Lower-than-expected
business travel demand contributed to year-over-year declines in United
Airlines' revenue and yield in the first quarter.
Revenue decreased 4.8%, to
$8.2 billion, and passenger revenue per available seat mile declined 7.4%.
Consolidated yield dropped 6.1%. Close-in business travel during the weeks
around Easter declined more than anticipated, one factor in those decreases.
Low oil prices also
continue to affect United's corporate business in the energy sector,
particularly at its Houston hub. The carrier's corporate portfolio business
declined 3% during the quarter and, even when taking the energy sector out of
the equation, was down 2%, United vice chairman and chief revenue officer Jim
Compton said. "The energy sector, as well as the overall Houston hub, will
continue to put pressure on us. We're seeing good demand but at a lower
yield."
United's load factor
declined 1.2 percentage points to 79.9%. Capacity increased 1.8%, while traffic
was up 0.3%.
The carrier scaled back
its capacity-growth outlook for the year. It now projects consolidated capacity
will increase between 1% and 2% in 2016, compared with an early outlook of
between 1.5% and 2.5%. It cut its international capacity-growth outlook to the
1% to 2% range from a previous range of 2.1% to 3.1%, while its domestic
capacity outlook was unchanged. United plans to fund growth in San Francisco
and Denver, the hubs that have stronger demand, from reductions in Houston.
The carrier expects
revenue growth to be flat to positive by the fourth quarter. It's on track to
introduce a basic economy fare in the second half of the year, which will boost
its ability to compete with low-cost carriers. United president and CEO Oscar
Munoz said operational improvements would drive higher revenue in the back half
of the year, as well. During the first quarter, United reported its best
quarterly on-time performance and its mishandled-bag rate since its merger with
Continental.
The carrier's net income
for the first quarter was $313 million, down from $508 million in the first
quarter of 2015. An increased income tax expense — $181 million, compared with
$3 million in the first quarter of 2015—was largely responsible for the drop.
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Source: Business Travel
News