Rampant delays and cancelations that United Airlines passengers endured during
the summer hurt the airline's profits as many customers fled to competitors,
United executives revealed Thursday during a quarterly earnings call with
But those problems are behind the airline, they insisted.
Jeff Smisek, CEO of United Continental Holdings, likened the airline's operational problems, largely stemming from a switch to a new reservation computer system, to a road-repair detour that a commuter copes with on the way to work.
"We recognize that some of our customers chose to fly other airlines during the summer when our operational performance degraded, just like when your preferred road to work goes under construction, you might choose to take a detour until the road gets repaired," said Smisek, who called the third quarter "the toughest quarter of our integration."
"Well, the road is repaired. And with our operations back on track ... we expect to earn back those customers who took a detour."
Executives wouldn't put a dollar figure on how much fleeing customers cost the company, but "it was a significant number," said Jim Compton, chief revenue officer.
United "clearly had a bad quarter operationally," said Avondale Partners airline analyst Fred Lowrance.
Steps the airline has taken to return to respectable on-time performance included increasing airport staffing, returning to higher levels of spare aircraft that can fill in when there's a problem and rolling out an easier-to-use version of its reservation system used by airport agents.
During September, United's on-time arrival rate was 82 percent, exceeding its goal of 80 percent. However, Smisek conceded September was an easier month on operations compared with heavy summer traffic. He said he was confident the airline will perform well during the heavy holiday travel season.
Also, the airline's mishandled baggage rate declined by more than 30 percent between July and September, Smisek said.
"We are now running a reliable airline again," Smisek said.
United Continental Holdings, which operates United Airlines, on Thursday reported third-quarter profits that fell short of Wall Street expectations.
In the third quarter, the Chicago-based airline earned $520 million, or $1.35 per share, excluding special items. Analysts on average expected $1.47 per share.
Revenue in the quarter was $9.91 billion, a 2.6 percent drop over the same quarter last year and slightly lower than the expected $9.97 billion. Third-quarter consolidated passenger revenue decreased 2.6 percent year-over-year.
Including special charges, UAL reported third-quarter profit of $6 million, or 2 cents per share. The largest special charge in the quarter was a $454 million expense associated with payments that could be made if pilots ratify a new contract. On Aug. 2, the airline reached an agreement in principle with the Air Line Pilots Association, and the two sides are in the process of drafting a tentative contract, which would then be voted on by pilots.
Total fuel expense, a huge cost for airlines, was $3.4 billion, down 1 percent in the quarter compared with last year's same quarter.
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