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United Airlines' second-quarter
corporate revenue grew 2 percent year over year, "fairly consistent with
first-quarter growth," chief revenue officer
Jim Compton said Thursday during the
carrier's quarterly earnings call.
Compton pointed to relative strength in demand from
business services, computing, financial services, information technology,
electronics and pharmaceutical clients, but "lagging" performance in
the aerospace and defense sectors and
"some" weakness in manufacturing.
Despite United's corporate
sales growth and ongoing recovery from a challenging 2012, some analysts
exhibited concerns regarding the airline's competitive footing in the corporate
While it's not clear how the carriers differ in their
accounting of "corporate revenue," United's growth in the segment was
lower than Delta's professed 4 percent year-to-date growth rate from the
same period last year. Additionally, Delta indicated corporate revenues were
"up 8 percent in the last four weeks, driven by strength in the domestic
market," according to Delta president Ed Bastian.
Wolfe Research analyst Hunter
Keay told United executives Thursday that "it feels to me that to some
extent on the revenue line there might be some struggles on the corporate side."
Keay also pointed to
"Delta adding routes like Newark-Paris," which he suspected was
"probably a pretty lucrative pharmaceutical corporate route for you. To me
it implies that Delta thinks that they can take advantage of your
Compton replied that
"we're really comfortable with our position in New York" and "we
have competitive capacity challenges all the time."
Regarding the route singled
out by Keay, "Some of that capacity has been there before with Air France,
so now Delta is flying it and so forth," Compton said. Air France and
Delta are SkyTeam partners and operate a transatlantic joint venture.
Morgan Stanley's John Godyn suggested
United faces mounting competitive threats in the corporate sector. "We've
certainly seen Delta making improvements of their own with the Virgin Atlantic concept that they have going on, and the new American is on the
horizon, and some of their synergies are related to taking corporate travel market share back," Godyn said during the earnings call.
With that backdrop, Godyn
asked if United envisions "a more competitive corporate market, or is the
pie getting bigger?"
Compton responded, "As
demand, as measured by GDP, grows faster than capacity, I think the pie is
growing," he said. "Obviously that's dependent on the strength of the
Compton added that the
corporate market "is competitive" and "will be competitive, but
we think our value proposition—when it's our turn in front of the corporate travel
managers—is a powerful one." He stressed the strength of the carrier's
network, product and service investments and ongoing capacity discipline as
keys to growth in the corporate space.
Despite some analyst concerns, the tone of United
executive commentary sharply contrasted that of the carrier's 2012
second-quarter earnings call, during which CEO Jeff Smisek took time to apologize for the carrier's lackluster operational
performance and the aftermath of its buggy transition to a new passenger
services system in March 2012.
In the following months, there was evidence of deteriorating corporate buyer sentiment and business travelers jumping to
competitors, though turbulence has since subsided.
At times during the conference call on Thursday,
executives used the phrase "turning the corner," and Smisek suggested
that applies to the corporate segment.
"Conversations with our
corporate customers today are very different than they were last year," he
said Thursday. "Last year was a year of apology. This year, it's an
opportunity for us to sell our services to our important corporate customers,
make sure they understand not only the power of network but the investments
we're making in our fleet and in our product and in our technology and our people.
We're excited about how things are going directionally."
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