What Can We Expect From United Continental’s Q3 Earnings?

United Continental (NYSE:UAL) is all set to post earnings for Q3 on October 16. The company managed to post a rather good Q2, reporting significant gains in earnings and revenues. That said, we can expect things to take a negative turn in the coming quarter. The airline has indicated that unit revenues are expected to dip into the red, after briefly turning positive in the last quarter.  However, the fall in the metric is expected to only be around 3.5-4%, which is smaller than the drop of as much as 5 percent forecast in September.

Probable Highlights:

• As mentioned above, United expects unit revenues to fall by about 3.5-4% in comparison to the same period last year, as the company faced tougher year-over-year comparisons and increased pricing pressures. Further, we can expect unit revenues to remain negative for the remainder of the year as well.
• Non-fuel costs could rise by up to 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 Q4. The company hopes to see per unit ex-fuel costs to come in around 2.5-3.5% for the full year.
• In Q3, the year-over-year consolidated completion factor is expected to be down by a significant 1.6 points on the back of severe storm systems that plagued the East Coast. Further, consolidated capacity is expected to rise by only about 3%, at the lower end of the company’s revised guidance range of 3-3.5%, hurt again, by adverse weather conditions.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such 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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