United Airlines projected a slowdown in a benchmark financial gauge as trans-Pacific fares weaken, and the carrier delayed delivery of four Airbus A350 long-haul jets earmarked for those routes.
Passenger revenue for each seat flown a mile could rise as much as 1 percent or fall by the same magnitude this quarter, United said in a statement Tuesday as it reported earnings. That trailed a recent forecast by Delta Air Lines, which predicted an increase of at least 2.5 percent.
United’s weaker outlook followed a second quarter in which United worked to recover from a public-relations fiasco after passenger David Dao was dragged from a plane in Chicago, suffering a broken nose and other injuries. The airline is also contending with financial pressure from a seat glut on routes to Asia, which is weighing on the financial forecast.
The carrier didn’t set a new delivery date for the A350-1000 planes, which had been scheduled to arrive next year. United is deciding the future of its order for 35 of Airbus’s largest twin-engine jetliners as the carrier’s new management team reviews the fleet. The airline is retiring its aging Boeing 747 jumbo jets, many of which ply routes between Asia and the U.S.
The earnings report wasn’t all bad news. United reported that second-quarter profit rose to US$2.75 a share, beating the US$2.72 estimate of analysts. Sales climbed 6.4 percent to US$10 billion. The company reported a 2.1 percent increase in revenue for each seat flown a mile. That was the first gain in two years for the measure, known as unit revenue, which is a proxy for pricing power.
But analysts had been expecting a stronger forecast for unit revenue in the third quarter. Raymond James Financial’s Savanthi Syth and Morgan Stanley’s Rajeev Lalwani had estimated a gain in unit revenue of 1 percent. Helane Becker of Cowen & Co. anticipated a 1.5 percent increase.
In the second quarter, unit revenue slid 5.5 percent in the Pacific region, the only major market to post a decline, United said. In a recent investor conference, President Scott Kirby said the supply of seats across the Pacific was still too high considering that the economies of China and Hong Kong had weakened recently.
Last year, United got almost 14 percent of its revenue from the Asia region, compared with 7.4 percent for Delta and just 4.5 percent for American Airlines.