United Airlines' efforts to improve revenue performance by adjusting its revenue management techniques appears to be delivering the desired results. The company for the second quarter reported nearly 4 percent year-over-year growth in passenger revenue and consolidated passenger revenue per available seat mile, ahead of initial expectations. Representing fare paid, passenger yield improved by 3 percent.
United revenue derived from "large" corporate clients grew by 3 percent in the second quarter "despite decreased year-over-year corporate revenue in April due to the Easter holiday shift," according to chief revenue officer Jim Compton, speaking Thursday with analysts and media. He noted "good growth" for United's PerksPlus small business program and said that overall corporate revenue increased about 6 percent.
Compton said a nearly 6 percent increase in domestic PRASM was driven by a "solid demand environment as well as strong execution on our revenue management initiatives." On the latter, United in last year's third quarter first publicly discussed the need to fix faulty revenue management assumptions, something it claimed to have started by the next quarter.
For example, the airline is "taking fewer early bookings and holding seat inventory for later, higher-yielding bookings," Compton explained, which contributed "three-quarters of a point of consolidated PRASM growth in the second quarter." He said United expects the practice to deliver a full point of PRASM growth during the current quarter.
Compton also said that the airline "recently restructured premium-cabin fares on many of our domestic and short-haul Latin flights," which led to another 0.5 percentage-point growth in PRASM and helped boost paid premium-cabin load factor by 5 percentage points to 47 percent.
United also reported a 7.9 percent year-over-year increase in ancillary revenue per passenger, to more than $21. That included a 28 percent revenue jump related to paid premium upgrades.
In a research note, Cowen and Company analysts wrote that while United "has historically lagged its major competitors in PRASM growth," the third quarter could represent "a turning point," given the airline's growth guidance of 2 percent to 4 percent. That is "in line with Delta," according to the research note, "and shows the company is beginning to bridge the gap in terms of PRASM."
United Continental Holdings for the second quarter reported net income of $789 million, up from $469 million in the year-earlier period.