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United loses money; other airlines post 1Q profits

Published on NewsOK Modified: April 24, 2014 at 7:38 pm •  Published: April 24, 2014

DALLAS (AP) — Even with the turbulence of severe winter storms and stubbornly high fuel prices, many of the major airlines are cruising and their stock prices are soaring.

Mergers have reduced competition and made it easier for the airlines to limit the supply of seats and raise average fares. Extra fees bring in billions more each year.

On Thursday, American Airlines and Southwest Airlines reported record profits for the first quarter, usually the weakest time of year for the airlines. That followed a rousing report from Delta Air Lines a day earlier.

Still stuck on the tarmac: United Airlines. While rivals were making money, United lost another $609 million during the first three months of the year. Its shares plunged $4.22, or 9.2 percent, to $41.84 in afternoon trading.

The No. 2 airline company behind American, United Continental Holdings Inc. is struggling to make the 2010 merger of United and Continental work. As costs rise, United is taking in less per mile from passengers — it's not charging fares high enough to cover expenses.

"This quarter's financial performance is well below what we can and should achieve," conceded United Chairman and CEO Jeff Smisek. He said that the company still had too many parallel technology systems, "and our customer service historically since the merger has not been as good as it should be."

Analysts weren't mollified by the promise to fix problems. On a conference call, the normally cheerful Helane Becker of Cowen and Co. prefaced a question for United executives with, "One of last year's many excuses ... "

And Jamie Baker of J.P. Morgan wondered whether the steps United is taking — things like setting aside more seats for last-minute fliers who pay higher prices — will matter. He said that United faces too much competition at key hubs in San Francisco and Denver.

"I'm just not convinced that even if properly executed ... United has the same profit potential as your primary competitors," Baker said.

Smisek defended United's strategy and assets, admitting only that hub airports in northern cities such as Chicago and Newark, N.J., were more vulnerable to bad winter weather. United said that $200 million of its first-quarter loss was due to 35,000 weather-related flight cancelations.

Jim Corridore, an analyst with Standard & Poor's, said in an interview that United is still paying the price for network meltdowns that caused widespread flight cancelations over the past couple years.

"They certainly say the right things on the conference calls," he said, "but once you make a mistake like they did with their technology — losing customers, the site being down, the reservations systems not being synched properly — it snowballed and they have been playing catch-up ever since."

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