Boston, MA 05/01/2014 (wallstreetpr) – United Continental Holdings Inc (NYSE:UAL) continues to report the loss and witness the difficult to recover since 2010 merger with Continental Airlines. However, its competitors such as American Airlines (AAL) recovered from the loss occurred after the merger with the U.S. Airways and posted profit quarter over quarter.
The stock fell by 9.8% to $41.53 after the first quarter loss posted by UAL among major airlines in the U.S.
Persistent losses
Winter weather conditions in January and February has a significant impact on all American airlines as it reduced the passenger traffic significantly. Airlines like AAL and Southwest (LUV) are able to report quarterly profit through some strategic initiatives. However, UAL failed to generate enough revenue and control its operating expenses that lead to additional earnings losses. In 1Q2014, adjusted net loss was $489 million, or $1.33 per share that was below the average estimates of $1.36 complied by Bloomberg.
Adverse weather conditions further increased UAL’s loss by ~$200 million and decreased the passenger revenue by 2.3% to $7.4 billion. UAL’s PRASM (passenger revenue per available seat mile) decreased by 2% compared to the first quarter of 2013. Therefore, United Continental Holdings Inc (NYSE:UAL) has grounded 35,000 flights that reduced the number of passenger flow by 1.4%.
But, year over year operating expenses increased by $60 million that increased the consolidated unit costs (CASM) by 3.1% on a capacity reduction of 0.3%.
Liquidity pressure
United Continental Holdings Inc (NYSE:UAL) used more of its cash to finance its operations due to higher debt repayments and capital investment. It has $6 billion unrestricted liquidity, including $1 billion of credit facility as of March 31, 2014. During the first quarter, UAL generated only $694 million of operating cash flow versus gross capex of $737 million and debt and lease payments of $637 million.
Conclusion
United Continental Holdings Inc (NYSE:UAL) expects positive results in foreseeable quarters while considering specific measures, but, time will tell whether the airline can improve its future performance and create shareholder’s value.
