United Q2 Earnings: Stock Dips On Gloomy Outlook For Q3

United Continental (NYSE:UAL) reported quite a solid quarter this time around, beating on both earnings and revenues by a significant margin. This goes to show that the PR debacle that plagued investors at the start of the quarter has had little to no impact on the airline’s performance. The company managed to book a profit of $818 million, up about 39% compared to the same period last year. An increase in sales was spurred on as demand remained strong, and capacity matched. The company has already managed to fly more than 71 million passengers in the first half of the year, representing a growth of 4.2% year-over-year. Additionally, the company recorded a notable 2.1% increase in unit revenues.

Despite the positives, United’s stock fell by more than 3% in after-hours trading as the management indicated a return to negative growth in unit revenue in Q3, when the company heads into tougher year-over-year comparisons and increased pricing pressures.

Key Highlights:

• After almost two years of struggling with negative unit revenues, United finally managed to cross into the positive territory. The airline managed to record a 2.1% increase in its unit revenue in Q2. As expected, growth recorded in the U.S. and Latin American markets more than offset the headwinds realized in the Pacific market. Despite the feat, investors have little to rejoice. As mentioned above, tougher year-over-year comparisons and heavy pricing pressures in the Pacific could see the unit revenues return to the red in Q3.
• Non-fuel costs rose by almost 3% this time around, driven primarily by the recently ratified labor contracts penned late last year and higher maintenance costs. However, we can expect the pace of non-fuel costs to slow down in the second half of the year. The company hopes to see per unit ex-fuel costs come in around 2-3% in Q3. For the full year, the metric is expected to come in around 2.5-3.5%.
• Additionally, the company managed to outperform major competitors in areas like on-time performance and passenger growth. This news comes at a time when United has faced major backlash on their treatment of passengers. However, ever since the famed incident that rocked media houses last quarter, the company has consistently, and significantly, reduced the number of passengers involuntarily denied boarding.

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