United’s 43% Increase in Fuel Costs – 2Q18 Results

United Airlines Logo

・UAL reported $684M net income for 2Q18

・Flight attendant groups will integrate in October

・Fuel costs increased 43% ($2.4B YoY)

・United recovered 75% of increased fuel costs


United’s better-than-expected quarterly results 

United Airlines parent company United Continental Holdings (UAL) beat analysts’ expectations and reported largely positive second-quarter results today. Phew!

Revenue increased 7.7% to $10.78B, although rising fuel costs led to a 16.7% decrease in net income. Other metrics like PRASM (passenger revenue per available seat mile), increased yield, and strong operational performance recovered 75% of increased fuel costs.

🌟 Check out View From the Wing for Gary’s take

Key metrics show strong results

revenue 7.7% ($10.4B)

net income 16.7% ($6.84M)

passenger revenue in all regions except Latin America

fuel costs 43% ($2.4B)

passengers carried 7.3% (41M)

load factor 1.3 pts (84.8%)

Takeaways from United’s Quarterly Earnings

Industry-leading operational performance

While it’s easy to criticize United’s customer experience, I must commend United for its strong operational performance. A key industry metric for on-time pushback from the gate is D:00, meaning the plane pushed back ‘0’ minutes after scheduled departure time.

United leads the industry at 70%, meaning 70% of flights leave exactly on-time. And check out Southwest: only 46% of flights (!!) pushed back at D:00.

U.S. Airline On-Time Performance

U.S. Airline On-Time Pushback ‘D:00’ | Image: United

Overall passenger revenue (PRASM) is up 3%

🌟 PRASM = passenger revenue per available seat mile

United PRASM

UAL 2Q PRASM | Image: United

United PRASM

Overall PRASM Increased 3% | Image: United

  • Domestic-only itineraries outperformed domestic flights feeding an international itinerary・
  • United is starting to see premium cabin sales recover in Asia
  • Weakness in Mexico and Nicaragua led to 2.9% decrease in PRASM

Non-fuel costs (CASM) are down 0.4%

🌟 CASM = cost per available seat miles

While United’s fuel costs spiked a whopping 43% (~$2.4B), its non-fuel CASM decreased thanks to a ‘ramp up of cost savings’ (translation: cost cutting). It’s worth noting Delta reported a similar 40% increase in fuel costs, so it’s not just United dealing with rising costs.

United CASM

Non-fuel costs are down | Image: United

Almost half of United’s seats (ASMs) are international

🌟 ASM = available seat miles

ASM breakdown by region 

  • Domestic = 56%
  • Atlantic = 18%
  • Pacific = 16%
  • Latin America = 10%

United Explorer card: sell, sell, sell…

YoY new acquisitions for the Explorer Card are up 10%

Investors and Wall Street are happy, at least over the last few days 

United Continental Holdings (UAL) Stock Price

UAL 5-Day Stock Price | Image: Google

United’s cargo revenue is up 19%

United’s cargo performance | Image: United

Lastly… a new ‘favorite’ corporate jargon phrase 

Ramp up of cost savings is a rather clever way of saying cutting costs.


H/T: View From the Wing

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