United Airlines Reports Second-Quarter 2018 Performance & Earnings Call 18 July 2018
 

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Quarterly 10-K

Investor Update -- 17 July 2018

Past reports
UA Announces Q1 2018 Financial Results 17 April / Conference Call 18 April
UA Announces Q2 2017 Financial Results 18 July / Conference Call 19 July

UA Announces Q2 2018 Financial Results 17 July / Conference Call 18 July
 

Consensus EPS estimate of $3.07, which UA beat at $3.23 ($2.48 net) and the company raised its full-year EPS guidance a quarter to $7.50 to 8.75.

Guidance is +4-6% PRASM for 3Q.

No significant fleet plan changes, mainline status quo, but it appears the company will take 3 fewer CR2s than originally planned (37 vs. 40 by YE), and will add 8 more ERJ-145 (total of 9).

I would add two figures that I don't see in the above posts. United's 2Q operating income was $1.161M, and its projected 3Q capacity/ASM bump is 4.5% to 5.5%.

First, IMHO on the "good" side, United is projecting a 4-6% PRASM increase on a 4.5-5.5% bump in ASM, which is better than what Delta is projecting a 3.5-5.5% growth (they don't say if this is TRASM or PRASM) on 3-4% higher capacity. If you take the mid-point of these numbers, and UA actually achieves them, it will be the first quarter in a long while that United actually will have bested Delta in revenue metrics when considering capacity.

Second, on the "comparison" side, Delta had $1.68B in Operating income (vs UA’s lower $1,161M), and a 4.4% PRASM increase on a 3.5% increase in ASM. United only had a 3% PRASM (2.8% TRASM) increase in unit revenues, on a slightly larger 4.3% increase in ASM. Once again Delta out-performed United, and not by a small amount. The difference is about an extra $120M in revenue that Delta got, and United did not get, this quarter. Given that Delta is already getting a fare premium over United, continued premium growth by Delta is noteworthy. IMHO this shows that United's "better" results are not the result of United doing better in relation to competitors (at least DL) but rather a raising tide impacts all boats...

Third, a few bits of information I found interesting from the DL call, which I pass on because I think they are useful to know:

- DL: “ we're seeing a domestic Net Promoter Score of 44%, up 3 points versus the prior year” Anyone want to guess if UA can say the same thing? (also curious what the DL international score is....) The projected scores I have seen for United have been more like a 10.... I remain of the view that United has to fix the underlying product/service issues and push up its NPS score to ever regain the ground that is lost from 2012 onward.

- DL: “We are committed to continuing to improve our products as well as our network footprint as we add A350s and reconfigure 777s with our four class product, including Delta One suites, Premium Select, and the industry's largest seats in coach on our 777 fleet” It is clear that Delta is going to start advertising its much better product in the face of UA (and AA) going with horrible tight configurations.

-DL: “[PE] is is generating an average fare premium of over 100% to a standard coach seat” I have no idea what United projects to get, but this number is higher than I would expect.

- DL reported that of its income, 88.3% ($9308M) was from ticket sales, 6.4% ($680M) was from FF redemption (which count as revenue) and 5.3% ($558M) was travel related (change fees, baggage, onboard sales). I have not notice this type of breakout by an airline before, and it gives an interesting indication of the % of "revenue" that comes from FF awards (note: FF miles are booked as a liability, and when they are redeemed it counts as revenue)

For whatever little it's worth, UA does not subscribe to NPS, which is a paid service. I am beyond certain UA would have a NPS substantially lower than Delta, but it's a meaningless point of comparison between the two companies.

United - at least on every survey I have ever gotten - asks the "would you recommend" NPS type questions. United may not subscribe to one of the several companies that provide data (I don't think DL does either) but it clearly collects the 411. It was quoted in the 2013 WSJ piece on NPS as doing so, and relying upon it. The difference is that DL has mentioned improvements in its scores several times through the years, United, well its radio silence. That United has never said a peep about what its scores are post 2012, suggests they are not so hot... Its not meaningless, just not something UA wants to talk about since its (as you appear to agree) bad...

I only mentioned it since its interesting that this quarter DL touted (1) how great its new seats are and how its 777 Y seats are the widest in the industry, and (2) how its NPS scores are up. In the ongoing debate about whether service/product quality matter or instead everyone just buys on price so United was savvy to cut its product/service and bank the cost cuts, that DL is saying what it is saying is relevant IMHO. This said, lets see, perhaps United will comment on how all of the "changes you will like" have create outside passenger happiness. :)

I dunno what NPS scores refer to?

United has a better J class with Polaris, which although suffering delayed implementation, IMHO I prefer UA aircraft 777/787 predominance versus the vast DL 767 fleet.

This discussion will continue forever. Wishing you fair travels ;)


Adam

I've been really disappointed with DL and ST international options from west coast. Find UA and *A options much better.

Domestic is another story. Just booked AS (on a former VX 320) for SFO-WAS. UA offers a horrid economy product SFO-IAD, with no chance of 1K clearing RPU on the well timed flights.

Have to agree if most of my flying was domestic UA, I would examine other options. But not sure, NYC-based, that AA is any better. Delta perhaps but I have not been on them in a year, and their domestic First is pretty bad as well. Admit I am longtime married to UA and it's like all successful relationships - requires compromise!

Adam

How have fares been since AS took over? I stopped comparing since VX was always a non-differential joke compared to UA (and with 8F I guess they could get away with it).

Of course Delta will say that Y product matters and that their "investments" will generate a strong return. From the same perspective, United is going to say that offering consumers more choices, including more J, more Y+ and a lower cost Y product, helps it compete. Do you expect Delta to say that they were to cheap to invest in performance improvements and a new Y cabin in the 777?

UAL up about 8%, getting close to 52w high.