United's revenue from corporate business grew 9 percent year over year in the first quarter as the carrier reported strength in both domestic corporate business and premium cabin demand on international flights.
Total passenger revenue increased 6.5 percent year over year during the quarter to $8.15 billion, and chief commercial officer Andrew Nocella said the revenue environment is "the strongest we've seen in some time." Growing demand from the energy sector is driving corporate revenue growth, and United also sees strength in pricing, he said, echoing a sentiment expressed by Delta last week. "As a result of an intensifying competitive landscape in corporate pricing, particularly in the small and medium enterprise segment, we invested in sales initiatives that have sharpened our competitive position across all sectors, geographies and the entire fare spectrum," Nocella said.
Basic Economy fares also have provided pricing strength, he said. While they are available on two-thirds of United's domestic market, travelers buy less restrictive fares 60 to 70 percent of the time, according to the carrier.
Domestic, Transatlantic & Transpacific
Domestic U.S. unit revenue rose 1.6 percent amid "healthy business and leisure demand."
Unit revenue growth was the strongest on transatlantic routes, up 8.8 percent year over year, driven by premium cabin demand, according to United. In Latin America, unit revenue rose 5.1 percent, buoyed by demand to Central America and to beach markets in the Caribbean.
While transpacific unit revenue overall decreased in the first quarter, it increased by a mid-single digit percentage in March. It would have risen overall in the first quarter if not for Micronesia, indicating a reversal of "13 quarters of underperformance," according to Nocella.
In a research note, Cowen said transpacific unit revenue growth likely would be positive by the third quarter: "We expect the [second quarter] will continue to show negative pricing trends in the Pacific driven by capacity issues in Hong Kong and secondary Chinese cities. That said, unit revenue results in the Pacific are improving sequentially and performing better than United initially anticipated."
Traffic & Capacity
Overall, United's traffic increased 4.7 percent year over year in the first quarter as capacity increased 3.6 percent, pushing load factor up 0.8 percentage points to 80.4 percent. Yield increased 1.7 percent year over year.
The carrier has been working to grow its hubs' connections to regional markets and had announced with its fourth-quarter earnings that it would expand capacity overall by 4 percent to 6 percent in 2018. Now, it has narrowed that range to between 4.5 percent and 5.5 percent.
United reported a net income of $147 million for the quarter, up 48.5 percent year over year.
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