How Is United Airlines Likely To Grow In The Next Two Years?

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UAL: United Airlines Holdings logo
UAL
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. However, we expect things to turn around for the company going forward on continued expansion plans, increased demand, and a better economy. While increased capacity could harm pricing conditions, we believe the added demand could easily offset this.

We have created an interactive dashboard analysis to estimate United’s future revenue based on its expected revenue growth in each of its divisions. Click on the link to modify the figures to arrive at your own price estimate.

As per our calculations, United is expected to increase its revenues by 1.1 billion taking in close to $38.9 billion in FY 2019, at a CAGR of about 1.5%. As mentioned above, we expect this growth to be driven by increased revenues at Mainline and Cargo, with increase in commercial flying and strong expansion plans acting as definitive catalysts. In addition, increased flying would enable higher fee revenues. That said, in keeping with the trend, we expect regional revenues to decrease, and hurt the top line going forward.

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But how did we come up with our revenue estimate for FY 2019? We added up each of our segment revenue estimates. Now, in order to estimate the revenues for each of the divisions, we broke down the historical data to their core revenue drivers (except in the case of Cargo and Other Operating revenues). This enabled us to forecast each of the drivers, thereby making our estimates as accurate as possible.

Passenger-Mainline Revenue Growth:

The available seat miles, or capacity, is expected to increase to 241 billion in 2018 and to 248 billion in 2019. Additionally, average yield is expected to remain around 0.13, while load factor comes in around 81% through both years.

Passenger-Regional Revenue Growth:

The available seat miles, or capacity, is expected to fall to 27 billion in 2018 and to 26 billion in 2019. Additionally, average yield is expected to remain around 0.254, while load factor comes in around 82% through both years.

Cargo Revenue Growth:

Revenue in FY 2018 is expected to touch $1159 million, while we expect the figure to increase to $1229 million by FY 2019.

Other Operating Revenue Growth

Revenue in FY 2018 is expected to touch $4383 million, while we expect the figure to increase to $4471 million by FY 2019.

 

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