United Airlines' revenue from corporate customers during the first quarter of 2015 declined 1 percent year over year due to reduced demand from the energy sector, and the carrier is reducing capacity in energy-centric markets as a response.
Revenue from the energy sector was down 20 percent year over year, United vice chairman and chief revenue officer Jim Compton said in the company's first-quarter earnings call. Excluding the energy sector, corporate revenue during the quarter increased 1 percent year over year, with the healthcare sector showing the most strength, he said.
In United's hub in Houston, a major energy market, revenue
per available seat mile sank 5 percent year over year, executives said. Travel
cutbacks from the energy sector hit United's revenues especially hard because
its international travel tends to be in high-yield, premium cabins.
"We are working closely with corporate customers to
address their travel needs and have begun taking appropriate capacity
reductions in several energy-centric markets to address their declining
performance," Compton said. "Coming into the summer, we plan to reduce
capacity in these markets by 6 percentage points compared with our original
expectations."
Those capacity reductions include international and North
American routes, including those to energy markets in North Dakota and Canada,
he said. United is "prepared to make additional changes if necessary,"
he added.
United's revenue also took a hit from reduced fuel
surcharges, particularly in the Asia/Pacific region, though United has "increased
base fares to offset a portion of that headwind where demand permits,"
Compton said.
Overall, United lowered the capacity increase it forecast for
2015 to a range of 1 percent to 2 percent. It previously had projected an
increase of 1.5 percent to 2.5 percent. The carrier plans to increase domestic
capacity between 0.2 percent and 1.2 percent this year and international
capacity between 2 percent and 3 percent.
United's first-quarter profit was $508 million, a first-quarter
record for the carrier and an improvement from a $609 million loss in the first
quarter of 2014. Consolidated passenger revenue increased 0.5 percent to $7.4
billion during the quarter and was up on all routes except transpacific ones.
Consolidated passenger load factor remained flat at 81.1 percent during the quarter, as both traffic and capacity increased 0.1 percent. Average yield per revenue passenger mile and passenger revenue per available seat mile both increased 0.4 percent year over year, while total revenue per available seat mile declined 1.1 percent.