Skift Take

In real terms, United made a lot of money last quarter. But there are some signs that business is not as strong as it was a year ago.


As it increases capacity by less than expected this year, United Airlines will reduce its United Kingdom flying and cull its domestic schedule on Saturdays, the carrier said Tuesday.

In announcing second quarter earnings, United said it will increase capacity, as measured by available seat miles, by 1 percent to 1.5 percent for 2016. In January, United had predicted it would grow 1.5 to 2.5 this year.

In a conference call with media on Tuesday, United executives gave few concrete details about how they would reduce domestic weekend flights, but they noted they were reducing capacity slightly to keep pace with demand. Saturday flights can be less profitable for airlines, as fewer business travelers travel. The airline may also make other cuts to domestic schedules, but it did not detail them on Tuesday’s call.

While leisure travelers continue to pay relatively high fares in most markets, United noted it continues to see some softness with corporate travel, as business travelers on all airlines have been paying historically low fares, even for last-minute travel. United executives said they are hopeful corporate yields will improve in September but they said it is too early to know for sure.

Like Delta, which announced last week it is reducing its United Kingdom schedule, United said it is assessing UK flights. The problem, United Chief Revenue Officer Jim Compton said, is not direct fallout from the UK’s plan to leave the European Union. Instead, since the referendum, the British Pound has lost value against the U.S. dollar, making travel more expensive for UK residents.

The currency imbalance is less of a concern for London, executives at United and Delta have said, but it is a potential problem elsewhere. United said it is reducing its schedule this winter from Washington Dulles to Manchester, and likely will do the same with Newark to Birmingham. The airline also plans to use smaller aircraft from Dulles to London.

“What we are focused on right now is the dollars’ strength related to the pound,” Compton said. “That has an impact in the UK, particularly in markets that have a strong point of sale in the UK. … We are now looking at our schedules as it relates to the UK.”

United reported second quarter net income, including special items, of $588 million on revenues of $9.4 billion. Passenger revenue per available seat mile, a key metric that indicates how much airlines earn for each mile they fly, decreased 6.6 percent, year-over-year.

United blamed the passenger revenue decrease on several factors, including the strong U.S. dollar, too much industry capacity and less travel from United’s key corporate customers in the energy and gas industry.

Reach new heights in aviation
November 12 in Dallas
See Who's Onboard

Have a confidential tip for Skift? Get in touch

Tags: earnings, united airlines

Photo credit: United Airlines will sell fewer seats than expected later this year, as it trims capacity to match demand. Ted S. Warren / Associated Press

Up Next

Loading next stories