The largest U.S. airline -
United Continental Holdings Inc.
) - reported better-than-expected results in first quarter 2013.
The company's performance was supported by better operational
activities and services that somewhat compensated for rough
weather conditions as well as the heavy burden of salaries and
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The company posted loss of 98 cents per share, narrower than the
Zacks Consensus Estimate of a loss of $1.09 per share. Comparing
year over year, the result was worse than a loss of 87 cents per
Quarterly total revenue improved 1.4% year over year to $8.72
billion. The result surpassed the Zacks Consensus Estimate of
$8.70 billion. On an annualized basis, Passenger and Other
revenues increased 0.7% and 12.7%, respectively, while Cargo
revenues decreased 14.0%.
Airlines traffic, measured in revenue passenger miles, dropped
1.2% year over year to 46.5 billion. Capacity (or available seat
miles) slid 4.9% year over year to 57.4 billion, while load
factor (percentage of seats filled with passengers) improved 300
basis points year over year to 81.1%.
Consolidated passenger revenue per available seat miles (PRASM or
unit revenue) increased 5.9% year over year, supported by 11.0%
growth in Atlantic PRASM and 7.2% in Pacific PRASM, partially
offset by a decrease of 2.6% in Latin American PRASM.
Total operating expenses, excluding special items, increased 1.3%
year over year to $9.0 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 6.8% year over year.
At the end of the first quarter, the company had $6.4 billion in
unrestricted liquidity, of which $1 billion was in revolving
credit facilities. In the quarter, United Continental generated
operating cash flow of approximately $393 million and spent
approximately $526 million.
Other Airline Stocks
Delta Air Lines
) reported first quarter 2013 results on Apr 23, with adjusted
earnings of 10 cents per share, surpassing the Zacks Consensus
Estimate of 7 cents. The results also improved considerably from
the year-ago adjusted loss of 5 cents per share.
Southwest Airlines Co.
) reported first quarter 2013 results on Apr 25. The company's
adjusted earnings of 7 cents per share beat the Zacks Consensus
Estimate of 3 cents. The results improved considerably from the
prior-year quarter loss of 2 cents per share.
United Continental - which placed an order with
The Boeing Company
) for 150 brand-new 737 narrow-body airplanes designed with
superior CFM engines - currently holds a Zacks Rank #3, implying
a Hold rating.
Our positive view on the company is backed by robust growth
prospects based on its smooth and reliable operational base,
re-designing of fleet structure and efficient services. We also
appreciate the company's focus on upgrading airport facilities as
well as introducing attractive loyalty programs for flyers.
However, we remain concerned about escalating fuel prices, the
upward movement of non-fuel expenses, competitive threats,
fluctuations in passenger and cargo demand, and a sluggish global