United beats Street 3Q forecasts, despite dip in profit

AP News
Posted: Oct 17, 2016 6:55 PM
United beats Street 3Q forecasts, despite dip in profit

DALLAS (AP) — Profit is down and revenue is still falling at United Airlines, as the airline industry struggles with lower average fares.

United's third-quarter profit, however, was still enough to beat Wall Street expectations.

It has been more than a year since United brought in a new CEO, who pledged to improve customer service. The airline has improved by some measures, now often beating two of its three main rivals in on-time performance.

But United is still plagued by ongoing problems including technology outages. The latest computer glitch occurred just last week, although it happened during the middle of the night so only 16 flights were canceled.

Linda Jojo, the airline's chief information officer, on Monday offered the airline's first detailed description of last week's breakdown.

"We were doing a routine flight-schedule update and we had an internal systems glitch," which "caused two programs to basically overload each other," she said.

Jojo noted that airline technology systems are complicated and her staff must work through that.

"We got frankly a little bit of bad luck and saw something we had never seen before," but the issue has been fixed, she said.

Chicago-based United said that it earned $965 million in the third quarter, usually the strongest for airlines because it includes most of the busy summer vacation-travel season.

Excluding one-time costs, the profit worked out to $3.11 per share. The average estimate of nine analysts surveyed by Zacks Investment Research was for earnings of $3.05 per share.

A year ago, United Continental Holdings Inc. reported a profit of $4.8 billion, although it would have been $1.7 billion without a one-time tax-allowance gain.

Revenue fell 4 percent from the same period last year to $9.91 billion. It was the eighth straight quarter in which revenue dropped from a year earlier.

Investors pay close attention to revenue for every seat flown one mile, a figure called unit revenue. United reported that figure dropped 5.8 percent in the third quarter — better than Delta's 6.8 percent decline, but still another reminder that average prices have been falling because airlines added flights faster than the growth in demand.

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United predicted unit revenue would fall again in the fourth quarter by between 4 and 6 percent compared with the same period in 2015.

The airline's predictions of fourth-quarter unit revenue and profit margins were "a bit underwhelming," said Jack Atkins, an analyst with Stephens Inc. He said he thought the revenue forecast would be better because airlines have recently reported improving trends in some fares.

Atkins said costs at United and other airlines are creeping higher as they negotiate new contracts with union workers. On the other hand, he said, the cost pressure will give the airlines more incentive to limit seats and drive up fares and revenue.

Shares in United Continental Holdings Inc. closed down 17 cents, to $53.03, before the report. They were unchanged in after-market trading.


David Koenig can be reached at http://twitter.com/airlinewriter