Tags: United | Continental | Revenue | Gauge

United Continental Revenue Gauge Shows Surprising Strength

Wednesday, 09 Jul 2014 05:19 PM

United Continental Holdings Inc. said a benchmark revenue gauge in the second quarter beat its April forecast on improved performance on Pacific and domestic routes.

Revenue for each seat flown a mile rose 3.5 percent in the three months ending in June from a year earlier, United said in a filing Wednesday. In April the company estimated a 1 percent to 3 percent increase for the quarter.

United Chief Executive Officer Jeff Smisek is under pressure to improve upon its industry-low financial performance in the first quarter, when it lost $489 million, or $1.33 a share, excluding some items. The Chicago-based company reported higher unit costs than its North American peers.

The forecast puts United behind American Airlines Group Inc., which said Wednesday that revenue from each seat flown a mile likely increased 5.5 percent to 6.5 percent in the second quarter and pretax margins would exceed its previous forecast. Southwest Airlines Co. said its unit revenue probably rose more than 8 percent in the second quarter.

United shares jumped on the news, which came out after regular markets closed. Shortly after 5 p.m. in New York, the shares were up 6.6 percent at $42.72, after gaining 1.3 percent during the regular session.

Investors got their first look at United’s unit revenue since it issued its second-quarter estimate more than two months ago. Unlike its U.S.-based peers, United doesn’t give monthly updates on its revenue forecast.

Michael Linenberg, an analyst at Deutsche Bank in New York, questioned United’s low unit revenue forecast in a research note written in April. Other airlines had estimated gains in the mid- single digits, he noted.

Unique Headwinds

“Is United management being too conservative given some of its revenue misses over the past several quarters?” Linenberg said in his note. “Or is the company facing some unique headwinds?”

Linenberg suggested the company was being cautious as it tweaked its revenue management practices and held back seats to capture more profitable, late-booking passengers. The company also faces more challenges than others because of its large exposure to the China and Hong Kong markets, which have seen big capacity increases. Linenberg forecast second-quarter growth of 1.9 percent in revenue for each seat flown a mile.

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United Continental Holdings Inc. said a benchmark revenue gauge in the second quarter beat its April forecast on improved performance on Pacific and domestic routes.
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2014-19-09
Wednesday, 09 Jul 2014 05:19 PM
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