United revenues to take weather-related hit in Q1

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United Airlines anticipates unit revenue and capacity declines in the first quarter, following the cancellation of roughly 35,000 flights due to severe weather.

The Chicago-based carrier expects a 1.5% to 2.5% decrease in consolidated passenger revenue per available seat mile (PRASM) during the period, according to an investor update on 8 April. The weather-related cancellations decreased this number by 1.5 percentage points.

United expected first quarter PRASM to decrease by 0.5% to 2.5% in February.

Consolidate capacity decreased roughly 0.3%, following a 1.2% reduction in domestic capacity and 1% increase in international capacity, during the quarter.

About 30,000 of the 35,000 flights that United cancelled were regional flights.

Consolidated traffic was also down 0.3% during the three months ending in March, according to a traffic update from the carrier.

Consolidated costs per available seat mile (CASM) excluding fuel, profit sharing and third-party expenses are a bright spot at United. It expects these to increase by 3% to 4% during the quarter, which is 0.5 percentage points better than the guidance it provided in January.

“Despite reduced capacity, increased expenses related to out-of-position crews, and what we can only imagine is a new record for glycol consumption, United is guiding to consolidated ex-fuel/profit/third-party CASM… slightly better than their initial [guidance],” writes JP Morgan analyst Jamie Baker. “An impressive outcome, in our view.”

Despite the unit cost improvements, JP Morgan has widened its quarterly loss projection for United due to the poor revenue numbers, he says.

United anticipates an average cost of fuel of $3.16 to $3.21 per gallon, which is up from an expected $3.08 to $3.13 per gallon in January.

Gross capital expenditures are expected to total $730 million to $750 million in the quarter.

United anticipates debt and lease payments of roughly $640 million during the period.