United Air Profit More Than Doubles on Cost Controls
UAL, parent of No. 2 U.S. carrier United Airlines, Tuesday said its quarterly profit more than doubled as it controlled costs during a strong summer travel season that saw growth in international travel.
The results shattered expectations, sending its share price to its highest level in six momths. Shares of UAL were up almost 4 percent Tuesday.
The company, whose labor and fuel costs declined during the quarter, said its second-quarter profit amounted to $274 million, or $1.83 per share, compared with $119 million, or 93 cents per share, a year earlier.
Wall Street analysts had expected the company to earn $1.39 per share, according to Reuters Estimates.
Airlines have been profitable for the quarter, but results have been mixed. Last week, AMR , parent of the No. 1 U.S. carrier American Airlines, reported a profit that missed expectations.
Low-cost carrier Southwest Airlines said its profit declined as its fuel hedges unwound.
Also Tuesday, JetBlue Airways reported a higher quarterly profit but said it would further slow its growth plan.
UAL reported operating revenue of $5.2 billion, a 2% increase over the comparable quarter in 2006.
Calyon Securities airline analyst Ray Neidl linked the revenue gain largely to UAL's strong international operations, particularly trans-Pacific routes where the company saw a 12.2% increase to $817 million in passenger revenue.
UAL's passenger revenue from its trans-Atlantic operations increased by 25.5% to $639 million.
Airlines have been battered in recent years by soaring fuel costs and low-fare competition. Carriers initiated several lasting fare hikes in 2006, but the trend toward higher fares has slowed in 2007, even during the peak summer travel season.
The company said its consolidated yield, which represents fares, increased by 3.6%, while its load factor, which is a measure of how many seats are filled, increased 0.8%.
UAL, which exited bankruptcy in February 2006, ended the quarter with $5.1 billion in cash and short-term investments.
The company said its costs per available seat mile for its mainline operations decreased by 3.8% for the second quarter. UAL's fuel costs, which was its top expense in the quarter, declined by 3.5% to $1.2 billion.
Jet fuel spot prices along the U.S. Gulf Coast averaged about $2.06 per gallon in the second quarter of 2007 compared with an average price of about $2.07 per gallon a year earlier, according to the Energy Information Administration.
The company expects its mainline costs per available seat mile, excluding fuel, to increase by 4% to 4.5% for the third quarter compared with the year-ago period. For the full year, UAL sees its costs rising 1.5% to 2% for the full year 2007 over 2006.
UAL expects its mainline capacity to decline as much as 1.5 percent in the third quarter and as much as 1 percent for the full year.