Tuesday, April 18, 2017
United, Facing Uproar Over Passenger Treatment, Says Earnings Beat Expectations: Third-largest U.S. airline by traffic says increased fuel costs cut into its latest quarterly profit
The Wall Street Journal
By Susan Carey and Ezequiel Minaya
Updated April 18, 2017 3:45 a.m. ET
United Continental Holdings Inc., navigating a turbulent week a since a passenger was dragged off one of its regional flights, reported strong first-quarter profit in the three months before the incident.
The nation’s third-largest airline by traffic beat analyst expectations for the fifth consecutive quarter even as profit fell from the same period a year ago on higher fuel costs. United raised its forecast for unit revenue growth between April and June to between 1% and 3% year-over year, an improvement from the first quarter when it was flat. Unit revenue measures the amount taken in for each passenger flown a mile. The industry has been struggling for two years to reverse declines in that important metric.
United’s President Scott Kirby said that if the forecast bears out it would be the first period of positive unit revenue growth in two years, despite the April 9 altercation at Chicago’s O’Hare International Airport.
Chief Executive Oscar Munoz said the incident on Flight 3411 “has been a humbling experience, and I take full responsibility.” He said United needs to do more for its customers, and the incident “will prove to be a watershed moment for our company.”
Mr. Munoz has pledged a thorough review of the company’s policies and training by the end of the month. United already made some policy changes after videos of Dr. David Dao being dragged off Flight 3411 went viral last week.
Mr. Munoz and other executives will host a conference call Tuesday morning with analysts and reporters. They are expected to face questions over the treatment of Dr. Dao, the carrier’s flat-footed initial reaction and whether the company can see any sign of lower bookings from dissatisfied fliers as it heads into the crucial summer travel season.
Chicago-based United said it earned $96 million, or 31 cents a share, in the first quarter, a decline from $313 million, or 88 cents a share, a year ago. The decline was blamed on higher fuel expense—up 28% from a year ago—and the effect of new labor contracts approved in 2016.
Revenue was in line with expectations, at $8.4 billion, an increase of 2.7% from a year earlier. In the first quarter, traffic rose 2.2% on a 2.6% increase in capacity.
Excluding one-time items, United earned $129 million, or 41 cents a share, better than the consensus among analysts, who had the company delivering $116 million excluding items. Among the special items were $21 million in severance and benefit costs for about 1,000 mechanics who agreed to voluntarily separate from the airline through early 2019.
United shares rose nearly 2.5% Monday to close at $70.77, and edged up after hours to $71.25.
Original article can be found here: https://www.wsj.com
Posted by Kathryn on Tuesday, April 18, 2017