I’ve been hugely critical of United Airlines’ operation, so in the interest of fairness it’s worth pointing out that second quarter financial results were much improved.
Cranky Flier had a good, albeit too-enthusiastic take on United’s performance in the second quarter.
They made $900 million for the quarter, a huge departure from the first quarter in which they lost $600 million.
The second and third quarters are the strongest for the industry. Everyone else is making today. And United still substantially lagged. American, which suffered far greater effects from Venezuela.
But this is a big deal for United anyway, even if they aren’t outperforming the industry, because another quarter like the first one (which was never in the cards) would have meant the Board of Directors would be pretty much forced to oust current executive leadership. That didn’t happen. Smisek has more time.
Going forward, just as United followed Delta’s playbook with their mileage program, they’ll follow Delta and American operationally — they’re getting rid of plenty of 50 seat regional jets, and they’re re-banking their hubs to reduce connection times (spreading out connections is better for costs, but hurts revenue since competitors have shorter travel times). They’ll also follow American’s lead in operating more seasonally — far more capacity in the summer than the winter.
Their earnings statement trumpets the continued rollout of uncomfortable slimline seats that are lighter and allow the airline to squeeze more seats onto a plane. And they’re finally making progress with wireless internet. Cranky points out that on the earnings call, United hemmed and hawed and gave a non-answer regarding the future of Washington Dulles. So that will be something to watch.
They’re putting $1 billion into share repurchase (over 3 years) rather than retiring debt or making additional capital investments with the money. They’re desperate to please Wall Street in the short term.
Bottom-line is that they made money, which buys them time, and they plan to copy their competitors to try to improve the operation.
My fear, for flyers, is that Smisek believes his own hype — that the problems are fixed — because the frontline ones certainly aren’t.
They almost have to make money during the current (third) quarter. What will be especially telling is how they perform during the 4th quarter of 2014 and 1st quarter of 2015.
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