DALLAS (AP) — Lower average fares and higher labor costs led to a 52 percent drop in fourth-quarter profit at United Airlines, but sadly for passengers those lower prices may soon be a memory.
The amount that the average United passenger paid to fly a mile fell more than 1 percent in the fourth quarter, as the airline continued to add seats faster than growth in demand.
Still, that was a huge improvement — from United's perspective anyway — to the nearly 6 percent drop in the same figure during the previous quarter.
Delta Air Lines has already forecast that revenue per mile will be flat to up 2 percent in the first quarter — a result of airlines cutting back on growth to end a 2-year downward spiral in average fares. United predicted Tuesday that so-called unit revenue will be flat in the first quarter, which if true would end a string of seven straight declining quarters.
"We saw meaningful improvement in the pricing and demand environment in the (fourth) quarter," United President Scott Kirby said in a statement issued Tuesday with the airline's financial results.
Jim Corridore, an analyst with CFRA Research, said that while United's guidance of flat unit revenue in the first quarter was weaker than a peer's, it was "still a positive trend in our opinion."
Chicago-based United Continental Holdings Inc. said that it earned $397 million in the quarter, down from $823 million a year earlier. Excluding what it considered non-repeating costs, the company said it would have earned $1.78 per share. That topped the $1.73 forecast of 15 analysts surveyed by FactSet and the $1.65 prediction from nine analysts surveyed by Zacks Investment Research.
United's revenue inched higher by 0.2 percent to $9.05 billion, matching expectations in the FactSet survey.
Operating expenses rose faster; up 1.2 percent. The company has recently reached new contracts with several union groups, and as a result labor costs rose 5.9 percent from a year earlier, more than offsetting a drop in fuel spending. Labor is now the biggest cost at United and most major U.S. airlines.
United declined detailed comment on the results until executives hold a conference call with Wall Street analysts Wednesday.
United shares fell 58 cents to close at $73.74 before the report. In after-hours trading, they were down another $1.49, or 2 percent, to $72.25.