United Airlines Projects New Period of Growth as Q4 Profit Jumps

By Paul Riegler on 23 January 2018
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IMG_9776 (1)United Airlines will grow capacity at an accelerated rate through the end of the decade, as it plays catch-up with its two largest competitors.

After the closing bell, the nation’s number 3 airline by traffic said Q4 net income rose 46% on a modest increase in revenue.

The airline plans to increase overall system capacity by 4% to 6% for three years starting in 2018, the airline’s president, Scott Kirby, said at a presentation in New York Tuesday afternoon.

“We spent years shrinking while our competitors were growing,” he said, referring to the period following the United-Continental merger. “We’re not going to accept a 10-point margin gap.”

Following the merger, the combined airline trimmed regional flights and focused on routes connecting larger markets such as Newark and Atlanta, even though the competition was fiercer and margins were noticeably lower. As a result, 26% of United’s business today comes from smaller, higher-yield markets while American and Delta derive 30% to 40%.

In addition to adding 24 aircraft to its mainline fleet, the Chicago-based carrier will add 31 regional jets from Bombardier and Embraer to its regional fleet.  That will bring the latter to 549 aircraft. While this will drive up the cost per mile flown, the airline’s CFO Andrew Levy conceded, it’s necessary “to fix our network.”

Adding flights connecting big airports with smaller cities is “the magic elixir,” Kirby added.

(Photo: Accura Media Group)

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