United Airlines parent UAL Corp reported its first quarterly operating profit since 2007, boosted by a 26.2 percent jump in passenger revenue and lower-than-expected costs.
“Compared to our model, cargo and regional revenue were stronger and non-fuel costs were lower,” UBS analyst Kevin Crissey said in a research note.
Operating revenue rose 28.4 percent to $5.16 billion, with a 57 percent jump in cargo revenue and 36.3 percent rise in revenue from United’s regional affiliates. Operating expenses rose 21 percent to $4.73 billion.
Excluding fuel and expenses associated with United’s proposed merger with Continental Airlines , costs rose 1.9 percent. JP Morgan analyst Jamie Baker had expected a 3.4 percent rise in this metric for the second quarter.
Mainline unit revenue, or the revenue derived from the seats on planes that United flies, rose more than 28 percent.
Q3 Cost Ooutlool Prompts Concern
Airlines are widely expected to post better second-quarter results as air traffic recovers from the recession. Capacity cuts have positioned carriers to operate fuller planes, helping them to increase fares.
United last reported an adjusted quarterly profit in the third quarter of 2007.
United’s report comes on the heels of Delta Air Lines’ quarterly scorecard. The airline posted its highest quarterly profit in a decade but its third-quarter outlook disappointed investors.
The merger between United and Continental will create the world’s largest airline, edging out current leader Delta.
“We expect United (management) to provide a warmer tone regarding the current revenue environment than Delta did,” Crissey wrote.
Both Crissey and Baker said the company’s cost outlook for the third quarter appeared to be worse than expected. United expects its mainline costs, excluding fuel, to rise as much as 4.8 percent.
But the company’s 2010 cost outlook remained fixed, suggesting “a rebalancing of our 3Q and 4Q forecast,” Baker said in a research note. (Reuters)