Artocle: United Airlines Will Pare Capacity on Brexit, Corporate Demand

By: Bill Peters | 7/20/2016

United Airlines (UAL) on Wednesday said
it expected transatlantic flight capacity
to be down 1%-2% in the fourth quarter,
and the company said weaker pricing
for
corporate
travel
and
global
uncertainty could restrain seating
supply for the rest of the year.
The capacity forecast for the region,
included in a slide presentation, came a
day after the carrier said it would
reduce U.S. flights to the U.K. this
winter, partly due to the U.K.'s vote last
month to leave the European Union.
Delta Air Lines (DAL) also cut its fourthquarter flight capacity outlook to 1%
growth, partly due to the Brexit vote.
The vote initially shocked world markets
and has left the U.K.'s business
relationship with the rest of Europe up in
the air. United's presentation said the
company was monitoring the effects of
Brexit and would "adjust accordingly."
United expects overall fourth-quarter
capacity growth of 1%-2%, partly due to
lower GDP estimates for the period. In
addition, the carrier expects "further
softening" of its ability to charge
corporate travelers more to travel for
the rest of the year, Chief Revenue
Officer Jim Compton said during the
company's earnings call on Wednesday.
In reporting second-quarter earnings
late Tuesday, the carrier cut its full-year
capacity growth outlook to 1%-1.5%
growth. United Airlines shares rose
slightly less than 1% to 48.30 on the
stock market today after the company
topped Wall Street's estimates for the
quarter. Delta lost 0.8% to 40.21.
American Airlines (AAL), the other big
global U.S. carrier, dipped 0.3% to

35.92. American reports later this week,

with its Q2 earnings call on Friday.
Investors have been hoping airlines
would work harder to keep flight
capacity more in line with passenger
demand after last year's cheap-oil
windfall allowed more room for profits
and inspired aggressive industry wide
expansion.
United on Wednesday also said it
expected adjusted unit costs for the
year to rise between 2%-3%, reflecting
extra expenses from labor deals. The
company has struggled to keep up with
Delta and American. United CEO Oscar
Munoz said Wednesday that "we fully
acknowledge we aren't yet performing
from a financial perspective to the level
of our and your expectations."
Delta has said it would remain
dedicated to turning around unit
revenue, a key measure of an airline's
financial performance, by year-end.
United has been less committed to a
specific target.
Munoz on Wednesday said the company
acknowledged "the importance of
returning to positive unit revenue" and
how its capacity plans affect the metric,
which measures sales per passenger as
it relates to available flight seating and
distance traveled.
"However, we must evaluate what our
network is today and the evolution to
ensure that long-term optimization of
sustainable earnings is maintained," he
said during the call. "At times, this may
include adding capacity to strengthen
our
best-performing
markets
and
ensuring we remain competitive."

On
Thursday,
domestic-focused
Southwest Airlines (LUV), Alaska Air
(ALK) and Hawaiian Holdings (HA) report
earnings. Southwest stock fell 1.6% to
42.03, Alaska rose 0.6% to 63.49 and
Hawaiian climbed 0.5% to 43.76.

Source:
http://www.investors.com/news/unitedto-pare-back-capacity-on-brexitcorporate-demand/