United Continental Holdings Inc. UAL posted adjusted earnings of $4.53 per share in the third quarter of 2015, beating the Zacks Consensus Estimate of $4.49. Earnings were also up substantially on a year-over-year basis. The bottom line was aided by low fuel costs.
On the other hand, operating revenues of $10.31 billion fell short of the Zacks Consensus Estimate of $10.27 billion and declined 2.4% on a year-over-year basis. Passenger revenues declined 3.8% to $8.96 billion. Cargo revenues were down 0.8% while other revenues improved 9.8% in the third quarter.
During the reported quarter, airline traffic, measured in revenue passenger miles, increased 2% year over year on a consolidated basis while capacity (or available seat miles) grew 2.1%, leading to a 20 basis point decline in load factor (percentage of seats filled with passengers) to 85.6%. Consolidated passenger revenue per available seat mile (PRASM or unit revenue) declined 5.8% year over year. Yield on a consolidated basis declined 5.6% compared with the third quarter of 2014.
Total operating expenses, excluding special items, declined 10.7% year over year. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, third-party business expenses and special items; increased 1% year over year to 9.48 cents. Aircraft fuel expense declined over 38% in the reported quarter. Fuel price (economic) per gallon in the third quarter of 2015 was $1.97. The comparable figure was $3.01 per gallon a year-ago.
The company expects PRASM in the fourth quarter to decline in the range of 4% to 6%. Fuel price (Including all cash-settled hedges) is expected in the band of $1.85 to $1.90 per gallon in the final quarter of 2015.
As of Sep 30, 2015, United Continental had $6.9 billion of unrestricted liquidity, which included $1.35 billion of undrawn commitments under its revolving credit facility. The carrier has generated $627 million of free cash flow in the quarter under review. During the quarter, the company returned $262 million to shareholders through buybacks.
Zacks Rank
Currently, United Continental has a Zacks Rank #2 (Buy). Investors interested in the airline space may also consider Ryanair Holdings RYAAY, SkyWest Inc. SKYW and Virgin America VA, all of which sport a Zacks Rank #1 (Strong Buy).
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