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Could 2016 Be the Year of Revenue Growth for United Continental?

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Dec. 4 2020, Updated 10:53 a.m. ET

4Q15 and full year 2015 results

For 4Q15, United Continental (UAL) reported revenues of $9 billion, a 3% year-over-year (or YoY) decline as compared to 4Q14 revenue of $9.3 billion. The fall in revenues was driven both by lower cargo revenues and passenger revenues. Passenger revenues fell by about 4.4% year-over-year (or YoY) while cargo revenues declined by 11%.

For the full year 2015, UAL’s revenues declined by 2.7% to $37.8 billion from $38.9 billion in 4Q14. Passenger revenues for the year fell by 3% YoY while cargo revenues remained flat.

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Why did revenue decline?

Despite strong performances, UAL’s unit revenues declined 6% year-over-year during the fourth quarter. Unit revenue is earned by an airline for flying one passenger for one mile. It is also known as passenger revenue per available seat mile (or PRASM).

The major reasons for this decline were a strong US dollar and lower fuel surcharges due to heavily declining crude prices. UAL was also impacted from declining business travel in the energy sector in its primary hub, Houston, Texas. Competitive pricing added to the pressure on revenues.

Outlook

United Continental (UAL) expects its unit revenue to decline approximately 6%–8% YoY for the upcoming first quarter of 2016. Revenues are expected to remain under pressure in 2016. The same factors—including a strong US dollar, low fuel surcharges, and declining business from energy sector clients—are expected to contribute to this decline.

The PowerShares Dynamic Leisure & Entertainment Portfolio ETF (PEJ) invests 5% of its holdings in UAL. It also invests 5% of its holdings in Delta Air Lines (DAL), 2.7% of its holdings in Alaska Air Group (ALK), 2.5% in Allegiant Air (ALGT), and 2.4% in JetBlue Airways (JBLU).

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