United profit helped by cheap fuel, but Houston a problem

Thu Jan 21, 2016 4:59pm EST
 
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By Jeffrey Dastin

(Reuters) - United Airlines forecast a higher profit margin for the first quarter on Thursday, helped by a windfall from cheap jet fuel, but warned that the collapse in oil prices is hurting demand for travel from energy center Houston, one of its main hubs.

The second-largest U.S. airline by capacity also said its chief executive will return early from medical leave, as its parent reported results that fell short of Wall Street's expectations.

Shares of United Continental Holdings Inc (UAL.N: Quote) closed up 21 cents, or 0.5 percent, at $45.33.

The Chicago-based airline said it expects to save more than half a billion dollars on fuel in the first quarter compared to a year ago, when the price of oil was about twice as high.

Partly on the strength of that, it forecast a pre-tax profit margin between 8 percent and 10 percent for the January-to-March period, excluding some items, above the 6.8 percent it reported a year earlier.

Chief Executive Oscar Munoz, who suffered a heart attack in October, said on a conference call on Thursday that he was feeling "great" after a heart transplant this month.

"It's a competitive industry, (but) I'm a competitive guy," he said, aiming to dismiss investor concerns that United's margin will continue to lag its peers.

However, the drop in oil also presents a headache for United, as it has dragged on sales to energy clients around the heavily used Houston hub. United said it is lowering its Houston flight capacity in response to slower demand.   Continued...

 
United Continental Holdings Inc CEO Oscar Munoz is seen in an undated handout picture courtesy of United Airlines. REUTERS/Courtesy of United Airlines/Handout