United Airlines Drops Most in Almost 6 Years After Weak Forecast

  • Carrier posts biggest decline on S&P 500, leads industry lower
  • Airline falling behind Delta in key financial measure

United Continental Holdings Inc. fell the most in almost six years after a weak revenue forecast sparked concern that the airline is struggling to catch up with its rivals’ financial performance.

The third-largest U.S. carrier sank 10 percent to $52.60 at 1:01 p.m. Thursday in New York after tumbling as much as 12 percent, the biggest intraday drop since May 2010. United’s decline was the largest on the Standard & Poor’s 500 Index and helped drag down other airline stocks.

United is falling behind Delta Air Lines Inc. in passenger revenue for each seat flown a mile, a key financial measure for airlines, amid intense domestic competition and softer demand abroad. United estimates that so-called unit revenue will decline 6.5 percent to 8.5 percent in the second quarter, deeper than the 2.5 percent to 4.5 percent drop anticipated by Delta.

“The core of United’s 2Q guide appears softer than expectations,” Jamie Baker, an analyst at JPMorgan Chase & Co., said in a note to clients.

First-quarter unit revenue fell 7.4 percent from a year earlier for the Chicago-based airline. Delta, the second-biggest airline, reported a 4.6 percent decline. American Airlines Group Inc., the largest, reports earnings Friday.

Domestic Competition

United’s forecast came as it reported adjusted earnings of $1.23 a share after the close of trading Wednesday. That topped the $1.18 average of 15 estimates compiled by Bloomberg. Sales declined 4.8 percent to $8.2 billion, matching analysts’ expectations.

The carrier paid an average of $1.37 a gallon for jet kerosene in the first three months of the year, down more than a third from a year earlier. That helped blunt the effects of heavy domestic competition from discount carriers and economic weakness in big energy markets such as Houston. A stronger dollar has hurt overseas demand by making flights more expensive in local currency terms.

United’s outlook for revenue is being dragged down by weak foreign currencies, aggressive pricing from domestic competitors and industry seating capacity that’s outstripping demand, company executives said on a conference call with reporters Wednesday.

The company still sees strong demand for travel to Europe in the important summer season, Chief Revenue Officer Jim Compton said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE