United Continental quarterly profit doubles as fuel prices decline

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United Airlines’ customer service desk at O’Hare International Airport on Sunday, Oct. 19   Janel Forte/Medill

By Janel Forte

United Continental Holdings, Inc., said its quarterly profit more than doubled as it reaped the benefits of lower fuel and other costs, and increased revenue from fees for checked baggage, early boarding, and seat upgrades.

The Chicago-based company’s net income in its fiscal third quarter rose to $924 million, or $2.37 per diluted share, from $379 million, or $0.98 per diluted share, in the year-ago quarter.

Excluding special items such as the impact of permanently grounding Embraer ERJ aircraft and losses from fuel hedges, the airlines reported per share earnings of $2.75, exceeding Wall Street analysts consensus estimate of $2.70 per share, according to Bloomberg.

“We are seeing good results from our revenue initiatives, and over the next several quarters, we expect to build on our early momentum,” said Jim Compton, United’s vice chairman and chief revenue officer.

Revenue for the global carrier rose 3.3 percent to $10.6 billion, from $10.23 billion in the same period a year ago.

Passenger revenue increased 4.4 percent to $9.3 billion from $8.9 billion in the year-ago quarter. Cargo revenue rose, 19.1 percent to $237 million from $199 million in the third quarter of last year.

The airline said revenue per passenger for ancillary fees increased by 10.9 percent from the year-ago quarter to $22 per passenger.

United lowered operation expenses in the quarter, with cost per available seat mile down 4 percent year-over-year. Third quarter total operating expenses decreased 3.6 percent to $348 million compared to the year-ago quarter.

Shares of United initially fell sharply on the earnings news, as investors focused on the company’s guidance for the current quarter.

“United said its revenue per available seat mile in Q4 is flat and non-fuel costs were up,” said Churchill Inc. analyst Mike Churchill. “The initial gut reaction from investors was ‘oh no’.”

By midday, the shares rebounded. Churchill said investors shifted their attention to the impact of lower fuel costs on operating margins and “realized jet fuel prices going down trumps uninspiring [revenue per available seat mile] growth at this point.”

Fuel costs account for an estimated 30 percent of industry-wide airline operating costs. United cut its fuel bill in the third quarter by 4.1 percent to $135 million from the year-ago quarter. Fuel bills are projected to decline further, the company said, as oil prices decline and the airline integrates more fuel-efficient aircraft into its fleet.

United stock fluctuated throughout the day, but ended the session up 36 cents at $49.42.