Source: Chicago Tribune
Author: Gregory Karp
United Continental Holdings, which operates United Airlines, on Thursday reported third-quarter profits that fell short of Wall Street expectations.
In the third quarter, the Chicago-based airline earned $520 million, or $1.35 per share, excluding special items. Analysts on average expected $1.47 per share.
CEO Jeff Smisek referenced the airline's operational problems, which partly stem from a change in reservation systems in March and led to widespread delays until September, when the airline reached its goal of flights being on time 80 percent of the time. The computer system, new to United employees, was part of the effort to combine United and Continental airlines, which merged in 2010 to form the world's largest carrier.
"We overcame tough operational challenges and remain focused on running a reliable airline, delivering to our customers the benefits of our product investments and delivering to our co-workers tools and training to provide good customer service," Smisek said in a statement.
Revenue in the quarter was $9.91 billion, a 2.6 percent drop over the same quarter last year and slightly lower than the expected $9.97 billion. Third-quarter consolidated passenger revenue decreased 2.6 percent year-over-year.
The airline is entering a new phase of redeploying aircraft to match with right planes to the right routes, Jim Compton, UAL's chief revenue officer, said in a statement.
"Early results of our redeployment efforts are promising, and we are eager to optimize our global network and realize the full revenue potential of our merger," he said.
Including special charges, UAL reported third-quarter profit of $6 million, or 2 cents per share. The largest special charge in the quarter was a $454 million expense associated with payments that could be made if pilots ratify a new contract. On Aug. 2, the airline reached an agreement in principle with the Air Line Pilots Association, and the two sides are in the process of drafting a tentative contract, which would then be voted on by pilots.
John Rainey, UAL's chief financial officer, called it "a challenging quarter."
Total fuel expense, a huge cost for airlines, was $3.4 billion, down 1 percent in the quarter compared with last year's same quarter.
However, the airline highlighted some positives in the quarter, including placing an order to buy 150 new Boeing 737 aircraft, and taking delivery of its first Boeing 787 Dreamliner, the first North American carrier to take delivery of the 787.
United also provided an update on passenger amenities. It now has 180 airplanes offering DirecTV live television service, and it offers extra-legroom Economy Plus seating on 90 percent of its mainline fleet. The company continues to install flat-bed seats in premium cabins on its international fleet and has 159 aircraft with lie-flat seats, which it claims is more than any other U.S. carrier.