UAL Profit Beats Estimates on Fuller Jets, Higher Fares at United Airlines
July 20 (Bloomberg) -- Kathryn Mikells, chief financial officer of UAL Corp., discusses the airline's second-quarter profit and its planned merger with Continental Airlines Inc. Second-quarter profit excluding some costs was $1.95 a share, which topped the $1.75 average of 12 analysts’ estimates compiled by Bloomberg. Mikells speaks with Betty Liu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)
United Airlines parent UAL Corp., which plans to merge with Continental Airlines Inc. to form the world’s largest carrier, posted profit that exceeded analysts’ estimates on fuller planes and higher fares.
Second-quarter profit excluding some costs was $430 million, or $1.95 a share, topping the $1.75 average of 12 analysts’ predictions compiled by Bloomberg. That compares with a loss of $321 million, or $2.21, a year earlier, the Chicago- based company said today in a statement.
Revenue jumped 28 percent to $5.16 billion as United took advantage of increasing business and leisure travel by raising fares. United and other carriers haven’t added back planes that were parked during the recession, giving them more control over pricing as demand improves.
“To improve profitability, we need pricing power, and you get that by managing capacity,” Chief Financial Officer Kathryn Mikells said today in an interview on Bloomberg Television.
United’s capacity was little changed in the second quarter, and its planes flew 84.3 percent full, 2.3 percentage points more than the same period a year earlier. Revenue for each seat flown a mile jumped 27 percent, showing that the carrier is regaining control over fares.
UAL rose 82 cents, or 3.9 percent, to $22 at 10:36 a.m. New York time on the Nasdaq Stock Market. The shares advanced 64 percent this year through yesterday, outpacing a 7.9 percent increase for the 12-carrier Bloomberg U.S. Airlines Index.
‘Very Disciplined’
United’s capacity will be little changed this year, and competitors have been “very disciplined” as well, Mikells said.
Mikells declined to provide a capacity forecast for 2011 beyond saying that it’s “too early in this recovery period to suggest that it’s the right time to add capacity.”
Second-quarter net income rose to $273 million, or $1.29 a share, from $28 million, or 19 cents, a year earlier.
UAL ended the quarter with $5.2 billion in cash, of which $4.9 billion was unrestricted.
UAL agreed in May to merge with Continental in an all-stock deal, and together they will surpass Delta Air Lines Inc. as the world’s biggest carrier. United is currently third-largest and Continental is No. 4. AMR Corp.’s American Airlines is the second-largest.
Pilots
United and Continental also said today they have agreed in principle on a transition and process accord with the pilots of both companies before the merger, providing a framework for pilots until the carriers’ operating certificates are combined.
“We are pleased to have reached this important agreement at such an early stage of the integration planning process, as it is a key first step in building a long-term, productive relationship between the combined company and our pilots,” Jeff Smisek, Continental’s chairman and chief executive officer, said in a statement. He will serve as CEO of the combined carrier.
The two companies’ pilots said last month that they hope to reach a joint contract by the time the merger closes. The carriers expect the transaction to be completed in the fourth quarter of this year.
Support from unions, particularly pilots, can be pivotal to the success of a combination because unified labor contracts let airlines operate more efficiently.
To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.
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