The largest U.S. airline -
United Continental Holdings Inc.
) - reported better-than-expected results in second quarter 2013.
Consistent progress in customer service, enhancement of
operations and aggressive promotional activities aided the
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The company posted earnings of $1.35 per share, a penny ahead of
the Zacks Consensus Estimate. Comparing year over year, the
results declined from $1.41 per share.
Quarterly total revenue improved 0.6% year over year to $10.0
billion. The result surpassed the Zacks Consensus Estimate of
$9.9 billion. On an annualized basis, Other revenues increased
21.1%, while Passenger and Cargo revenues decreased 1.1% and
Airlines traffic, measured in revenue passenger miles, dropped
1.7% year over year to 53.6 billion. Capacity (or available seat
miles) slid 2.1% year over year to 63.3 billion, while load
factor (percentage of seats filled with passengers) improved 40
basis points year over year to 84.7%.
Consolidated passenger revenue per available seat miles (PRASM or
unit revenue) increased 1.0% year over year, supported by 6.1%
growth in Atlantic PRASM, partially offset by a decrease of 3.4%
in Pacific PRASM.
Total operating expenses, excluding special items, increased 0.2%
year over year to $9.2 billion in the reported quarter.
Consolidated unit cost or cost per available seat mile (CASM),
excluding third-party business expense and special items, crept
up 4.5% year over year.
At the end of the second quarter, the company had $7.0 billion in
unrestricted liquidity, of which $1 billion was in revolving
credit facilities. In the quarter, United Continental generated
operating cash flow of approximately $1.1 billion and spent
approximately $549 million.
Other Airline Stocks
Southwest Airlines Co.
) reported second quarter 2013 adjusted earnings of 38 cents per
share, a penny short the Zacks Consensus Estimate. The results,
however, improved from the prior-year quarter adjusted earnings
of 36 cents per share on fleet re-designing, expansion of network
and less fuel expense.
United Continental - which recently entered into a deal with
The Boeing Company
) to buy 10 of its 787-10 aircraft - currently holds a Zacks Rank
#3, implying a Hold rating.
We believe that the company is poised for growth in the coming
quarters from its renewed and upgraded jets, expansion of
network, customer-friendly services and promotional activities.
United has agreed to buy 30
) 175 regional jets. The deal, estimated at about $4 billion,
also has the option of 40 additional purchases.
However, we remain concerned about fluctuating fuel prices,
competitive threats, changing passenger and cargo demand,
technological mishaps and a sluggish global economy.