Record third-quarter profit at United fueled by cheap fuel
Helped by lower jet fuel prices, United Airlines posted a record third-quarter profit even with lower revenue and airfares.
The airline's new acting CEO renewed his predecessor's pledge to improve service and boost profit margins.
Brett Hart, who was named acting CEO on Monday after Oscar Munoz suffered a heart attack, said the airline was determined to be more reliable and to improve the flying experience.
This week in Chicago, United began testing new boarding processes that it hopes will keep flights on time. It has been replacing 50-seat regional planes with bigger jets that include first-class seats that are coveted by some business travelers. Executives said flight attendants are giving free drinks to loyal customers who end up in economy because there weren't enough first-class seats for an upgrade.
United trails its closest rivals -- American, Delta and Southwest -- in on-time performance this year, and its complaint rate is higher than those of Delta and Southwest, according to government figures. Fixing the operational problems will improve customer satisfaction, Hart said.
Munoz had been on the job only 37 days after replacing the ousted Jeff Smisek, and United's share price has suffered in comparison to its closest rivals during the changes in leadership.
On a conference call with analysts and reporters, the company gave no more information about Munoz's health or whether and when he might return. "The last several weeks have been very eventful for United, with news of Oscar's heart attack hitting many of us hard," Hart said.
The turnover in the top job has not seemed to hurt United's financial performance. For the third straight quarter, United Continental Holdings Inc. reported record earnings with the help of cheaper jet fuel.
Third-quarter net income was $4.82 billion, including an income tax-related benefit of $3.22 billion. Without that and other one-time items, the airline said it earned $1.7 billion, or $4.53 per share.
Ten analysts surveyed by Zacks Investment Research expected on average $4.49 per share, but 15 analysts surveyed by FactSet had forecast $4.55.
Revenue fell 2.4 percent to $10.31 billion, although that still topped the $10.27 billion forecast by four analysts surveyed by Zacks and $10.30 billion expected by 10 FactSet analysts.
Passengers paid United nearly 6 percent less for every mile flown, and United predicted another decline in per-mile revenue in the fourth quarter. By contrast, Southwest said Thursday it expects a small increase.
Stifel analyst Joseph DeNardi said United is being hurt by weaker traffic in Chicago and among corporate travelers in the struggling energy industry -- Houston is a major hub for United -- and on its U.S.-Asia routes.
United's spending on fuel plunged 38 percent, a savings of $1.19 billion. Labor costs surpassed fuel to become the company's largest single expense, at $2.53 billion, an increase of $190 million from the third quarter of 2014.
United shares were up $1.51, or 2.8 percent, to $56.06 in midday trading. The shares began the day down 18 percent since the beginning of the year.
(Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)