How Is United Continental Driving Cost Efficiency?
Despite weakness in topline, United Continental (NYSE:UAL) has managed to reign in its expenses, both fuel and non-fuel. Over the past year, the company has consistently shown improvement in its consolidated unit costs, majorly due to the positive impact of plummeting oil prices on fuel costs. The non-fuel costs incurred on salary, aircraft rent, and other general expenses have also remained subdued. However, going forward, the company expects its costs, excluding fuel to increase slightly owing to the recently ratified labor deals.
Non-fuel CASM
(year-on-year change)
Initiatives Undertaken By United To Manage Costs:
- Structural efficiency by getting rid of 50 seaters.
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- Upgauging its existing fleet to add capacity efficiently and to help margin expansion and address pilot shortage. Expected net benefit from upgauging is $800 million by 2018.
Source: united.com
- A strong U.S. dollar provides expense tailwind.
- Efficient use of in-house maintenance abilities by migrating to a single maintenance system, to help in accretion of benefits to the tune of $500 million.
- Optimization of supplier contracts.
- Introduction of bundled and entry level fares to address the misalignment between customer’s willingness to pay and the products offered.
Have more questions about United Continental (NYSE:UAL)? See the links below:
- United Witnessed A Decline In Q2’16 Earnings, Despite Substantial Fuel Cost Savings
- United Continental Q2’16 Earnings Preview: Higher Oil Prices & Declining PRASM To Weigh On Results
- Here’s Why We Have Revised United Continental’s Price Estimate To $52 Per Share
- Lower PRASM And Higher Tax Bill Caused United Continental’s 1Q’16 Earnings To Drop Despite Huge Fuel Cost Savings
- Currency Headwinds To Offset United Continental’s Fuel Cost Savings For 1Q’16
- How Will United’s Equity Value Be Impacted If The Crude Oil Prices Rebound To $100 Per Barrel By 2018?
- How Will United’s Equity Value Be Impacted If The Crude Oil Prices Average At $50 Per Barrel In 2018?
- How Will United’s Revenue And EBITDA Grow Over The Next Five Years?
- How Important Is United’s International Division For Its Overall Equity Value?
- What Is United’s Fundamental Value Based On 2016 Estimated Numbers?
- Why We Think United Continental Is Worth $65 Per Share?
- What Drove United’s Revenue And EBITDA Growth Over The Last Five Years?
- How Has United’s Revenue And EBITDA Composition Changed Over The Last Five Years?
- What Is United Continental’s Revenue And EBITDA Breakdown?
- How Has United Continental Utilized Its Cash Flows Over The Last Three Years?
- How Have Plummeting Crude Oil Prices Impacted United Continental’s Operating Margin?
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for United Continental
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