United Continental: The Year In Review

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United Airlines Holdings

United Continental (NYSE:UAL) has had a rather eventful 2017. The first half of the year recorded better than expected results, with revenues and earnings consistently beating the consensus estimates, while the second half witnessed a slowdown. Earnings in Q3 were down by almost 28% year-over-year on higher costs associated with adverse weather conditions that forced the airline to cancel more than 8,300 flights. Consequently, revenues came in $210 million lower in comparison to the same period last year. This momentum is expected to lull into Q4 and beyond, as the company works to make the best of the situation.

Key Highlights From The Year:

  • Early in the year, United was in the news for all the wrong reasons. A video, that went viral, showed security agents violently deplaning a 69 year old doctor when he refused to give up a seat that he was being forced to let go. The incident sparked widespread outrage amongst customers, with some calling for a total boycott of the airline. Many investors were spooked into selling off their shares after the surfacing of the video. However, despite the gravity of the situation though, financially, United came out from the incident relatively unscathed, as is evident from the results in the first half of the year.
  • Like many of its competitors, after almost two years of struggling with negative unit revenues, United finally managed to cross into the positive territory this year. The airline managed to record a 2.1% increase in its unit revenue in Q2. Despite achieving this feat, investors had little to rejoice. Adverse weather conditions, tougher year-over-year comparisons, and heavy pricing pressures in the Pacific pushed unit revenues into the red again in Q3. Additionally, given the uncertainty in the airline space at the moment, we can expect negative unit revenues to persist for some time now.
  • In Q3, the company managed to land itself in the media spotlight again – and again for the wrong reasons. Earlier on in Investor Day 2016, management had mentioned that it expects to grow earnings by about $1 billion in 2017, and by about $2 billion in 2018. When pressed on giving an update on this, CEO Oscar Munoz asked investors to remain patient, while giving his team some time to work things out. His failure to provide a concrete answer irked analysts further. The market reacted in about the same way, recording the single largest fall in the airline’s stock price since 2011.
  • Despite all this, the company was determined to increase its reach throughout the year. In the most recent additions, United has decided to add 10 new routes from 5 of its hub airports, including flights to two cities it does not currently serve – Elmira, N.Y., and Wilmington, N.C. This is part of the airline’s conscious effort to solidify its network by increasing connecting opportunities at its hub airports. In this respect, we can expect to see many more additions to the network in the coming quarters.

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