Lower-than-expected business travel demand contributed to
year-over-year declines in United Airlines' revenue and yield in the first
quarter.
Revenue decreased 4.8 percent year over year to $8.2
billion, and passenger revenue per available seat mile declined 7.4 percent.
Consolidated yield dropped 6.1 percent. Close-in business travel during the
weeks around Easter declined more than anticipated, one factor in those decreases.
Low oil prices also continue to affect United's corporate
business in the energy sector, particularly at its Houston hub. The carrier's
corporate portfolio business declined 3 percent year over year during the
quarter and, even when taking the energy sector out of the equation, was down 2
percent, United vice chairman and chief revenue officer Jim Compton said. "The
energy sector, as well as the overall Houston hub, will continue to put
pressure on us. We're seeing good demand but at a lower yield."
United's load factor declined 1.2 percentage points year
over year to 79.9 percent during the quarter. Capacity increased 1.8 percent,
while traffic was up 0.3 percent.
The carrier scaled back its capacity-growth outlook for the
year. It now projects consolidated capacity will increase between 1 percent and
2 percent in 2016, compared with an early outlook of between 1.5 percent and
2.5 percent. It cut its international capacity-growth outlook to the 1 percent to
2 percent range from a previous range of 2.1 percent to 3.1 percent, while its
domestic capacity outlook was unchanged. United plans to fund growth in San
Francisco and Denver, the hubs that have stronger demand, from reductions in
Houston.
The carrier expects revenue growth to be flat to positive by
the fourth quarter. It's on track to introduce a basic
economy fare in the second half of the year, which will boost its ability
to compete with low-cost carriers. United president and CEO Oscar Munoz said
operational improvements would drive better revenue in the back half of the
year, as well. During the first quarter, United reported its best quarterly
on-time performance and its mishandled-bag rate since its merger with
Continental.
The carrier's net income for the first quarter
was $313 million, down from $508 million in the first quarter of 2015. An increased
income tax expense—$181 million, compared with $3 million in the first quarter
of 2015—was largely responsible for the drop.