United Airlines enjoyed an "I told you so" moment with its fourth-quarter revenue results, as capacity growth plans that rattled analysts early last year appeared to pay off.
United in prior years had abandoned regional service from its hubs in favor of taking on American Airlines and Delta on their key routes. The carrier's more recent strategy has grown those routes. United introduced 93 routes in 2018, more than any other U.S. airline, and capacity for the full year rose 4.9 percent year over year. Those plans had concerned investors, worrying that they would lead to lower fares. However, United's traffic growth, at 6.4 percent, outpaced capacity growth and did not dilute unit revenue or yield growth. "Not all capacity growth is created equal, and I think we proved that this year," CEO Oscar Munoz said on United's earnings call.
Corporate business growth contributed. Chief commercial officer and EVP Andrew Nocella said corporate revenue growth outpaced the 11 percent overall revenue growth in the fourth quarter. Despite the volatile stock market and the ongoing government shutdown, corporate demand has started off strong this year, as well, said United president Scott Kirby.
In the first week of the year, business bookings were up 11 percent compared with a year prior, and yield on those bookings was up slightly, as well. While it's usually difficult to draw conclusions based on a single week, the first week of the year is an exception, as it's a good indicator of whether businesses are tightening T&E budgets for the year ahead, Kirby said.
In 2018, United also set its best completion rate and its best on-time performance for the first departures of the day. For the fourth quarter, United's traffic rose 7.2 percent year over year amid a 6 percent increase in capacity, pushing total load factor up 1 percentage point to 82.7 percent. Yield increased 3.8 percent. "United's results should be applauded, as the company did a great job executing their strategic plan in 2018," Cowen and Co. analyst Helane Becker wrote in a research note.
United reported a net income of $462 million for the quarter, down from $579 million in the fourth quarter of 2017. Fuel costs rose nearly 27 percent year over year for the quarter. For the full year, net income held steady from the previous year, at $2.1 billion.
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