United shares rise on strong June results

By Julie Johnsson
Posted July 9, 2010 at 2:44 p.m.

Shares of United Airlines’ parent UAL Corp. rose on Friday, after the Chicago-based airline reported stronger passenger revenue gains than its peers for the month of June.

After the close of Thursday’s trading session, United announced that its consolidated passenger revenue per available seat mile — a standard measure of airline revenues — increased an estimated 30.5 percent to 31.5 percent in June versus prior-year results.

United’s strong showing bested analysts’ predictions and capped a dramatic turnaround over the past year. The third-largest U.S. carrier, United caters to business travelers, especially those making international connections, and was hit hard last year as companies cancelled business trips because of the slowdown in production in China and the economic crisis in Europe.

United’s shares reached a 52-week nadir of $3.07 on July 10, 2009, as analysts speculated that a liquidity squeeze could force United into bankruptcy. United responded by leveraging most of its available assets, boost its cash reserves by more than $1 billion dollars.

One year later, United has more than $3.8 billion in cash in hand, and it is reaping the results as travel rebounds — especially as capacity constraints cause prices to soar. Average summer air fares to U.S. destinations from Chicago are one-third higher than a year ago, while flights to Europe cost 30 percent to 50 percent more, according to Rick Seaney, CEO of FareCompare.com.

United’s passenger load factor, a measure of how full its planes are, increased two points, to 87.9 percent in June. United said its June passenger revenues were 5 percent to 6 percent higher than its June 2008 results, before Wall Street’s swoon sent airlines into crisis mode.

The boost to United’s revenues was more than the 30 percent gain forecast by airline analyst Michael Derchin of CRT Capital Group LLC. Derchin boosted his second-quarter revenue estimate for Southwest Airlines on Friday,¬†after the low-cost carrier reported a 24 percent jump in its passenger revenues for June.

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