United Continental’s promising 3Q results boost confidence



Company overview

United Continental Holdings Inc. is one of the three leading legacy carriers in the US, providing transportation services to passengers and cargo. It has a diversified network serving passengers to 233 destinations in the domestic market through major hubs in Chicago, Denver, Houston, Los Angeles, Newark, San Francisco, Washington, Guam, and 141 international destinations. With 5,229 daily departures, United served 139 million passengers in 2013.

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In 2013, United ranked first according to scheduled passenger miles, including both domestic and international markets. For more details on the company, refer to United Continental Holdings: A must-know company overview. United’s (UAL) competitors include legacy carriers such as Delta Airlines (DAL) and American Airlines (AAL) and low-cost carriers including Southwest (LUV) and JetBlue (JBLU). In this article we will analyze United’s performance in the third quarter of 2014.

Part1_3Q results

Third quarter performance highlights

  • United’s revenue increased by 3.3% to $10,563 million in 3Q14. Passenger unit revenue grew by 4%.
  • United managed to reduce its operating expense by 3.6% and on a per available seat mile (or ASM) basis, cost decreased by 4%.
  • Overall fuel expense decreased by 4% to $3,127 million and per unit fuel cost after adjusting for hedging gains or losses decreased by 3.2% to $3.02 per gallon from $3.12 in 3Q13.
  • Operating margin increased to 11.3%, a year-over-year increase of 630 basis points. Net margin also increased to 8.7%.
  • United’s leverage measured by debt-to-capital ratio was ~76%.
  • The board authorized a share repurchase program to acquire up to $1 billion of UAL’s shares within the next three years.

United (UAL) is part of more than 30 ETFs. ETFs such as the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN) hold between 38% to 44% of their holdings in airline stocks.


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