Profit at United Beats Estimates on Cost Cuts
Adjusted earnings per share of $2.61 beat estimates of $2.56 per share. United announced that it is planning to cut growth for this year and sees capacity for the full-year increasing at the most just 1.5% compared to 2015. Previously the airline was expecting growth of 2%.
United has joined efforts by Delta Air Lines and American Airlines to cut back on the number of flights as well as seats, which put pressure on airfares and hurt airline stocks.
Passenger’s revenue, broken down by seat flown one mile, a financial gauge that has become a benchmark for airlines that is called unit revenue, has continued to fall for over one year.
An airline analyst on Wall Street said that cuts in industry capacity will help unit revenues this fall.
Unit revenue was down by 6.6% during the second quarter at United and will drop by between 5.5% and 7.5% during the ongoing quarter said a prepared statement released by United, which is based in Chicago.
One analyst on Wall Street called United’s outlook underwhelming.
Revenue at United for the second quarter reached $9.4 billion, which was in line with estimates of analysts. It net income eliminating special items was down for the quarter compared to last year ending at $863 million, said the carrier.
Excluding certain charges, operating expenses were down 6.1% as the price of fuel tumbled.
United shares were down 0.6% in afterhours trading on Tuesday. United rallied since dropping to its low point for 2016 June 27 but the stock is down over 16% overall in 2016 through the close of business on Tuesday.
The board at United authorizes a new share buyback of $2 billion with no timetable set. The new program is an addition to the one almost complete of $3 billion announced during July of 2015.
The cutbacks in growth for 2016 will be felt throughout the network of United, with specific reductions to capacity on Saturday in the U.S. and to flights from the U.S. out of Dulles International Airport in Washington to some markets in the UK.
Flights from Washington to Manchester, England and returns will be seasonal starting during the upcoming winter rather than being year round. Flights to Heathrow Airport in London will use jets that are smaller, said the airline.
Get Analysts' Upgrades and Downgrades Daily - Enter your email address below to receive a concise daily summary of analysts' upgrades, downgrades and new coverage with MarketBeat.com's FREE daily email newsletter.