United Continental 3Q profit rises but misses Wall Street expectations
Oct 24, 2013 / 5:04 pm
Sorry, bargain-hunters. United Airlines says it sold too many cheap tickets in the third quarter, and plans to fix that, pronto.
The airline is tweaking computer formulas that tell it when to sell tickets at a discount, and when to hold out for last-minute travellers willing to pay more. Get it right, and an airline can both fill a plane and get as much revenue as possible from its travellers. Get it wrong and the airline ends up filling the plane with folks who paid less than they might have otherwise.
United said on Thursday that its computers missed the mark for much of this summer. As a result, "our revenue results were not at the level we expected or deem acceptable," said Jim Compton, United's chief revenue officer, on a conference call.
Compton said United has already made changes so it sells fewer cheap seats in advance of a flight. And next month it will tweak the computers again so they account for recent demand in addition to the usual seasonal patterns.
United has been struggling to absorb Continental after their 2010 merger. On Thursday, Chairman and CEO Jeff Smisek said it has improved its operations and customer service to the point where it is competitive in those areas, but its financial results still aren't good enough.
United is still the world's largest airline by passenger traffic, but some customers avoided it after some well-publicized service problems. Traffic fell slightly in the most recent quarter, and is down 1 per cent for the year. By comparison, traffic at rival Delta Air Lines Inc. is up slightly so far in 2013.
About 79 per cent of United flights arrived on time through August of this year, according to the Transportation Department. That was better than American's 75 per cent but not as good as Delta's 85 per cent.
In an effort to improve both its on-time performance and its financial results, United is trying to cut its taxi times, make sure the jetbridge is ready to meet an incoming plane, and get the plane ready to go more quickly, Compton said.
For instance, United used to wait until the scheduled boarding time to allow the first passenger to scan a boarding pass and head down the jetbridge. Now, it starts one minute before boarding time, so the first passenger is stepping onto the plane right at the scheduled boarding time, spokeswoman Megan McCarthy said.
United Continental Holdings Inc. earned $379 million, or 98 cents per share, for the quarter. If not for special charges, it would have earned $590 million, or $1.51 per share. Analysts surveyed by FactSet expected $1.54 per share.
United had a profit of $6 million, or 2 cents per share in the year-ago quarter.
Revenue in the most recent quarter rose 3 per cent to $10.23 billion, also less than analysts had expected.
United passenger revenue for Pacific flights fell 11 per cent. It posted an 11 per cent gain in revenue from Atlantic flying, and a gain of 0.4 per cent in domestic revenue.
"Long-term we continue to like the company, however we believe the absolute short-term will not be pretty," Cowen and Company analyst Helane Becker wrote in a note shortly after United's results came out.
Investors have been patient with United, assuming that its profit margins will catch up to Delta, which has had longer to absorb its acquisition of Northwest.
But JPMorgan analyst Jamie Baker wrote after the earnings report that the gap of nearly a half-per cent between United's profit margins and the rest of the industry appears to be getting worse, not better.
"We remain perplexed by the market's willingness to value UAL as the next Delta in spite of UAL's fundamental results," he wrote.
Shares of Chicago-based United Continental Holdings Inc. rose 37 cents to $31.32 in afternoon trading.
Read more Business News
|QHR Technologies Inc||1.18||-0.01|
|Anavex Life Sciences||0.329||+0.014|
|Copper Mountain Mining||1.53||-0.05|
Big Picture Bank earnings and upbeat economic news highlight an active week In contrast with last week’s quieter, U.S. holiday-shortened week, the first week of December was a comparatively acti...
This column is the last of three, for how to prove your personal injury claim. It is the piece de resistance of the trilogy, the Chuck Norris piece – the final say! As mentioned in the first two...
The bank manager just phoned and asked for full and immediate repayment of the line of credit because the latest, (and they were late!), financial statements showed continuing losses and falling sales...
- Ad or not, soaring WestJet viral video a branding win: marketing experts
- Mobile trend will push phone, tablet ownership past PCs in 2014: IDC Canada
- Court strikes down several claims in wheat board lawsuit, but case move ahead
- Airlines forecast big profit jump to $19.7 billion in 2014 as fuel prices fall, demand rises
- US business stockpiles jump 0.7 per cent in October, biggest gain since January
- US hits firms evading Iran sanctions, while Congress debate over new measures goes on
- Bombardier and Embraer split American Airlines regional jet order
- Britain's phone-hacking trial hears Queen Elizabeth II annoyed by nut-eating police officers
- CPPIB buys portfolio of agricultural land from Assiniboia Farmland LP for $128M
- US unemployment aid applications surge to 368,000, reflecting bump in claims after holiday
- BoC's Poloz says low interest rates needed to keep deflation at bay
- New house prices rose in October after flat September: StatsCan