DALLAS (AP) — United Airlines' second-quarter profit dropped 51 percent as revenue fell due to lower average fares, which are expected to persist through the rest of the summer.
The results were dragged down by a $412 million write-down of its operations at Newark, New Jersey, and by paying taxes — it didn't last year. Still, the reduced profit beat Wall Street expectations.
And United said Tuesday that it approved buying up to $2 billion more of its own stock — a move that will make existing shares more valuable.
But airline investors lately have been obsessed with a decline in average fares that started in early 2015 and picked up speed this year.
Fares are falling because airlines are using today's cheaper jet fuel to add flights faster than demand is growing. Even though fuel crept up this spring, it is still a relative bargain — United saved $669 million, or 32 percent, compared with last year's fuel bill.
In an attempt to shore up prices, United announced that it will trim its plans for growth later this year ever so slightly. Instead of increasing flying by 1 or 2 percent, it will grow by between 1 and 1.5 percent for the full year.
Whether that is enough to make a difference to investors remains to be seen.
On a brief call with reporters, United executives said they will reduce some flying this winter between the U.S. and the U.K., where a drop in the British pound has made foreign travel more expensive.
United will suspend winter flights between Washington, D.C., and Manchester, use smaller planes on some Washington-to-London flights, and eliminate two of six weekly trips between Newark, New Jersey, and Birmingham.
Within the U.S., they said, some Saturday service could be trimmed — they didn't identify routes.
United said that revenue for every seat flown one mile fell 6.6 percent in the second quarter. That is a key measure of pricing power and tracks average fares. United predicted that the figure would fall by a similar amount — between 5.5 percent and 7.5 percent — in the third quarter.
United Continental Holdings Inc. reported net income of $588 million in the second quarter, which includes the start of the all-important summer travel season. That was down from $1.19 billion a year earlier.
Excluding one-time items such as a write-down of its Newark operations, profit was $2.61 per share, 5 cents better than analysts expected, according to a FactSet survey.
Revenue fell 5.2 percent to $9.40 billion, just beating the analysts' $9.39 billion estimate.
United shares rose 14 cents to close at $47.85 before the results were released and slipped 52 cents in extended trading. They are down 16.5 percent in 2016.
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