United Airlines stock dives

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When United Airlines (UAL) announced its third-quarter 2017 financial results today, the numbers revealed its shares are in a nose dive.

During the quarter, the airline cancelled approximately 8,300 flights as a result of severe weather in southeast Texas, Florida, and parts of the Caribbean. The operational disruption reduced third-quarter pre-tax income by an estimated US$185 million.

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United Airlines CEO Oscar Munoz, along with other airline executives, were hit with a barrage of questions from Wall Street analysts, whose investment concerns remained intact after the earnings call, when the airlines did not address questions head-on regarding next year’s anticipated earnings.

In addition to financial concerns, United Airlines is trying to regroup itself from more than one social firestorm, from dragging a doctor off a flight, screaming and bloodied, to kicking off paying passengers due to over-booking.

For the third quarter of 2017, revenue was $9.9 billion, roughly flat year-over-year including an estimated $210 million loss of revenue from severe weather during the quarter. Third-quarter 2017 consolidated passenger revenue per available seat mile (PRASM) was down 3.7 percent compared to the third quarter of 2016. Cargo revenue was $257 million in the third quarter of 2017, an increase of 14.7 percent year-over-year primarily due to higher international freight volume.

Operating expense was $8.8 billion in the third quarter, up 6.0 percent year-over-year. Consolidated unit cost per available seat mile (CASM) increased 3.0 percent compared to the third quarter of 2016 due largely to higher fuel and labor expense. Third-quarter consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, increased 2.6 percent year-over-year, driven mainly by higher labor expense.

UAL generated $577 million in operating cash flow and ended the quarter with $6.3 billion in unrestricted liquidity, including $2.0 billion of undrawn commitments under its revolving credit facility. Capital expenditures were $1.1 billion in the third quarter.