Source: Financial Times
Author: Jeremy Lemer
United Airlines, the third biggest US carrier by revenues, recorded second-quarter profits that beat expectations as it benefited from a sharp rebound in passenger and cargo traffic, allowing it to fill its planes and raise ticket prices.
For the three months to the end of June, United generated net income of $273m, up from $28m in the same period in 2009, producing earnings per share of $1.29 compared with $0.19 last year.
Excluding mark-to-market gains on certain hedging contracts, United reported earnings per share of $1.95, beating consensus estimates for earnings per share of $1.75.
The results were driven by soaring revenue which jumped more than 28 per cent to $5.1bn. Passenger revenues from the Pacific region and Latin America were particularly strong, growing 52.4 per cent to $789m and 63.4 per cent to $118m respectively.
Cargo revenue rose 57 thanks to increasingly strong demand worldwide, especially in Asia.
Since the end of 2009, airline carriers have seen a fitful return to profitability as the global economy has tentatively emerged from recession, giving leisure and corporate customers the need and the ability to fly again.
On Monday, Delta also swung to a second-quarter profit after more than two years of losses, although a cautious outlook statement and comments about increasing capacity disappointed investors, sending its shares down sharply.
In early trading on Tuesday, shares in United rose 2.6 per cent to $21.73.
Over the year-to-date, United shares have risen more than 60 per cent, boosted by operating results that have consistently outperformed its peers.
"We are pleased to report a significant net profit improvement in the quarter along with excellent operational results across the company," said Glenn Tilton, chief executive and chairman of UAL Corporation, United's parent company.
"The United team continues to execute across our critical operating, service and financial metrics and this strong performance builds momentum that we take into our planned merger with Continental Airlines later this year."
If approved by regulators the merger, announced in May, would create the world's largest airline. The move would also cap a nearly five-year turn around since United emerged from a contentious bankruptcy in 2005.
In a letter to employees, Kathryn Mikells, United's chief financial officer, noted that the company was generating 6 per cent more revenue from every passenger it flew a mile on one of its aircraft than it did two years ago before the recession.
"With this quarter of strong earnings, we have a platform we can build on to get where we need to be, which is long-term sustained profitability," Ms Mikells said.
Beneath the headline numbers however there were a few less positive trends.
Operating expenses rose 20 per cent to $4.7bn, driven largely by a sharp rise in fuel costs but yields, a key measure of ticket prices, were up only
18.2 per cent.
The results came as the International Air Transport Association released its June survey of airline finance chiefs showing a marked rise in confidence.
Last month Iata re-wrote its 2010 industry financial forecast, predicting a $2.5bn profit rather than a loss of $2.8bn.