3-Day Delay in Shanghai Departure Typifies United's Quarter
United competitors Delta (UAL) and US Airways (LCC) both beat second-quarter estimates, and US Airways reported its best quarter ever, beating records for net income, both including and excluding items, set in the second quarter of 2006. Bankrupt American (AAMRQ.PK) also surprised the industry with strong results throughout the quarter.
As for the current quarter, United said its consolidated passenger revenue per available seat mile in July would be flat compared to the same month a year earlier. A day earlier, US Airways President Scott Kirby said his carrier's July PRASM would rise 1% to 2%, reflecting difficult comparisons with a year earlier.
Following the United call, S&P Capital IQ analyst Jim Corridore downgraded United shares to hold from buy.
"Our downgrade reflects our view that UAL's merger integration issues are leading it to underperform peers," Corridore wrote. "While we think long term the merger will bring great benefits, we have less confidence in management's ability to manage the integration in the near term."
Corridore cut his 12-month target price to $24 from $30 and his 2012 full-year earnings estimate to $2.89 a share. Analysts surveyed by Thomson Reuters had been estimating $4.53.
Smisek referred during the call to United's inadequate operational performance, which, he said "didn't meet our goals." He said changes such as introducing Airbus aircraft into Houston "added new stress to the system."
In May, the latest month for which Department of Transportation statistics are available, United's on-time rate of 77.8% was the worst for 15 reporting airlines. United also cancelled 3.8% of its flights, the highest for any mainline carrier, and had the highest percentage of mishandled bags and tarmac delays of any mainline carrier. "We hold ourselves to a higher standard than we've delivered lately, and we will return (to it)," Smisek said.
-- Written by Ted Reed in Charlotte, N.C.
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