United Airlines boosts profit on more revenue, cheaper fuel

AP – United Airlines reported on Tuesday that higher revenue and cheaper fuel helped boost its fourth-quarter profit by nearly 40 per cent, to USD641 million.

The airline’s forecast of first-quarter earnings easily beat Wall Street expectations.

It is not all clear sailing for United, however.

The financial report came the same day that United shares tumbled on fear that a virus outbreak in China could hurt travel between the United States (US) and Asia, a key market for the airline. Even before the outbreak, a closely watched measure of revenue per seat was dropping on United’s flights to and from Asia.

And Boeing again pushed back its timetable for return of the 737 Max, making it almost impossible for United to meet its goal of putting the plane in its schedule by early June. It is more likely that United will go through a second straight summer without the Max, forcing it to cancel thousands of flights and lose the revenue from those ticket sales.

Workers load baggage into a United Airlines plane at San Francisco International Airport in San Francisco. PHOTO: AP

Rivals Southwest and American have disclosed how much the loss of their Max jets is costing them in pretax income. United has never given a figure, and declined again on Tuesday. The company has said only that it is talking to Boeing Co about compensation.

United executives discussed the financial results with analysts yesterday.

US airlines are enjoying strong demand for travel that has allowed them to sell more high-priced seats and amenities while limiting price hikes for average fares. United has been expanding by adding flights from its US hubs such as Denver, Houston and San Francisco to smaller cities. United will change CEOs in May, with Oscar Munoz stepping down and being replaced by Scott Kirby, the company’s President since mid-2016.

For the fourth quarter, United said profit excluding what the company deemed non-repeating items was USD2.67 per share. That was three cents better than the average estimate of 17 analysts surveyed by Zacks Investment Research.

Revenue rose four per cent to USD10.89 billion, in line with analysts’ forecasts.

United added passenger-carrying capacity despite the loss of its Max jets, and revenue grew about twice as fast as operating expenses. There, labour costs rose six per cent, but United’s fuel spending dropped more than five per cent as fuel prices fell from the same period in 2018.

Passenger revenue per mile for each seat, an indication of pricing power, rose nearly one per cent, in line with United’s forecast of three months ago. The airline predicted that same figure would be flat to up two per cent in the January-through-March quarter.

United forecast adjusted earnings of 75 cents to USD1.25 per share in the first quarter. Analysts are expecting 72 cents per share.

Shares of Chicago-based United Airlines Holdings Inc fell USD3.91, or 4.4 per cent, to close on Tuesday at USD85.79. They were down 64 cents in late trading.