United Air tops profit estimates, but sees unit revenue dip
(Reuters) - United Continental Holdings Inc on Wednesday reported a first-quarter profit above analysts' expectations and said it would slow its growth plans because flight capacity across the industry has exceeded passenger demand, pushing down prices.
The No.3 U.S. airline by traffic earned $313 million in the first quarter. On an adjusted basis, profit fell 25 percent to $435 million, or $1.23 per diluted share, in part because United began recording non-cash taxes.
Analysts on average estimated United would earn about $420 million, or $1.18 per diluted share, according to Thomson Reuters I/B/E/S.
Despite the results, shares slumped nearly 3 percent in after-hours trade because the airline forecast that unit revenue would continue to sink from a year ago. United executives presented a bleaker picture of demand than rival Delta Air Lines Inc did last week, which had said average U.S. domestic fares were starting to rise.
"Demand is not growing at the level of industry capacity," United's Chief Revenue Officer Jim Compton said on a media call.
A collapse in oil prices continues to hurt bookings for travel from energy center Houston, one of United's principal hubs. At the same time, a surge in flights from low-cost airlines such as Southwest Airlines Co and Spirit Airlines Inc continues to keep prices low compared to a year ago.
United said it expects passenger revenue as measured against flight capacity to decline between 6.5 percent and 8.5 percent in the second quarter. The closely watched financial measure fell 7.4 percent in the first quarter.
Sterne Agee CRT analyst Adam Hackel said the forecast was weaker than expected, noting that "the market was largely looking for unit revenue declines to start moderating" in the second quarter.
In response to soft demand, United said it has reduced plans to add flight capacity in 2016 by 0.5 percentage points, meaning it will grow between 1 percent and 2 percent compared to a year ago. Continued...