(Adds details on capacity increase)
By Alana Wise
NEW YORK, Jan 23 (Reuters) - United Continental Holdings Inc
shares fell more than 6 percent in after-hours trading
on Tuesday as the airline said it plans to increase capacity,
likely threatening its profit margin as it is locked in a price
war with low-cost carriers.
"The best way to compete with low-cost carriers is to match
their prices," one of its executives said on an earnings call
with analysts and investors. "We can't let low-cost carriers
have price advantages in our hubs."
The warning spooked investors, who are keeping a close eye
on United's bottom line as the company tries to prevail in a
fierce fare war that has sent some ticket prices tumbling.
Shares of Delta Air Lines Inc and American Airlines
Group Inc also fell more than 5 percent after hours.
United said it expected to increase its capacity by between
4 percent and 6 percent in 2018, and would likely grow by a
similar amount in 2019 and 2020, on the grounds that it would
give the carrier a competitive edge in its fight against
The No. 3 U.S. carrier by passenger traffic earlier reported
fourth-quarter net profit of $580 million, or $1.99 per share,
compared with $397 million, or $1.26 per share, in the year-ago
quarter, helped by costly last-minute ticket purchases.
Excluding special charges, United reported profit of $1.40
per share, beating Wall Street's average estimate of $1.34 per
share, according to Thomson Reuters I/B/E/S.
In the current period, higher labor costs, costlier fuel and
the ongoing pricing battle are weighing on the carrier's profit
margins. United added to investors' unease by saying it will
continue to compete with low-cost airlines on price.
In the fourth quarter, United posted a 0.2 percent increase
in passenger unit revenue, a closely watched measurement of an
airline's success, after a posting a sharp decline in the prior
The Chicago-based airline's results follow a strong
fourth-quarter performance and quarterly outlook by rival Delta
Air Lines Inc, which reported better-than-expected
profit earlier this month.
(Reporting by Alana Wise; editing by Bill Rigby)
First Published: 2018-01-24 00:23:46
Updated 2018-01-24 01:45:39
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