United Airlines is not meeting management expectations for financial performance, despite improving its net profit in the second quarter from a year earlier.
"Are we satisfied with our financial results this quarter year-to-date? Absolutely not," says Jeff Smisek, chairman, president and chief executive of the Chicago-based carrier, during an earnings call on 25 July. "We are not satisfied with them. They do not represent what we can and will be, and we're really focused on that."
United posted a $469 million net profit after special items during the quarter, reversing from a loss in the first quarter.
Operating revenue was up 0.6% to $10 billion and operating expenses were down 1.4% to $9.23 billion in the quarter compared to a year earlier. Operating income was $770 million.
Despite the headline improvements, passenger revenue per available seat mile (PRASM) only grew 1% to 13.7 cents while costs per available seat mile (CASM) excluding fuel, special charges and third-party business expenses rose 6.6% to 9.39 cents.
"Our level of unit cost increase this year is unacceptable to me and to many others," says John Rainey, chief financial officer of United, during the call.
Executives emphasised the various improvements that United was making to its operations during the call. Jim Compton, chief revenue officer at the airline, says that efforts to increase the number of available spare parts and return spare aircraft to prior levels are "paying off" and that maintenance-related cancellations are down 37% year-on-year.
The availability of spare parts and the number of spare aircraft were two issues that dogged United when it significantly underperformed operationally a year ago.
"We now have more than a year's experience using SHARES, our passenger service system, together with ORION, our revenue management system, to optimise revenue over our unmatched global network by balancing local inflow traffic, both domestically and internationally, especially in our Newark and San Francisco hubs," says Compton on the result of the airlines technology integration in 2012.
United also launched an early-out programme for passenger service, fleet service and storekeeper work groups during the second quarter that executives anticipate will provide quick and tangible benefits once they conclude.
Geographically, the carrier reported revenue results similar to those at other US carriers. PRASM for Europe grew 6% year-on-year while the metric for the Pacific fell 3.5% during the quarter. United attributes the Europe improvement to "rightsizing" the airline's footprint in the region while the depreciation of the Japanese yen and yield pressure in Australia hit its Pacific unit revenues.
Delta Air Lines saw similar improvements in Europe and weakness in the Pacific.
"During the second quarter, we demonstrated progress across all of our top priorities for 2013," says Smisek. "We operated a more reliable airline this quarter, despite experiencing moderate to severe weather and air traffic control delays during almost half the days in the quarter."