United Airlines Profit Drops 52%

United Airlines Profit Drops 52%

United Airlines released its 4th Quarter and year-end results for 2016, with the most startling takeaway being a drop of 52% in their profit from last quarter.  The drop is mostly attributed to decreased fare prices and higher operating costs.

Operating costs are said to have increased by 1.2% and new contracts with union groups increased labor costs by 5.9%.  This means the greatest cost to United comes from labor, and its cost is higher than most other U.S. Carriers.  The airline made $397 million in fourth quarter revenue, down from $823 million a year earlier.

Scott Kirby, President of United Airlines, said they saw positive information from the statistics last quarter, saying, “We saw meaningful improvement in the pricing and demand environment in the quarter.  Looking forward, we anticipate first-quarter consolidated unit revenues to be approximately flat, marking the fourth straight quarter of sequential quarter-over-quarter improvement.”

United’s report was worse than Delta’s, which was released last week.  Delta’s profit fell 36.5% in quarter four, from $980 million at the end of the fourth quarter in 2015 to $622 million in quarter four of 2016.  Delta’s operating revenue fell from $9.50 billion to $9.46 billion.

United also highlighted the following advancements in its fleet from the past year:

• In the fourth quarter, launched service to Havana, Cuba from its Newark and Houston hubs. During 2016, the company also introduced new routes between San Francisco and five international destinations including Tel Aviv; Xi’an, China; Singapore; Auckland, New Zealand; and Hangzhou, China.
• In the fourth quarter, took delivery of the first Boeing 777-300ER in the company’s fleet, named the “New Spirit of United,” featuring the all-new United Polaris business class seat.
• During the quarter, announced a modification to its narrowbody order book by converting its original order for 65 Boeing 737-700 aircraft into four 737-800 aircraft to be delivered in 2017 and 61 737 MAX aircraft with delivery dates to be determined.
• During the year, took delivery of 22 new Boeing aircraft, including 737NGs, 787s and 777s, as well as six used Airbus A319 aircraft.