What Has Led To A 15% Fall In United’s Stock Price Since The Beginning Of The Year?

by Trefis Team
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UAL
United Airline Holdings
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Not only is the aviation sector volatile and cyclical, but also quite unsettling for most investors. It is symbolic of the economic health of a country, so every little piece of news results in speculation and a reaction from investors and traders. Having said that, United has been trading approximately 15% lower currently than its stock price at the beginning of the year. Most of this is attributable to the currency headwinds being experienced in United’s international segments, resulting in pressure on unit revenues, and the gradual recovery being seen in oil prices. Below we discuss some of the fundamental factors that affected United’s stock price:

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  • Financial performance lagging peers in terms of all operating metrics: revenues, capacity, earnings, unit revenues, costs.

Pre-Tax Margin (%)

UAL Vs. Peers

1

  • Integration with Continental was more complex than expected due to operational difficulties.
  • The crude oil prices increased almost 37% since Q1’16 due to a range of factors, such as production cuts in the U.S., geopolitical disturbances in Venezuala and Nigeria, and a wild-fire in Alberta, Canada. As a result, United’s operating margins were negatively impacted.

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  • Declining share in domestic markets as the carrier lost premium customers.

United’s Declining Domestic Seat Share

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  • Technical failures and glitches resulting in disgruntled clients.
  • Lack of direction due to frequent changes in higher management.

 

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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