United Airlines said its passenger unit revenue may have fallen more than expected in the fourth quarter just ended, after the November attacks in Paris dampened demand and lower oil prices hurt sales to the carrier’s energy clients.
Passenger unit revenue, fell by between 5.75 and 6.25 percent in the fourth quarter from a year ago, United said in a regulatory filing.
That compares to an earlier forecast for a drop of between 4 and 6 percent for the October-December quarter.
The forecast may suggest continued turbulence for US airlines, which suffered from steep unit revenue declines in 2015.
The Paris attacks’ impact on demand is “concerning,” said Sterne Agee CRT analyst Adam Hackel, adding that hotel bookings were down in France during the holidays. The November 13 attacks by militants in which 130 people died were claimed by Islamic State.
Hackel said, however, that United’s fare increase last week by USD$6 round-trip may help offset the decline.
Consumers will have little choice but to accept the rise, which was initiated by Delta and matched industry-wide.
For months, lower fuel prices have ramped up competition within the United States, enabling large US carriers to reduce fares in line with budget airlines that have lower operating costs.
United has taken a bigger sales hit than peers from last quarter’s nearly 20 percent decline in US crude prices.
The carrier accounted for more than 80 percent of flights at Houston’s George Bush Intercontinental Airport last year, according to aviation data and analytics company OAG.
United said its pre-tax profit margin for the fourth quarter will be between 9.75 and 10.75 percent, within the range of its prior guidance of a 9.5 to 11.5 percent margin.
The airline also estimated its capacity grew 1.8 percent last quarter. It said the rise, at the upper end of its range of prior guidance, stemmed from improving operations and canceling fewer flights.
Under new chief executive Oscar Munoz, United has worked to complete more flights on time to boost customer satisfaction, the lowest among its rivals in J.D. Power’s 2015 ranking.
Munoz has been on leave since suffering a heart attack in October. United said last week that Munoz underwent a heart transplant, potentially delaying his return until the spring and renewing concerns about the company’s leadership.
(Reuters)
