United Airlines forecasts 4Q2009 unit revenue to fall by 6.25% to 7.25% year-on-year (AP, 17-Dec-2009). Unit costs are expected to fall by 7.9% to 8.2%, (excluding profit sharing and some hedging impacts). Mainline unit costs excluding fuel are expected to rise by 1% to 1.5% year-on-year. The airline is reducing capacity in the quarter by 3.3% and expects demand to be flat. The carrier expects to end the quarter with USD3 billion in unrestricted cash, up approximately USD500 million from 30-Sep-2009, and excluding USD250 million from financings completed in 4Q2009.
United Airlines forecasts 4Q2009 unit revenue to fall by 6.25% to 7.25% year-on-year
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CAPA global airline financial outlook
Operating margin to reach new high in 2016, but this may signal a subsequent downturn. CAPA’s global airline operating margin model indicates that the industry was more profitable in 2015 than it has been for almost five decades. Moreover, the model predicts that world airline operating margins will rise further above previous historic peak levels in 2016. These new levels of profitability are mainly thanks to the low oil price environment, coupled with strong demand growth in spite of global economic growth rates that are far from exceptional.
Much of the industry is also benefiting from a period of relative capacity discipline. New revenue sources may also be helping, although their role in airline profitability is still emerging.
The macroeconomic and geopolitical backdrops provide the main risks to this forecast. Beyond that, the biggest challenge for the industry will then be to try to sustain margin levels, rather than to allow a peak to be followed by a rapid downturn, as has always happened in the past. But downturns can play a positive role in industry development, possibly even stimulating consolidation.
Global airline financial outlook
Operating margin to reach new high in 2016, but this may signal a subsequent downturn