NOPAT, its ability to generate economic profit was significantly impacted by fluctuations in the cost of capital and invested capital. The recent increase in the cost of capital appears to have offset the gains in NOPAT, resulting in a decline in economic profit in the final year of the period.
Net Operating Profit after Taxes (NOPAT)
United Airlines Holdings Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in frequent flyer deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income (loss).
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense, net of interest capitalized = Adjusted interest expense, net of interest capitalized × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income (loss).
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
The financial data reflects a significant recovery and improvement in profitability over the five-year period.
- Net income (loss)
- There is a clear trend of substantial reduction in net losses followed by consistent positive net income. Initially, the company reported a large net loss of $7,069 million in 2020. This loss narrowed considerably to $1,964 million in 2021, marking a notable improvement. In 2022, the company shifted to profitability with a positive net income of $737 million, which further increased to $2,618 million in 2023 and $3,149 million in 2024. This progression indicates a strong turnaround in the company’s bottom line over the period.
- Net operating profit after taxes (NOPAT)
- The NOPAT figures corroborate the improvement observed in net income, displaying a similar trajectory. Starting from a negative $7,141 million in 2020, NOPAT improved substantially to a negative $797 million in 2021. By 2022, it became positive at $2,682 million, followed by consistent growth to $4,823 million in 2023 and $5,148 million in 2024. This upward trend suggests that the company's core operations have become increasingly profitable after accounting for taxes, highlighting enhanced operational efficiency and recovery.
Overall, the data indicates a pronounced recovery from the substantial losses experienced in 2020, transitioning into increasing profitability from 2022 onward. Both net income and NOPAT demonstrate sustained positive momentum, which is indicative of improved financial health and operating performance over the analyzed period.
Cash Operating Taxes
United Airlines Holdings Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Income Tax Expense (Benefit)
- The income tax expense experienced significant fluctuations over the five-year period. In 2020, a substantial tax benefit of -$1,753 million was recorded, indicating a tax credit or loss carryback. This benefit decreased in magnitude in 2021 to -$593 million. Starting in 2022, the expense shifted to a positive figure of $253 million, reflecting a transition from tax benefit to tax expense. This positive expense continued to increase in 2023 and 2024, reaching $769 million and $1,019 million respectively, suggesting a growing tax liability correlating potentially with improved profitability or changed tax circumstances.
- Cash Operating Taxes
- Cash operating taxes demonstrated a generally stable pattern with slight fluctuations. There was an increase from $246 million in 2020 to $374 million in 2021, followed by a slight decrease to $352 million in 2022. The amount further declined to $274 million in 2023 before experiencing a modest rise to $288 million in 2024. Overall, cash operating taxes remained within a relatively narrow range, reflecting consistent operational tax cash outflows despite varying income tax expense trends.
Invested Capital
United Airlines Holdings Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of frequent flyer deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of short-term investments.
- Total reported debt & leases
- The total reported debt and leases increased significantly from 33,909 million USD in 2020 to a peak of 41,063 million USD in 2021. Following this peak, there was a gradual decline over the subsequent years, reaching 33,633 million USD by the end of 2024. This trend indicates a reduction effort in debt and lease obligations after the initial growth, suggesting an improvement in leverage or debt management policy.
- Stockholders’ equity
- Stockholders’ equity showed a decreasing trend from 5,960 million USD in 2020 to 5,029 million USD in 2021, indicating a possible decline in net assets or profitability during that period. However, from 2021 onwards, equity grew strongly, reaching 12,675 million USD in 2024. This consistent increase suggests improved retained earnings, equity financing, or asset revaluation, reflecting a strengthening capital base over time.
- Invested capital
- Invested capital rose from 46,438 million USD in 2020 to a high of 52,534 million USD in 2021, followed by a sharp decrease to 41,357 million USD in 2022. After this decline, there was a recovery trend with invested capital increasing to 49,435 million USD by 2024. This fluctuation may be associated with asset sales, restructuring, or changes in working capital, before stabilizing and growing again in the final years analyzed.
Cost of Capital
United Airlines Holdings Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, finance leases, and other financial liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, finance leases, and other financial liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, finance leases, and other financial liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, finance leases, and other financial liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, finance leases, and other financial liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, finance leases, and other financial liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, finance leases, and other financial liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, finance leases, and other financial liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, finance leases, and other financial liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, finance leases, and other financial liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
United Airlines Holdings Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | ||||||
| Uber Technologies Inc. | ||||||
| Union Pacific Corp. | ||||||
| United Parcel Service Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The economic spread ratio exhibited significant fluctuations over the five-year period. Initially negative, the ratio demonstrated improvement before declining again in the most recent year presented. Economic profit moved from substantial losses to a modest profit, then back to a loss, mirroring the trend in the economic spread ratio.
- Economic Spread Ratio
- The economic spread ratio began at -26.49% in 2020, indicating a substantial shortfall in returns relative to the cost of capital. A marked improvement was observed in 2021, with the ratio increasing to -10.72%. This positive trend continued into 2022, reaching -3.87%, suggesting a narrowing gap between returns and the cost of capital. In 2023, the ratio turned positive, reaching 0.37%, signifying that returns exceeded the cost of capital for the first time in the observed period. However, this improvement was not sustained, as the ratio decreased to -2.61% in 2024, indicating a return to returns falling short of the cost of capital.
- Economic Profit
- Economic profit demonstrated a clear progression from significant losses to a brief period of profitability. Starting at a loss of US$12,300 million in 2020, the loss decreased to US$5,633 million in 2021 and further to US$1,602 million in 2022. A profit of US$170 million was achieved in 2023, but this was followed by a loss of US$1,290 million in 2024. The movement in economic profit directly correlates with the fluctuations observed in the economic spread ratio.
- Invested Capital
- Invested capital increased from US$46,438 million in 2020 to US$52,534 million in 2021. A decrease was then observed in 2022, falling to US$41,357 million. Invested capital then rose to US$45,532 million in 2023 and continued to increase to US$49,435 million in 2024. While generally trending upwards, the fluctuations in invested capital may have influenced the economic spread ratio, particularly when considered alongside the changes in economic profit.
The interplay between economic profit and invested capital resulted in the observed pattern of the economic spread ratio. The return to a negative economic spread ratio in 2024, despite increasing invested capital, suggests a decline in operational efficiency or increased costs relative to revenue generation.
Economic Profit Margin
United Airlines Holdings Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Operating revenue | ||||||
| Add: Increase (decrease) in frequent flyer deferred revenue | ||||||
| Adjusted operating revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | ||||||
| Uber Technologies Inc. | ||||||
| Union Pacific Corp. | ||||||
| United Parcel Service Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted operating revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited significant fluctuations over the five-year period. Initially negative, the margin improved substantially before declining again in the most recent year presented.
- Economic Profit Margin Trend
- In 2020, the economic profit margin was -76.62%, representing a substantial loss relative to adjusted operating revenue. A marked improvement occurred in 2021, with the margin increasing to -22.58%. This positive trend continued into 2022, where the margin reached -3.53%, indicating a narrowing of the economic loss. The year 2023 saw the margin turn positive for the first time, reaching 0.31%. However, this gain was not sustained, as the margin decreased to -2.25% in 2024.
The economic profit margin’s movement closely mirrors that of the economic profit itself. The substantial losses in 2020 and 2021 corresponded with significantly negative economic profit figures. As economic profit improved in 2022 and became positive in 2023, the economic profit margin followed suit. The return to negative economic profit in 2024 resulted in a corresponding negative margin.
- Relationship to Adjusted Operating Revenue
- Adjusted operating revenue demonstrated a consistent upward trend throughout the period, increasing from US$16,054 million in 2020 to US$57,361 million in 2024. Despite this revenue growth, the economic profit margin did not consistently benefit. While the margin improved alongside revenue increases in 2021 and 2022, the margin’s decline in 2024 occurred despite further revenue growth, suggesting that increases in costs or adjustments to the cost of capital may have offset the revenue gains.
The volatility in the economic profit margin suggests sensitivity to underlying economic profit drivers. Further investigation into the components of economic profit – operating profit after tax and the cost of capital – would be necessary to fully understand the factors contributing to these fluctuations.