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United Airlines Reports Third-Quarter 2018 Performance & Earnings Call 17 Oct 2018

United Airlines Reports Third-Quarter 2018 Performance & Earnings Call 17 Oct 2018

Old Oct 16, 18, 2:18 am
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United Airlines Reports Third-Quarter 2018 Performance & Earnings Call 17 Oct 2018

United Airlines Reports Third-Quarter 2018 Performance

CHICAGO, Oct. 16, 2018 /PRNewswire/ -- United Airlines (UAL) today announced its third-quarter 2018 financial results, reporting third-quarter net income of $836 million, diluted earnings per share of $3.06, pre-tax earnings of $1.1 billion and pre-tax margin of 9.6 percent. Tropical storms across the system are estimated to have reduced diluted earnings per share by approximately $0.07. Third-quarter diluted earnings per share increased 42 percent year-over-year. The company recaptured approximately 100 percent of its year-over-year fuel expense increase in the third quarter.

"Our stand-out third-quarter performance, which produced double-digit revenue growth as we more than offset the steep increase in fuel costs, is proof that United is building momentum," said Oscar Munoz, chief executive officer of United Airlines. "Our growth plan has been essential to our success, and we're more confident than ever we'll achieve the ambitious adjusted earnings per share1 target of $11 to $13 we laid out for 2020."

  • UAL reported third-quarter adjusted net income of $837 million, adjusted diluted earnings per share of $3.06, adjusted pre-tax earnings of $1.1 billion and adjusted pre-tax margin of 9.7 percent.2 Third-quarter adjusted diluted earnings per share increased 36 percent year-over-year.
  • Consolidated passenger revenue per available seat mile (PRASM) increased 6.1 percent year-over-year, above the high end of the company's third-quarter 2018 guidance range of up 4 percent to 6 percent.
  • Consolidated unit cost per available seat mile (CASM) increased 6.4 percent year-over-year.
  • Consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, decreased 0.4 percent year-over-year.
  • UAL's mid-continent hubs in Chicago, Denver and Houston had year-over-year capacity growth of 9.7 percent in the third quarter and led the system in unit revenue growth performance in the quarter.
  • UAL now expects full-year 2018 adjusted diluted earnings per share3 to be $8.00 to $8.75. The company currently expects to recapture approximately 90 percent of the estimated $2.5 billion year-over year increase in full-year 2018 fuel expense.

For more information on UAL's fourth-quarter and full-year 2018 guidance, please visit http://ir.united.com for the company's investor update.

Third-Quarter Highlights

Customer Experience
  • Introduced a new boarding process at 1,000 gates around the world, designed to reduce customers' stress by spending less time waiting in line and providing them with improved boarding information.
  • United Airlines MileagePlus loyalty program voted Favorite Frequent-Flyer Program in Trazee Awards.
  • The United Polaris lounge at Chicago O'Hare International Airport voted Best Business Class Lounge in the United States by the 2018 World Airline Awards from Skytrax.
  • Debuted United Corporate Preferred, the industry's newest corporate travel program designed to offer top travel benefits to the company's most loyal business customers.
  • Launched the redesigned united.com homepage, featuring a more personalized digital experience for each customer.
Operations and Employees
  • In July, UAL had its best consolidated D :00 month of July in history and its highest consolidated load factor month ever.
  • Carried the most-ever customers to their destinations during the summer.
  • Consolidated completion factor at UAL's hubs in Houston, Chicago, Los Angeles and Washington Dulles reached third-quarter record levels.
  • Achieved the top score of 100 percent on the 2018 Disability Equality Index (DEI), a prominent benchmarking metric that rates U.S. companies on their disability inclusion policies and practices, also earning UAL a place on DEI's 2018 "Best Places to Work" list.
Network and Fleet
  • Announced several new international routes, including year-round nonstop service between Washington Dulles and Tel Aviv, Israel, making UAL the only airline to offer nonstop service between the two cities; daily, year-round service between San Francisco and Amsterdam; and nonstop seasonal summer service between Newark/New York and Naples, Italy, and Newark/New York and Prague, all subject to government approval.
  • Added 100 flights and more than 10,000 seats daily to 12 of the country's top ski destinations during the 2018/2019 ski season, more than 8,500 seats from U.S. hubs and eight other U.S. cities connecting more customers than ever to Las Vegas for CES 2019, and more than 204,000 total seats from September through November to popular college football towns including Madison, Wisconsin, and Columbia, South Carolina.
  • Announced orders to purchase 25 new Embraer E-175 and 13 new Boeing 787-9 aircraft.
  • Took delivery of one Boeing 737 MAX 9 aircraft and two used Boeing 767-300 aircraft.
Community and Environment
  • Committed to reducing the company's greenhouse gas emissions by 50 percent by 2050, the only U.S. airline to commit to emissions reductions, further strengthening UAL's ambition to be the world's most environmentally conscious airline.
  • Launched a Crowdrise fundraising campaign to support those affected by Hurricane Florence, Typhoon Mangkhut, flooding in Western Japan, wildfires in California and other disasters.
  • As part of a previously announced $8 million commitment, announced a $2 million grant to be split between the Community FoodBank of New Jersey, Urban League of Essex County, and Year Up New York, as well as a $1 million grant to First Place for Youth in Los Angeles, and a $1 million grant to the San Francisco Immigrant Legal and Education Network.

Earnings Call
UAL will hold a conference call to discuss third-quarter 2018 financial results and its financial and operational outlook for the fourth quarter and full year of 2018 on Wednesday, October 17, at 9:30 a.m. Central Time /10:30 a.m. Eastern Time. A live, listen-only webcast of the conference call will be available at ir.united.com. The webcast will be available for replay within 24 hours of the conference call and then archived on the website for three months.
PDF

Links
Q3 presentation link
Q3 call transcript link
Q3 webcast recording link ... mp3

Quarterly 10-Q

Investor Update -- 16 Oct 2018

Past reports
United Airlines Reports Second-Quarter 2018 Performance & Earnings Call 18 July 2018
UA Announces Q3 2017 Financial Results 18 Oct/ Conference Call 19 Oct

Last edited by WineCountryUA; Jan 15, 19 at 12:46 pm Reason: 10-Q, not 10-K
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Old Oct 16, 18, 2:22 am
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United Airlines to Hold Live Webcast of Third-Quarter 2018 Financial Results

CHICAGO, Oct. 4, 2018 /PRNewswire/ -- United Airlines will hold a conference call to discuss third-quarter 2018 financial results on Wednesday, Oct. 17, at 9:30 a.m. CT/10:30 a.m. ET. A live, listen-only webcast of the conference call will be available at ir.united.com. The company will issue its third-quarter financial results and fourth-quarter investor update after market close on Tuesday, Oct. 16.

The webcast will be available for replay within 24 hours of the conference call and then archived on the website for three months.
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Old Oct 16, 18, 6:10 pm
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As EWR764 noted in the earlier thread (United Reports September 2018 Operational Performance) UA has really soft comps due to Harvey last year. In 3Q 2017 UAL's prasm fell by 3.7% to 12.17 c/mi; DAL's was up 1.9% to 13.40 c/mi. (UA said it lost net income of $185M due to Harvey, but DAL lost $120M due to another storm. )

Outside of the headline numbers - UA had net income of $837, Delta had pre-tax income of $1.7B - the report looks good especially the 6.1% increase in PRASM (to 13.73) on 5.1% increase in ASM. Delta posted PRASM +4.2% now 14.81 c/mi on ASM +3.9%. So United made up some ground, although, again, the comps were easy this quarter.... [P.s. the consolidated figures for 3Q 2017 PRASM in that release don't match those UA lists in this release, I have no idea why.]

Delta projected TRASM of 3-5% in 4Q 2018, and United's range is the same 3-5% (http://ir.united.com/~/media/Files/U...tor-update.pdf) but on a bigger (5-6%) capacity increase than DL (4%).

So UA made up some ground, although again the comps were themselves easy this quarter.
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Old Oct 16, 18, 7:04 pm
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Who really cares if United has soft comps or underperformed Delta? United was strongly profitable on pretty aggressive growth. This should reassure customers that management will not be making drastic cuts or change in strategy. In fact, United can afford to continue investing in its employees and products.

Since the comparisons between United and Delta are popular, here’s a relevant one: United recovered 100% of the higher fuel prices with increased yield while Delta only made up 85%. As consumers, we don’t want to be gouged so it is good to know the higher PRASM does not reflect unreasonable profit taking.


Last edited by WineCountryUA; Oct 16, 18 at 9:25 pm Reason: merging consecutive posts by same member
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Old Oct 16, 18, 8:52 pm
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Originally Posted by fly18725 View Post
Who really cares if United has soft comps or underperformed Delta? United was strongly profitable on pretty aggressive growth.


And why all the fixation on Delta? We know Delta is more profitable than UA (and AA) because they executed their merger brilliantly while UA suffered 5 years of Smisek mismanagement. The changes made over 2.5-3 years of Oscar and 1.5-2 years of Oscar/Kirby/Nocella are now beginning to bear fruit on the balance sheet. Just look at UAL’s stock performance this year.

In Q2-2018 the year on year profit margin improvements/declines of the US carriers (they were all declines due to fuel) had Delta at #1 (-2.1%) with United a close #2 on -2.5%. No other airline got anywhere near those (Southwest was #3 with more than 4% decline). And I wouldn’t mind expecting UA and DL will end up being #1 and #2 in Q3 with the roles reversed. So why fixate on comparisons with Delta when United is beginning to close the gap on everyone, and outperform some (hi AA)?

This was a very good quarter for UAL. Let’s hope they stay focused and continue the good work.
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Old Oct 17, 18, 1:33 pm
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It's amazing how much more active these threads were when United wasn't producing such strong quarterly results! Not a whole lot to criticize here.

The call was interesting and there were some product-related tidbits I'll pass along after I have a chance to review the transcript, so as to accurately report. Keep an eye out in the next week for more details on the Premium Plus product, though...
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Old Oct 17, 18, 1:45 pm
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Originally Posted by EWR764 View Post
It's amazing how much more active these threads were when United wasn't producing such strong quarterly results! Not a whole lot to criticize here.
Well, in fairness: a) Most/all of the criticism even back then was UA promising growth and profitability numbers like this, while trying to "shrink their way to profitability" and following the customer service advice of the likes of Hunter Keay & co... UA changed course, and so while not everyone is happy with the new UA, they're at least no longer peeing on our collective legs and telling us that it's raining...

and b) FT cracked down on earnings call acrimony, so most (sensible) people moved on with their lives!
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Old Oct 17, 18, 1:51 pm
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Originally Posted by Darlox View Post
Well, in fairness: a) Most/all of the criticism even back then was UA promising growth and profitability numbers like this, while trying to "shrink their way to profitability" and following the customer service advice of the likes of Hunter Keay & co... UA changed course, and so while not everyone is happy with the new UA, they're at least no longer peeing on our collective legs and telling us that it's raining...

and b) FT cracked down on earnings call acrimony, so most (sensible) people moved on with their lives!
There hasn't been a dramatic shift in strategy at United. Yes, there have been some network and products tweaks but we're really seeing the results of on-going initiatives, including many started by the reviled post-merger management team.

People expect instant gratification in a black and white world. That is not reality.
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Old Oct 17, 18, 3:31 pm
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Originally Posted by Darlox View Post
Well, in fairness: a) Most/all of the criticism even back then was UA promising growth and profitability numbers like this, while trying to "shrink their way to profitability" and following the customer service advice of the likes of Hunter Keay & co... UA changed course, and so while not everyone is happy with the new UA, they're at least no longer peeing on our collective legs and telling us that it's raining...
I might also add that the argument was consistently made that Smisik and Co/Keay, etc were super smart folks, and that their plan to shrink domestic while growing international while cutting service and product quality would lead to outsided profits. These threads were/are a way to check if this thesis of how to run an airline was right or wrong.

This quarter United made up a small amount of the massive distance Delta put between it between 2012-2015 when United was under the enlightened management of Smisik. As I keep saying, the passangers (particuarly high value ones) that Smisik drove out the door really hurt United. Had United matched Delta's growth in PRASM over 2011-2018 (a marker of an ability to charge more as you attract those willing to pay more, it would have had resulted in United having another $805M in passenger revenue this quarter. That would have nearly doubled United's $837M profit, and lead to United basically matching Delta (which made $1.7B).

[The math: UA's PRASM went from 13.57 to 13.73c/mi; Delta went from 13.54 to 14.81c/mi over 2011-2018; that is 1.18% growth on UA vs. 9.14% growth at DL, multiple the difference (7.96%) by UA's 10,120M in passenger revenue this quarter]

I think the jury is still out on if UA has the right mix of product offerings quickly enough (with Polaris and old sCO J; PE, and ultra tight international Y), right mix of A/C (too many small RJs, enough mainline lift domestically?) as well as if it offers the right pricing strategies or soft product, but finally - after 8 years - getting the final work force integration done as well as a focus on both OT and trying to fix past mistakes (like the boarding process) are clearly improvements which should help over time. And while I disagree with a lot of what Kirby does, unlike prior management, he has shown the ability to not double and triple down on things that are not working.
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Old Oct 17, 18, 3:38 pm
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I like flying on a carrier that is profitable. I have gone through the bankruptcy of Alitalia and Swiss Air and held a TG ticket when they stopped US flights. It's all good. I hope United is around as long as I live -- lifetime blah blah.
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Old Oct 17, 18, 4:15 pm
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Originally Posted by spin88 View Post
That would have nearly doubled United's $837M profit, and lead to United basically matching Delta (which made $1.7B).
At least use the correct numbers: UA pre-tax earnings, $1.1 Billion vs Delta $1.7 Billion. The $837M is net.
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Old Oct 17, 18, 6:11 pm
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Old Oct 17, 18, 8:14 pm
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Great print by UA.

AA/DL/UA have all net cut their product quality the last couple of years. Denser domestic configurations, lower quality / skimpier premium cabin meals - even international, basic economy fares that give less for essentially the same price. The passenger in me didn't want that to work out - who doesn't want generous upgrades and good soft product - but the pragmatic side said - they'll get away with a lot of it if they crack reliability - which was prior management's greatest sin. That they did, and along the way got more airplanes in higher return places for the current demand environment.

As a very attractive young artist once told me - work your core and it all flows from there.

As long as we're going down memory lane...recall the litany of doom from a variety of voices...

"Polaris seat is not competitive...UA will lose its premium cabin customers"
"3 cabin first going away will tank premium business"


Turns out premium cabin load is one of the growth drivers this year - particularly transatlantic biz - even without much Polaris - and with the headwind of no more advance 3 cabin sales.

"International premium RASMs grew 3.7x faster than coach in the third quarter, and we can’t wait to see how we’ll perform once Polaris seats are fully rolled out. "
"When we look at where we’re going in the fourth quarter, what the premium cabins look like so far in the fourth quarter, we’re excited about what the future holds."
"I mean the premium cabins did really well across the board and the premium cabins even did fairly well to Latin America given the overall environment."

And...

"UA will need to trash margin and give huge givebacks via the frequent flier program to get customers back"

Today we stand at a no better, and in some ways less generous program than a few years ago, and they are printing these numbers. They also state they are winning previously lost customers back.

"As we’ve improved our operational performance and reliability and our customer service, we’ve seen some customers return to United that left us when we were not running the greatest operations several years ago. And that – the return of those customers have nothing to do with capacity, but more focused on our operational reliability."

"We’ve got – as a result of the recovery of the operation, we’ve seen market share come back that we previously lost. And we’ve also seen our improving customer service beginning to pay dividends. We’ve seen it in our internal customer metrics, and that translates into customers choosing to fly United when they have a choice more often than not. And everything we’re doing here at United ties together, from the world-class reliability to improving the product and customer service to the growth that drives customers to proactively choose United when given a choice."

Other from the transcript nuggets...

Looks like they are pleased with premium-heavy international configs - hopefully the 'more to say on this' is in reference to the premium dense 763s - though the other side of me says they'll use that as a chance to rip premium seats out of another part of the fleet.

"United’s hubs are located in the best premium markets on the globe. They represent the majority of business traffic to and from the United States. It is something, I think, very unique to us. And so we think we have appropriately sized our cabins to accommodate the business class needs or the premium needs across the globe.

So I think we're pretty pleased with that, and we offer, I think, pretty large-sized cabins to make sure whether you're going to China or London Heathrow, we can do that. We continue to look at the number of premium class seats we have onboard on all our aircraft given where our hubs are located. And I think, actually, we'll have more to say on this in the future as we make sure that we have the right number onboard every single aircraft we have."

I'm not bullish on any of the airlines - UA could very well be overpriced, as well as DL and AA, but UA is enjoying momentum this year.

Domestic - they're getting some nice - in the words of one analyst - pro cyclical lift. Getting biz pax from small markets with little choice to connect over hubs - instead of giving value fliers from bigger markets willing to take a cheaper fare via a connection. This is probably some of the first stuff to drop when a cycle turns though.

The international footprint is working in their favor this year - Europe doing well, Asia not (yet) contracting as feared, and doing a better job of selling premium seats.

Meanwhile Southwest has probably picked up a fair number of mid value biz travelers from all three - look at their valuation run: 234% appreciation the last 5 years vs 93% for Delta. People are getting fed up with the big 3 and Frontier / Spirit are a touch too bare bones.
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Old Oct 17, 18, 9:53 pm
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Originally Posted by EWR764 View Post
It's amazing how much more active these threads were when United wasn't producing such strong quarterly results! Not a whole lot to criticize here.
It was a lot more fun poking fun at that management team, and there's less bottled up resentment around here. These day's UA's running a pretty good operation and it continues to improve. Not perfect by any means (and the ongoing cuts to product quality are noticed and not welcome) but overall it feels like they're on an upward trend. Adding more Polaris seats will help.
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Old Oct 17, 18, 10:58 pm
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Originally Posted by Kacee View Post
It was a lot more fun poking fun at that management team, and there's less bottled up resentment around here. These day's UA's running a pretty good operation and it continues to improve.
The previous management team richly deserved the criticism they received. I agree that UA’s operations have improved, but making long haul Y a miserable experience with 10 wide pushes me to to the competition when I can’t get J or PE on UA.
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