How Is United Continental Driving Cost Efficiency?

by Trefis Team
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UAL
United Airline Holdings
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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)labour

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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.

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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.

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Have more questions about United Continental (NYSE:UAL)? See the links below:

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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