United Airlines beat analyst expectations on first-quarter earnings Wednesday while suffering a 38% drop in net income, which the carrier blamed on the strong dollar and a larger decrease than expected in business travel.
The Chicago-based carrier reported net income of $313 million, or 88 cents per diluted share, down from $508 million or $1.32 per diluted share, for the same period a year earlier.
When excluding special items, the earnings were $1.23 per share, which beat the $1.18 per share in earnings predicted by analysts polled by S&P Global Market Intelligence.
The earnings came on $8.2 billion in revenue, a 4.8% decline from the same period a year earlier. Passenger revenue was down 7.4%, which the company blamed on economic factors such as the strong U.S. dollar, which hurts ticket sales overseas, and lower oil prices. The company also said close-in business travel decreased more than expected surrounding the Easter holiday and spring break.
But expenses were also down. United’s fuel cost was 34.7% lower for the quarter, at $1.2 billion during January, February and March, compared to nearly $1.8 billion a year earlier.
A conference call and webcast with company officials was scheduled Thursday.
Oscar Munoz, United’s CEO, said in a statement he was “extremely proud” of the company’s 86,000 workers for the results, which included the best on-time results since the 2010 merger with Continental Airlines, with 71.9% of flights arriving within 15 minutes of their schedule.
“As we accelerate United’s path forward, we will continue to focus on running a great airline today while innovating for tomorrow,” Munoz said.
Special items excluded from the earnings figures included $100 million for bonus payments in conjunction with a labor contract through 2021 with the International Association of Machinists and Aerospace Workers, $74 million for lease changes at Cleveland’s airport, $8 million for severance costs for flight attendants and an $8 million loss from exchange-rate changes with Venezuela.
The earnings report came the same day United announced it would add two directors to its board, to avoid a proxy fight with activist investor groups PAR Capital and Altimeter Capital. The board members Barney Harford, former CEO of travel website Orbitz Worldwide, and PAR managing partner Edward Shapiro.
A third independent director will be added within six months.
Jim Corridore, an equity analyst at S&P Global Market Intelligence, changed his rating to “strong buy” from “buy” after the board announcement.
Vicki Bryan, senior high-yield analyst at Gimme Credit, said the investors remained quiet for years as United “shockingly squandered its promising potential by dropping to dead last in virtually every performance and quality metric.” She said the board changes and Munoz’s more collegial leadership should improve United’s performance and benefit stakeholders.
Munoz was named CEO in September after the ouster of Jeff Smisek, who was investigated as part of a corruption scandal in New Jersey. But Munoz suffered a heart attack weeks later and had a heart transplant before returning to work in mid-March.
USA Today
United Airlines beat Q1 expectations
