Tag Archives: United Continental

Business, Finance, Occupation & Industry

March Was a Month to Forget for Airlines

April 10, 2013 Bartle Doo Leave a comment

By Adam Levine-Weinberg, The Motley Fool

It’s that time of the month again; time to review the major airlines’ unit revenue results. Several major airlines complained about deteriorating booking trends during March, particularly for pricier last-minute ticket purchases. Here are the results for the five top U.S. carriers:

Airline	Unit Revenue Gain
AMR	0.3%
Delta Air LInes	2.0%
Southwest Airlines	Flat
United Continental	6.5%-7.5%
US Airways	Flat

Source: airline press releases

United Airlines was the clear winner in March, with an approximately 7% increase in unit revenue over March 2012. That was comparable to the company’s unit revenue gain in February. By contrast, every other airline reported a slowdown in unit revenue growth compared to February. Moreover, American, Southwest, and US Airways came dangerously close to posting year-over-year declines in unit revenue.

The consensus in the airline industry seems to be that the sequester is reducing demand for last-minute tickets. American, Delta, and US Airways all mentioned that demand for close-in bookings was lower than expected; Delta and US Airways attributed this specifically to the sequester. Government agencies are having to make do with smaller budgets, and travel budgets seem like an obvious target for cuts. Even when travel is essential, federal agencies may be able to save money by planning further in advance and securing cheaper tickets. Beyond the direct effect of lower government budgets, the sequester is also starting to weigh on the economy more broadly. The Labor Department’s March jobs report was much weaker than expected, and a stagnant economy is obviously bad for air travel demand.

Clear skies for United?
While United posted much better unit revenue growth than any of its competitors in March, I wouldn’t go rushing out to buy its shares just yet. First, United announced late last month that first-quarter costs had increased far more than the company had initially expected. Non-fuel unit costs are now expected to increase by 11.4%-12.4% for Q1. This guidance change quickly led to a dozen negative revisions to Q1 analyst estimates. Analysts now believe the company lost even more money last quarter than it did in Q1 of 2012.

Second, United’s industry-leading unit revenue growth in February and March was largely an artifact of easy comps from 2012. United changed its reservation system in early March last year, and the company deliberately sold fewer tickets for the weeks surrounding the system change. The goal was to lighten the burden on employees who were using the new reservation system for the first time by deliberately reducing traffic. (Despite this attempt to ensure a smooth transition, the system change went poorly and contributed heavily to United’s ranking at the bottom of the industry for customer service last year.)

United will have a harder time posting strong revenue growth this month. In fact, United (along with US Airways) has high market share in the Washington, D.C., area,

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

"The World's Leading Airline" Is Actually the Worst in the U.S.

April 9, 2013 Bartle Doo Leave a comment

By Adam Levine-Weinberg, The Motley Fool

Filed under: Investing

United Continental CEO Jeff Smisek has been marketing United as “the world’s leading airline” for the past year. At an industry conference last month, Smisek stated that he wasn’t worried about American Airlines taking the title of the world’s largest airline following the latter’s merger with US Airways . Instead he was focused on the goal of being the world’s leading airline. This entails having the best route network to get people where they need to go, and providing strong customer service along the way.

Unfortunately for United and its customers, reality doesn’t quite live up to Smisek’s vision. The 2013 Airline Quality Rating survey (an annual study of various quality of service metrics for the U.S. airline industry) put United at the bottom of the list (No. 14). Furthermore, the No. 12 and No. 13 airlines — SkyWest subsidiaries SkyWest Airlines and ExpressJet Airlines — are regional carriers doing most of their flying for United. United’s poor service quality will make it difficult for the airline to sustain its historical revenue premium. As a result, I believe the market is overestimating United’s ability to bounce back quickly from its disappointing 2012 earnings performance.

Survey says!
The Airline Quality Rating survey (link opens a PDF) takes into account four criteria: on-time performance, denied boarding frequency (aka “getting bumped”), mishandled baggage, and customer complaints. For 2012, United and its regional partners were near the bottom of the pile in terms of on-time performance and mishandled baggage, and were by far the worst offenders in terms of denied boardings and customer complaints. United’s overall score of -2.18 was far worse than the scores for its major competitors:

Airline	Rating (smaller negative number is better)
American Airlines	-1.11
Delta Air Lines	-0.58
Southwest Airlines	-0.81
United Airlines	-2.18
US Airways	-0.87

Data from 2013 Airline Quality Rating survey

United Continental‘s performance significantly deteriorated compared to 2011, when United scored -1.45 and Continental scored -1.41. Much of this drop can be attributed to the difficult merger integration process, particularly a number of IT system problems that disrupted flight schedules and hurt customer service. Nevertheless, even if the company had maintained its 2011 rating, that still would have placed it significantly behind all of its major competitors.

Why it matters
Despite its poor service compared to peers and unit revenue growth near the bottom of the industry for 2012, United still maintains a modest revenue premium over competitors. This is partially the result of having hubs in many of the biggest and wealthiest cities in the country. However, it its also partially a legacy of Continental Airlines‘ reputation for superior service. As recently as 2009, Continental was the top-ranked network carrier in the AQR survey. However, United Continental has lost that customer service advantage to Delta, and it should not be surprising that Delta …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Airline Stocks: Is It the End of the Party?

April 4, 2013 Bartle Doo Leave a comment

By Adam Levine-Weinberg, The Motley Fool

Filed under: Investing

After finishing 2012 with a strong December, airline stocks went on a tear in the first quarter of 2013. Of the five largest U.S. carriers (excluding American Airlines, which is in bankruptcy), the worst performer was JetBlue , which still gained a solid 17% for the quarter, outperforming the S&P 500 by nearly 10%.

Airline Q1 2013 Stock Performance vs. S&P 500, data by YCharts

However, in the past week, airline stocks have been buffeted by one piece of bad news after another. In just three days, a number of airline stocks have lost 10% or more of their value.

Airline 1 Week Stock Performance vs. S&P 500, data by YCharts

This quick reversal implies that we have probably reached the end of the airline rally. However, that does not mean that long-term investors should necessarily avoid the sector altogether. If you pick your spots carefully, you should still be able to earn some nice returns in airline stocks.

The rally
Last quarter’s massive airline rally was primarily driven by speculation about a potential merger between American Airlines and US Airways , followed by enthusiasm about the potential benefits for the industry, after the merger agreement was announced. Moderating oil prices also helped give airline stocks a boost. It seemed to me that the merger’s potential benefits were already priced in by the time the agreement was announced in mid-February, but investors continued to push airline stocks higher. Most notably, Jim Cramer came out as bullish on US Airways in early March, reversing a long-held aversion to airline stocks.

The main rationale for buying airline stocks based on the American-US Airways merger was the idea that consolidation would lead to capacity discipline, boosting pricing power. Continued unit revenue gains at the major airlines in January and February added to this hope. However, consolidation is not particularly new for the airline industry. In the past five years, Delta Air Lines merged with Northwest, United and Continental merged to form United Continental , and Southwest Airlines purchased AirTran. Most of the benefits of tamer — not to mention saner — competition have already been achieved.

The reality check
In the past week, airline investors have faced a major reality check. First, United Continental published an investor update before the long weekend in which it announced that non-fuel unit costs would increase by 11.4%-12.4% in the first quarter, far worse than its original projection of an 8%-9% increase. As a result, various analysts cut their Q1 estimates for United, anticipating an even larger loss than previously expected. Nevertheless, analysts were encouraged to see that United expects unit revenue to increase 5.4%-6.4% for the full quarter (implying a gain of roughly 7% in March).

However, if United’s report led investors to believe that the revenue environment is strong, Delta and US Airways proceeded to dump cold water on that notion. On Tuesday, Delta reported unit revenue growth of …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Coming Soon to Washington: Cheap Flights?

April 2, 2013 Bartle Doo Leave a comment

By Adam Levine-Weinberg, The Motley Fool

Filed under: Investing

Ever since American Airlines and US Airways announced their intention to merge in February, investors and industry observers have been wondering what effect the merger will have on competition. For the most part, American and US Airways have complementary route networks: They only overlap on 12 routes out of a total of 900. As a result, the two companies’ management teams have recently stressed that the merger should not raise antitrust concerns.

There’s always a but!
However, JetBlue Airways CEO Dave Barger recently squared off against US Airways CEO Doug Parker about the “new American’s” dominant position at Reagan National Airport, just outside of Washington, D.C. Reagan National is one of several U.S. airports covered by slot restrictions, where the number of flights is capped. As a result, airlines can only add flights by acquiring slots from carriers that already serve the airport, which can be very difficult to accomplish. JetBlue has had trouble growing its presence at Reagan National because of the unavailability of slots.

US Airways is already by far the largest carrier at Reagan National. Last year, the company completed a “slot swap” with Delta Air Lines , whereby Delta received 132 slot pairs at New York’s LaGuardia Airport in return for 42 slot pairs at Reagan National Airport. To win regulatory approval for that transaction, the two carriers had to divest eight slot pairs at Reagan National, leaving US Airways with 55% of the slots there. (JetBlue purchased those slots at auction for $40 million.) Based on current schedules, American Airlines appears to hold approximately 50 of the remaining slot pairs. As a result, if the merger goes through with no slot divestitures, the combined carrier would hold approximately two-thirds of the slots at Reagan National Airport.

US Airways and American only compete on two routes from National Airport: Nashville and Raleigh-Durham. Thus, a merger would only directly impact competition on those two routes. However, American’s potential stranglehold on slots at National Airport would give the company a massive competitive advantage in the D.C. region.

National is the key to D.C.
Doug Parker argued last week that holding two-thirds of the slots at Reagan National would not violate antitrust laws for two reasons. First, US Airways utilizes many smaller regional jets and turboprops there, so the combined carrier would only control about half of the seats, even though it would have two-thirds of the slots. Second, the D.C. area is also served by Washington Dulles Airport, where United Continental operates a hub, and Baltimore-Washington International Airport, which is the third-largest focus city for Southwest Airlines (including flights by its AirTran subsidiary). Between those three airports, American would only operate 25% of flights.

However, National is by far the closest airport to downtown D.C. and has its own stop on the Metro system. This makes it the preferred airport for most travelers in the region. While Dulles Airport will be connected to the Metro …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Delta Hits Turbulence on Sequester Cuts

April 2, 2013 Bartle Doo Leave a comment

By Travis Hoium, The Motley Fool

Filed under: Investing

Delta Air Lines stock is languishing on a generally upbeat day for the markets, down more than 7% late in the trading session. Delta had expected March to show a big improvement in revenue per seat-mile flown — a key metric for airlines — but sequester cuts and technical problems left the result short of forecasts. Revenue per seat-mile did grow 2% in March from a year earlier, but less than a month ago company officials had said they expected 4.5% to 5.5% growth.

One of the issues cited in today’s announcement was a decline in last-minute bookings by government employees, which Delta thinks owes to the sequester. Expensive airline tickets are an easy item to cut, and with across-the-board spending cuts taking effect March 1, Delta took a hit this month.

But that wasn’t Delta’s only problem in March. The company pointed to “temporary inefficiencies” in determining what to charge for flights, which had customers grabbing either cheaper tickets from competitors or inexpensive tickets from Delta. The company may be able to gain some of this revenue back in coming months, so this is the least concerning point.

Good for competitors?
The question is whether Delta’s loss is competitors’ gain. Today, investors don’t think so, judging by the decline in airline stocks. One analyst downgraded United Continental just yesterday because he thought higher costs would hurt the airline. The stock is down 4.3% today.

The merger of US Airways and American Airlines was supposed to lead to less competition and higher prices, but the latest data point doesn’t seem to be supporting that thesis. U.S. Airways is down 4.6% as of the time of writing.

Investors should keep an eye on trends in revenue per seat mile over the next few months. Sequester pressure will subside, but long-term challenges that have always faced the airline industry, such as fuel costs and fierce price competition, will remain.

ETFs you can buy today
To learn more about a few ETFs that have great promise for delivering profits to shareholders in a recovering global economy, check out The Motley Fool’s special free report “3 ETFs Set to Soar During the Recovery.” Just click here to access it now.

The article Delta Hits Turbulence on Sequester Cuts originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Business, Finance, Occupation & Industry

Maybe Buffett Was Right About Airlines After All

April 2, 2013 Bartle Doo Leave a comment

By John Maxfield, The Motley Fool

Filed under: Investing

“How do you become a millionaire? Make a billion dollars then buy an airline.”
— Warren Buffett

^XAL data by YCharts.

Or maybe not. Yesterday, on April Fool’s Day no less, the financial media grasped onto a particularly peculiar story. “Airline Returns Refute Buffett Aversion to U.S. Carriers” read a Bloomberg News headline. Barron’s chimed in with “Buffett’s Missed Airlines Bet.”

The argument in both was the same, though I suppose that’s not surprising given that the Barron’s article quoted the Bloomberg piece. Warren Buffett, probably the greatest investor of all time and the chairman and CEO of Berkshire Hathaway , has shunned airline stocks for the past quarter century. Yet, in the first quarter of this year, an index that tracks the sector surged by 35%. As of yesterday’s closing price, Delta has seen its stock soar by 33%, United Continental‘s by 28%, and US Airways Group‘s by 19%.

According to an analyst quoted by Bloomberg, “The same factors that made airlines uninvestable for years — too much capacity, too much debt — are the opposite now and make them attractive. I’m not going to shy away from an industry just because it has a bad history.”

So there you have it. Buffett was wrong, and an analyst who willingly ignores decades of precedent was right.

Well, suffice it to say, a coronation is perhaps a bit premature. Shares of the major airlines are down considerably today after Delta reported disappointing traffic figures for the month of March and cut its first-quarter revenue forecast. The company’s president had previously predicted that first-quarter passenger revenue per available seat mile — a key metric in the industry — would increase between 4.5% and 5.5% in the first three months of the year, implying a gain of between 4% and 4.5% in March. The company reported this morning, however, that the actual figure came in at 2%.

According to the press release issued by Delta, “The reduction from previous guidance is due to lower close-in bookings driven by the sequester, lower than expected demand as a result of our attempt to drive higher yields, and temporary inefficiencies during implementation of new revenue management technology.”

The fact remains that airlines are and have been a horrible investment. Was the first quarter of this year an aberration? Yes. Obviously. But does it disprove the prudence of Buffett’s aversion to the sector? I suppose the chart at the beginning of this article speaks to that.

Thanks to the savvy of investing legend Warren Buffett, Berkshire Hathaway‘s book value per share has grown a mind-blowing 586,817% over the past 48 years. But with Buffett aging and Berkshire rapidly evolving, is this insurance conglomerate still a buy today? In The Motley Fool’s premium report on the company, Berkshire expert Joe Magyer provides investors with key reasons …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why United Continental Is Poised to Pull Back

April 1, 2013 Bartle Doo Leave a comment

By Brian D. Pacampara, The Motley Fool

Filed under: Investing

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool’s free investing community, airline operator United Continental Holdings has received an alarming one-star ranking.

With that in mind, let’s take a closer look at United Continental and see what CAPS investors are saying about the stock right now.

United Continental facts

Headquarters (founded)	Chicago (1934)
Market Cap	$10.7 billion
Industry	Airlines
Trailing-12-Month Revenue	$37.2 billion
Management	Chairman/CEO Jeffery Smisek Vice Chairman/Chief Revenue Officer James Compton
Return on Capital (average, past 3 years)	8.2%
Cash/Debt	$6.5 billion / $13.2 billion
Competitors	Delta Air Lines Southwest Airlines US Airways

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 51% of the 790 members who have rated United Continental believe the stock will underperform the S&P 500 going forward.

Just last month, one of those Fools, gameguru, succinctly summed up the United Continental bear case for our community:

The recent run-up seems unsupported by fundamentals. Oil prices likely can and will go higher. TSA delays and FAA furloughs may reduce traffic. Recent weather problems will hurt traffic. Add to that, United is the only US carrier currently hampered by the Dreamliner’s grounding.

What macro trend was Warren Buffett referring to when he said that “this is the tapeworm that’s eating at American competitiveness”? Find out in our free report: “What’s Really Eating At America’s Competitiveness.” You’ll also discover an idea to profit as companies work to eradicate this efficiency-sucking tapeworm. Just click here for free, immediate access.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

The article Why United Continental Is Poised to Pull Back originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Southwest Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

function addEvent(obj, evType, fn, useCapture){
if (obj.addEventListener){
…read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Are William Shatner and Cheap Plane Tickets Gone Forever?

March 30, 2013 Bartle Doo Leave a comment

By Adam Levine-Weinberg, The Motley Fool

Filed under: Investing

The recent announcement that American Airlines and US Airways plan to merge has sparked fears that consolidation will lead to less competition and higher airfares. Assuming the merger is approved, more than 80% of domestic capacity will be controlled by just four airlines: the new American, United Continental , Delta Air Lines , and Southwest Airlines . All four will have been created by mergers within the past five years. Delta started the most recent round of consolidation by merging with Northwest, followed several years later by the merger of United and Continental and Southwest’s acquisition of AirTran.

This history of airline consolidation means we have a substantial amount of evidence about the effects of airline mergers on airfares. The days of so-cheap-you-can’t-believe-it airfares are probably gone. However, that’s a good thing, because irrationally priced airfares have resulted in trips to bankruptcy court by numerous airlines over the past three decades. Yet surprisingly, airfares have been quite stable in the face of rising oil prices since 2000. Airline mergers (and bankruptcies) have generated significant cost savings over time, allowing airlines to become profitable without raising fares beyond historical inflation-adjusted levels.

Stability in a sea of change
Since 1995, the average domestic airfare has risen from $288 to $367. The increase hasn’t been linear: Airfares spiked from 1996 until 2000, before dropping off for much of the next decade. Since 2009, airfares have been on the rise again.

Source: U.S. Department of Transportation

However, if we adjust for inflation, it turns out that airfares have declined since 1995. Q3 2012 airfares averaged just $243 in 1995 dollars, down more than 15% since 1995 and down more than 18% from the inflation-adjusted peak in 2000.

There is a catch, though. Department of Transportation statistics include only the base airfare. Non-ticket charges such as baggage fees aren’t included. Since airlines have been charging baggage fees for only about five years, the DOT statistics understate the increase in airline prices. On the other hand, the DOT also provides statistics on the percentage of airline revenue derived from ticket sales. Working backwards from this information, it appears that the average ticket price last summer including new fees was $294 in 1995 dollars, implying that fees for checked baggage, seat selection, and the like average around $50 — roughly the cost of checking one bag for a round-trip flight on most airlines.

At $294, the average inflation-adjusted airfare is still slightly below the 2000 peak of $297, but slightly higher than the 1995 level of $288. Given the turmoil that has shaken the industry in the past decade, the long-term stability of inflation-adjusted airfares is surprising.

Rising oil: no problem
It’s particularly remarkable to look at the trajectory of average airfares from 2007 to 2012. The average price of Brent crude skyrocketed over that period, from $72.44 in 2007 to $111.63 in 2012 (with a violent dip in 2009). Since jet fuel is the biggest cost item for …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why the Dow Overshadows These Forgotten Stocks

March 23, 2013 Bartle Doo Leave a comment

By Dan Caplinger, The Motley Fool

Filed under: Investing

Around the world, investors watch the Dow Jones Industrials as a measure not only of the 30 stocks in the average but also of the health of the entire global economy. Yet an obscure Dow average that few people even know about holds some interesting secrets about the broader stock market. Let’s look at this forgotten benchmark to see what it can tell us about the current bull market.

Getting the bigger picture
What most people refer to as the Dow is known as the Dow Jones Industrial Average, but over time, it has come to include far more than pure industrial companies. With everything from technology and telecom stocks to consumer-goods and financials, the Dow includes nearly every sector of the economy.

Most people are aware that there are separate Dow averages for the transportation and utility sectors. Those averages have few components and are much more focused, lacking the outside influence that the Dow gives to companies beyond the industrial sector.

But what many people don’t know is that there’s an overall average, the Dow Jones Composite, that incorporates all three of the other Dow averages. If you want to include stocks from every part of the economy, then the Dow Composite is the place to go.

How has the Dow Composite done lately?
Like the Dow, the Dow Composite has risen to new record highs lately, having eclipsed the average’s old 2007 highs earlier this year. But the Dow Composite has been setting new records for a lot longer than the Dow, as the Composite set a record on Jan. 25 and has risen more than 5% since then.

The strength in the composite has come largely from the transports. When you look at the best performers in the composite over the past year, the top five stocks on the list are all transports, with airlines representing the top four. Giants Delta Air Lines and United Continental have posted gains of 75% and 60% over the past year on the strength of higher ancillary revenue from baggage fees and similar charges, and the recent consolidation in the industry has boosted their prospects immensely. For top performer Alaska Air Group , up 82%, the possibility of further merger and acquisition activity has heightened interest in the regional carrier.

By contrast, the utilities have contributed the least to the Dow Composite‘s run. You have to go 13 deep into the top-performers list before you hit your first utility stock, NextEra Energy , which is up 31% after shifting its portfolio away from hydroelectric power toward wind and solar power that qualify for more tax credits. For the most part, utility stocks have lagged because of sluggish economic activity and the impact of costly natural disasters, particularly the two major East Coast hurricanes that hit the Northeast during 2011 and 2012.

Why don’t people follow the Dow Composite?
If the Dow Composite is more complete …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

GOL Linhas Earnings: An Early Look

March 22, 2013 Bartle Doo Leave a comment

By Dan Caplinger, The Motley Fool

Filed under: Investing

Earnings season is just about over, with almost all companies already having reported their quarterly results. But there are still a few companies left to report, and GOL Linhas is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Brazil has been a fast-growing economy in recent years, and as the No. 2 airline serving Brazil and the rest of Latin America, GOL has participated in that growth. Given how well U.S. airlines have done recently, has GOL seen the same success? Let’s take an early look at what’s been happening with GOL Linhas over the past quarter and what we’re likely to see in its quarterly report on Monday.

Stats on GOL Linhas

Analyst EPS Estimate	($0.21)
Year-Ago EPS	$0.19
Revenue Estimate	$1.63 billion
Change From Year-Ago Revenue	32%
Earnings Beats in Past 4 Quarters	1

Source: Yahoo! Finance.

Will GOL Linhas fly higher this quarter?
Over the past few months, analysts have gotten less optimistic about GOL Linhas. Loss estimates for the just-ended quarter have more than doubled, and analysts have also pushed down full-year 2013 earnings calls by $0.04 per share. Yet the shares have risen by nearly 20% since mid-December.

GOL Linhas has emerged as a major force in the Brazilian growth story. Filling a low-cost/low-fare niche in the market, GOL Linhas connects cities within Brazil and throughout Latin America and the Caribbean.

Yet recently, its traffic has suffered somewhat. In February, GOL Linhas said that its primary measure of passenger revenue fell almost 18% from a year ago, while available capacity dropped more than 15%. Load factors fell, and its domestic Brazilian segment was particularly weak. By contrast, its international figures improved sharply, with expansion of flights to Miami and Orlando having a big impact on international growth.

Back in December, GOL Linhas got a big jump on news that it might do an initial public offering of its mileage points program, and the company moved forward with a filing for the IPO last month. With nearly 9 million members in the “Smiles” program, GOL Linhas could reap substantial proceeds from the offering, with the program having grown by about 10% over the past year. Discussions of the possibility that United Continental and Delta Air Lines might do IPOs of their respective frequent-flyer programs several years ago didn’t go anywhere, but in GOL‘s home market, rival TAM, which is now part of LATAM Airlines , successfully offered shares of its “Multiplus” program.

In its quarterly report, watch for news of how GOL‘s Smiles IPO is …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

United Makes a Big February Comeback

March 11, 2013 Bartle Doo Leave a comment

By Adam Levine-Weinberg, The Motley Fool

Filed under: Investing

United Airlines had a surprisingly strong February, leading the major airlines in unit revenue gains for the first time since 2011. Unit revenue is a key indicator of demand for airlines and has an important impact on profitability. It’s therefore helpful to follow the results they report each month. Here’s how the top five U.S. airlines did last month:

February Unit Revenue Performance for Top Five U.S. Carriers

Airline	Unit Revenue Increase
AMR	4.7%
Delta Air LInes	5%
Southwest Airlines	2%
United Continental	6.5%-7.5%
US Airways	1%

Source: airline press releases.

Delta produced a solid gain as always and has been consistently in the top half of the industry for two years running. American Airlines parent AMR‘s gain shows that it’s continuing to gain traction, now that its future is more certain. During the month, AMR announced plans to merge with US Airways to form the world’s largest airline.

Future merger partner US Airways wasn’t so lucky, though. It brought up the rear last month, a result it attributed to its heavy exposure to the Northeast, where many schools canceled February vacations to make up for school days lost to Hurricane Sandy in the fall.

Finally, Southwest posted another lackluster performance in February. It has been integrating its AirTran acquisition very slowly, which may account for its recent underperformance. However, the company recently hit a milestone as it connected the two networks, which should improve results this spring and summer.

United’s surprise
United’s approximately 7% unit revenue increase was definitely the big news of the month, and it provides some comfort to investors that the company is finally outgrowing its merger pains. Investors sent United Continental stock up nearly 6% on Friday, to $31.35, its highest closing price since early 2008.

However, it would be rash to jump right in and buy United today on the basis of a single month of results. In 2012, United posted very weak unit revenue growth of 2% in February. The company stated at the time that its performance was negatively affected by 6% because of three factors: an accounting change in 2011, higher completion factor (i.e., fewer flights canceled because of weather or maintenance problems), and the integration of the United and Continental reservation systems.

These one-time effects hurt United in February (and, to a lesser extent, March) last year, creating an easier comparable figure to beat. Last month, United’s completion factor dropped to 98% from 99.2% in 2012, creating a unit revenue tailwind. United also shrank capacity by 8.4% (approximately 5% adjusting for the leap year); flying fewer seats tends to boost unit revenue, but it also increases unit costs. Since United plans to keep full-year capacity flat to down 1%, capacity reductions won’t provide such a significant tailwind going forward.

Conclusion
United’s performance last month was certainly stronger than expected, and the company should be given credit for that. However, I am still very skeptical about the company’s overall performance. There …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Embraer Finally in the Clear?

March 9, 2013 Bartle Doo Leave a comment

By Adam Levine-Weinberg, The Motley Fool

Filed under: Investing

Regional jet manufacturer Embraer gave investors a scare in late 2012, when slow sales of E-Jets aircraft for the 70- to 110-seat market raised the specter of production cuts. The company’s order backlog was only $12.5 billion by the end of 2012, down nearly 20% from the beginning of the year. At only 2 times annual revenue, Embraer’s order backlog is much lower than the comparable figures for competitors such as Boeing , which has a backlog equal to seven years of revenue.

Embraer does expect somewhat slower commercial aircraft production in 2013 with 90 to 95 deliveries, compared with 106 in 2012. However, the growing popularity of two class regional jets for the big U.S. network carriers creates a significant opportunity for Embraer to fill open delivery slots for the next few years while rebuilding its order backlog. Furthermore, the company is diversifying its revenue base by growing its private jet and military segments; combined, these will reach nearly half of total company revenue in 2013. These trends may have finally put Embraer on the upswing.

The growing American opportunity
While the U.S. aviation market is mature, demand for large regional jets such as Embraer’s E-Jets is very robust today. This is the result of three factors. First, the rapid rise of oil prices over the past decade has made fuel efficiency critical, and large regional jets burn much less fuel per seat than 50-seat and smaller regional jets. Second, large regional jets can accommodate a first-class section and/or premium economy seating and are more comfortable than 50-seaters in general. These amenities can help attract higher-yielding business passengers. Third, the “Big Three” airlines — Delta Air Lines , United Continental , and American Airlines — have all successfully negotiated with their pilots over the past year for the ability to increase usage of large regional jets.

Delta is the furthest ahead on this strategy and is in the midst of executing a plan that will reduce its 50-seat regional jet fleet from 313 at the end of 2012 to just 125 by the end of 2015. Many of those will be replaced by Boeing 717 mainline aircraft, but there will also be an increase in large regional jet flying.

United and American will see even more growth in large regional jet flying. According to a recently signed pilot agreement, American is permitted to operate more than 300 76-seat regional jets (such as the Embraer E-175), compared with just 47 previously. Embraer has already benefited from this change, as it recently received an order from Republic Airways for 47 E-175s to be operated for American. Deliveries will run from mid-2013 through 2015, and Republic has options for another 47 aircraft. American and its merger partner US Airways will probably look to grow their 76-seat fleet further to better compete with Delta, which gives Embraer a good chance of converting these options to firm orders.

Lastly, United’s recently completed pilot …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

United Continental Reports February Metrics

March 8, 2013 Bartle Doo Leave a comment

By Eric Volkman, The Motley Fool

Filed under: Investing

United Continental has released its operational figures for February. For the month, the company’s revenue passenger miles totaled 6.3 billion, a 4% decline from the same month of 2012. The decline was narrower — 1.7% — in the year-to-date period, dropping to just under 13 billion from January-February 2012’s 13.2 billion.

Available seat miles were also down, to 7.5 billion last month, from February 2012’s 8.1 billion, a decline of 7.6%. Those numbers year to date came in at 16.3 billion and 17.3 billion, respectively, for a decline of 5.7%.

Certain key numbers improved over those spans of time, however. Passenger load factor in February increased to 83.4% from the year-ago month’s 80.2%. It also grew in the year-to-date time frame, to 82.8%, against the 2012 period’s 80.6%.

The article United Continental Reports February Metrics originally appeared on Fool.com.

Fool contributor Eric Volkman has no position in United Continental. The Motley Fool has no position in United Continental. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

addEvent(window, "load", function(){new FoolVisualSciences();})
addEvent(window, "load", function(){new PickAd();})

var themeName = 'dailyfinance.com';
var _gaq = _gaq || [];
_gaq.push(['_setAccount', 'UA-24928199-1']);
_gaq.push(['_trackPageview']);

(function () {

var ga = document.createElement('script');
ga.type = 'text/javascript';
ga.async = true;
ga.src = ('https:' == document.location.protocol ? 'https://ssl' : 'http://www') + '.google-analytics.com/ga.js';

var s = document.getElementsByTagName('script')[0];
s.parentNode.insertBefore(ga, s);
})();

Read | Permalink | Email this | Linking Blogs | <a target=_blank href="http://www.dailyfinance.com/2013/03/08/united-continental-reports-february-metrics/#comments" title="View reader …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

The Other Dow Is at All-Time Highs, Too

March 5, 2013 Bartle Doo Leave a comment

By Dan Caplinger, The Motley Fool

Filed under: Investing

With all the hoopla over the possibility that the Dow Jones Industrials will set a brand-new closing record today, few investors are looking beyond the blue-chip average. But the Dow’s sister benchmark, the Dow Jones Transportation Average, has been hitting new highs for a while now, and it’s poised to hit a brand-new one today as well.

So far today, 19 of the 20 Dow Transports are trading higher, and the average has gained 1.6% as of 2:35 p.m. EST, outpacing even the strong performance of the Dow Industrials. FedEx is among the leading gainers, climbing more than 2.3% to a new multiyear high. As optimism about the economy grows, FedEx stands to gain from the accompanying jump in demand for its delivery services. Moreover, favorable trends like the push toward same-day delivery among retailers gives both FedEx and rival United Parcel Service good prospects for further growth, regardless of how strong the overall economy performs.

Airlines within the average also did well, with United Continental and Alaska Air Group up about 2.4% each. Airlines have seen their stocks soar in recent months, but some analysts had expected that once the merger between US Airways and American Airlines was complete, that run would come to an end. Yet airlines have seen their financial condition improve dramatically with the imposition of fees for baggage and other ancillary services, and even the lack of further consolidation in the industry shouldn’t pose a threat to that lucrative revenue stream going forward.

Keep moving
The Dow Industrials make some of the most important products in the economy, but the Dow Transports make sure those goods get to you. With both averages poised to set records, it’s no wonder investors are feeling good about the prospects for the U.S. economy today.

Find some long-term investing ideas by reading the Fool’s special report: “The 3 Dow Stocks Dividend Investors Need.” It’s absolutely free, so just click here and get your copy today.

The article The Other Dow Is at All-Time Highs, Too originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends FedEx and United Parcel Service. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Business, Finance, Occupation & Industry

Major Airline Stocks Soar: Should You Sell?

March 5, 2013 Bartle Doo Leave a comment

By Adam Levine-Weinberg, The Motley Fool

Filed under: Investing

While many airline stocks performed well in 2012, their performance over the past three months has been nothing short of extraordinary. Since early December, the five largest U.S. airlines (excluding American, which is currently in bankruptcy) have seen their share prices appreciate by more than 30% on average.

Airline Industry Three-Month Price Chart, data by YCharts

The biggest carriers, Delta Air Lines and United Continental , have shown the strongest performance, gaining 60% and 45%, respectively, over that time period. Low-cost carriers Southwest Airlines and JetBlue Airways have each gained more than 20%, while US Airways stock price has taken a bit of a breather after tripling in the previous year.

Airline stocks may be flying high now, but this performance is not necessarily supported by the fundamentals. While some companies like Delta and US Airways have posted consistently strong results recently, others have lagged. United Continental and Southwest have both been hampered by merger integration problems and have not yet generated any meaningful “revenue synergies.” Meanwhile, JetBlue is starting to regain its momentum after seeing Hurricane Sandy eat into revenue and earnings.

Owning the strongest airline stocks is probably the best decision now, as is often the case. At some point, there will likely be an industry correction, but Delta and (to a lesser extent) US Airways may be more insulated from such volatility than peers. Both companies still trade at attractive valuations (five to six times expected 2013 earnings) and have been increasing their profit margins recently. By contrast, the share prices for Southwest and United Continental seem to be running ahead of the fundamentals: Continued disappointments could lead to a quick reversal in either case.

The merger catalyst
One major cause of the recent airline stock run was growing speculation that US Airways would merge with American Airlines. US Airways had been publicly pursuing American since early 2012, but it was only recently that American’s management team warmed to the idea. The merger was ultimately announced on Feb. 14, but the decision was widely expected by then. In the week before the announcement, I wrote that US Airways and American Airlines shareholders were unlikely to profit from the merger (at least in the short term). Sure enough, US Airways shares have dropped by roughly 10% since the merger was announced, as investors have come to grips with the obstacles that lie ahead.

By contrast, other airlines held their ground or moved higher after the merger announcement, despite having already rallied on speculation that US Airways and American would indeed merge. Some airlines may indeed see benefits: for example, JetBlue CEO Dave Barger recently stated that he believes JetBlue will be able to expand its partnership with American Airlines later this year. By allowing more passengers to connect seamlessly between the two airlines at JFK, both companies should benefit.

On the other hand, United Continental could be a big loser, as it …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

United Continental May Have a Free Cash Flow Problem

March 4, 2013 Bartle Doo Leave a comment

By Adam Levine-Weinberg, The Motley Fool

Filed under: Investing

While earnings per share, or EPS, can be a handy statistic for investors to use to evaluate the performance of stocks that they own, it does not always tell the whole story. Ultimately, free cash flow is the holy grail for investors. Free cash flow is calculated by taking the amount of cash generated from operations and subtracting capital expenditures. In short, it represents the amount of profit left over after a company has made necessary investments in the business. Free cash flow is a particularly important metric for shareholders because it represents money that potentially could be returned to them through dividends or share repurchases.

On a straight P/E basis, United Continental looks fairly cheap even though it hit a new 52-week high last Friday. The Friday closing price of $27.38 is just 7.4 times the average analyst estimate for 2013 EPS, and 5.6 times the average estimate for 2014 EPS. However, free cash flow tells another story. United Continental is facing a period of heavy investment that will probably sap free cash flow through the end of this decade. This poor free cash flow outlook makes United a questionable investment candidate compared to peers, particularly Delta Air Lines .

Operating cash flow: a baseline
Over the past three years, United Continental‘s operating cash flow has been very inconsistent. This has been the result of two factors: profit instability caused by integration problems and rising oil prices, and one-time merger integration costs. In the past three years, operating cash flow has ranged from a low of $935 million last year to a high of $2.4 billion in 2011. If we add back United’s approximately $600 million of special charges in 2011, United would have generated as much as $3 billion in operating cash flow.

If we assume a return to that level of operating cash flow in 2013 and modest growth through the end of the decade (a bullish assumption, given United’s poor performance recently and the turbulent history of the airline industry), United may produce $25 billion in operating cash flow through 2019: an average of $3.57 billion a year. However, shareholders will see very little of that money.

Heavy capital commitments
The reason why shareholders may fare poorly even in the relatively bullish scenario outlined above is that United has very heavy capital commitments over the next seven years, as can be seen in the following table:

Year	Capital Commitments
2013	$1.8 billion
2014	$1.5 billion
2015	$2.0 billion
2016	$3.0 billion
2017	$2.5 billion
2018	~$2.5 billion*
2019	~$2.5 billion*
Total	~$15.8 billion

Data from United Continental‘s 2012 10-K (p. 139); * denotes author’s estimate.

United Continental has thus committed to spending nearly $16 billion in capital expenditures over the next seven years. Nearly all of those commitments relate to aircraft acquisitions. The company currently has 247 aircraft on order, …read more
Source: FULL ARTICLE at DailyFinance

Articles of Interest

American, US Air Close In on Merger

February 7, 2013 Bartle Doo Leave a comment

By Matt Cantor The world could soon have a new biggest airline. American Airlines‘ parent AMR and US Airways are ironing out a merger that would surpass national leader United Continental in traffic, insiders tell the Wall Street Journal . The merger, part of American’s path out of bankruptcy, could create a firm with… …read more
Source: FULL ARTICLE at Newser – Home

Business, Finance, Occupation & Industry

United Continental sees fourth-quarter charges

January 17, 2013 Bartle Doo Leave a comment

United Continental Holdings , the world’s largest air carrier, said on Thursday it expects fourth-quarter charges of $430 million, much of which is tied to paying off its pension debt.
Source: FULL ARTICLE at Fox Business Headlines

Bartle Doo Article Archives

Tag Archives: United Continental

March Was a Month to Forget for Airlines

"The World's Leading Airline" Is Actually the Worst in the U.S.

Airline Stocks: Is It the End of the Party?

Coming Soon to Washington: Cheap Flights?

Delta Hits Turbulence on Sequester Cuts

Maybe Buffett Was Right About Airlines After All

Why United Continental Is Poised to Pull Back

Are William Shatner and Cheap Plane Tickets Gone Forever?

Why the Dow Overshadows These Forgotten Stocks

GOL Linhas Earnings: An Early Look

United Makes a Big February Comeback

Is Embraer Finally in the Clear?

United Continental Reports February Metrics

The Other Dow Is at All-Time Highs, Too

Major Airline Stocks Soar: Should You Sell?

United Continental May Have a Free Cash Flow Problem

American, US Air Close In on Merger

United Continental sees fourth-quarter charges

Articles Archive