There are a few more discussion points following yesterday’s news post on United’s $521 million Q2 profit earnings.
One of the larger discussion items is that United is finally seeing unit revenue improvements, long overdue after nearly three years since closing its merger with Continental Airlines in 2010. R/ASM, or Revenue per Available Seat Mile, climbed 2.8%, with expectations to grow another 3-5% in Q3 2013, typically the strongest operating period for airlines.
Ancillary revenue generation showed signs of growth, as United is now pulling in an average of $20 per passenger in additional sales (non-ticket based fees).
Costs, however, are a concern. C/ASM, or Costs per Available Seat Mile, grew 0.7%, with signs of outpacing revenue growth for Q3 2013 at 5.5-6.5%, per the earnings call.
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United reported a consolidated load factor percentage of 84.7% for the quarter. Without going into specifics, United did claim that its customer satisfaction scores were, “up significantly” and that its “focus is to continue to deliver solid operational performance.”
Across the network, United reported that its network “right-sizing” in Europe. The carrier cancelled its Houston to Paris flight last year, as well as Newark to Copenhagen and Washington Dulles to Moscow Domodedovo routes. While removing several of these trunk routes, United also pulled down frequencies on its transatlantic services to smaller European markets such as Hamburg, Stuttgart and Berlin during the slower winter period, while also adding some new “thinner” markets on narrow-body aircraft such as Washington Dulles to Dublin and Manchester and Chicago O’Hare to Shannon, Ireland. United is also re-experimenting with a San Francisco to Paris route, which it has served in the past.
United will continue to adjust its transatlantic network by dropping its Newark to Istanbul flight in October, reducing frequencies on its Washington Dulles – Kuwait – Bahrain flight and continue to deploy its 787s on transatlantic routes such as Houston to London Heathrow and Lagos.
Latin America showed signs of strength, while deep South America was more problematic, which should come at no surprise since United announced last week it was canning its Newark to Buenos Aires nonstop flight in the fall.
Transpacific revenues were down 3.2% as the weakness of the Japanese Yen continued to have an affect on performance. Delta also expressed grievances as a result of the Yen depreciation, although it saw its quarterly profits doubly affected (USD 60 million reduction in revenue year over year) compared to United’s (USD $30 million). This makes more sense given that United’s transpacific network is less Tokyo-centric than Delta’s, which insulates them more from deterioration of Japanese currency.
Both carriers expect this weakness to continue throughout the remainder of 2013. Meanwhile, United will also deploy its 787s on new transpacific routes, having launched Denver to Tokyo earlier this summer, and placing the Dreamliner on its Los Angeles to Shanghai and Tokyo routes, and on Seattle to Tokyo. United also decided to postpone the re-launch of its San Francisco to Taipei, Taiwan route to spring 2014.
In summary, United is showing signs of rebounding, moving from its 2012 “year of apology” to its 2013, “year of recovery” position. The carrier still cannot rest on its laurels as it still has a long way to go to meet shareholder ROI, but this is a postive step in the right direction.