United launches its first route to Africa
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United Airlines stresses that capacity adds are accretive as 2Q2017 unit revenues turn positive
United Airlines expects to attain a positive passenger unit revenue performance in 2Q2017, which would mark the first positive result for the airline in that metric since early 2015. The airline’s PRASM results in 1Q2017 were in line with its initial forecast, which was more conservative than those of its larger US rivals. American and Delta refined their 1Q2017 unit revenue forecast downward, while United kept its guidance intact, and its performance fell within its initial estimates.
The airline’s 2Q2017 positive unit revenue outlook is driven by many factors, including a shift in its management of close in bookings to reduce reliance on advance purchase discounts. Latin America and the US domestic market continue to be bright spots for United, while declines in Pacific unit revenue continue to moderate. United’s better than expected unit revenue performance in trans-Atlantic markets in 1Q2017 should moderate as point of sale tilts more toward Europe later in the year.
Markets seem still to be digesting United’s decision to increase its planned 2017 capacity growth by 1.5ppt. United is stressing that much of the growth is driven by increased gauge, and the growth is designed to restore United to its natural share in the US domestic market.
Africa Fleet Outlook: Illustrates Continuing Under-achievement
African airlines currently have less than 150 aircraft on order compared to an active fleet of approximately 1,600. In the neighbouring region of the Middle East, there is a similar sized fleet but 1,400 orders. Fast expansion from Middle East airlines have made it extremely difficult for African airlines to compete. But this is hardly an excuse for African airlines falling short; over many decades they have demonstrated their capability to do that without any help from outsiders. Given the diverging order books of the two regions the outlook for the African airline sector remains relatively bleak.