Oscar Munoz, who took over as the CEO of United from Jeff Smisek in September 2015, has worked hard to improve things at the merged United Airlines and Continental Airlines but still there is much need for improvement to gain back customers and boost earnings.
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In a presentation to investors, United acknowledged that the integration with Continental has been rocky. A spat with activist investors this year that concluded with the turnover of half its board has added to the delay. That compared with 15.1 percent for American Airlines Group Inc. and 19.2 percent for Delta Air Lines Inc.
United also said it hoped to generate $1.5 billion by 2018 in part through “increased customer segmentation”, or different types of fare and seating classes.
The upgauging, which includes moves such as replacing smaller jets with larger aircraft, does come with some risks, Munoz said during Tuesday’s call.
United also updated on guidance. Earlier this year, United shifted capacity to Denver and San Francisco from Houston. It has offered a greater range of fares such as stripped-down ticket prices aimed at fending off discount carriers like Spirit Airlines Inc. United has been a laggard relative to other airlines.
Additionally, United said it expects 2016 second quarter consolidated passenger unit revenue to drop between 6.5% and 7.5% year-over-year vs. its previous expectations for a decline between 6.5% and 8.5%. United, the third-largest US carrier by passenger traffic, has lagged second-ranked Delta in on-time flights, satisfaction scores and profit margins, although its new chief executive officer has promised significant improvements.
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The declining revenue per mile figure shows that average fares are still falling because airlines are adding flights faster than demand is growing.
