UAL Corp. joined the chorus of beleaguered airlines Tuesday, warning that it expects to post a double-digit decline in second-quarter revenue because cautious customers have cut back on travel.
The news that the second quarter will be disappointing was no surprise, since UAL had issued a warning in April, airline analysts said. But the magnitude of the decline was greater than expected.
UAL Chairman and Chief Executive James Goodwin said the slowdown in the U.S. economy, combined with “significantly higher” fuel and labor costs this year, dealt the Elk Grove Township-based airline a triple whammy.
The parent of United Airlines left Wall Street to wonder about specific financial results, saying it couldn’t predict with any certainty, given the precarious state of the economy and the fate of its proposed merger with US Airways.
Analysts surveyed by First Call/Thomson Financial have been expecting United to post a loss of $3.40 a share in the second quarter, compared with net income of $3.47 per share in the same period last year.
United has plenty of company. AMR Corp., parent of American and Trans World Airlines, said Monday that it expects to post a $100 million loss in the second quarter. Last week, Delta Air Lines warned it will lose $140 million to $160 million, twice what analysts had expected.
Still, United may come in for special criticism on Wall Street because management has allowed itself to become distracted with issues outside the core airline, consultants said.
For example, United plans to get into the business of leasing corporate jets, which involves paying tens of millions of dollars for small jets that don’t fit with the rest of the fleet.
“They should be focused on running the core airline at a time like this, not buying small jets that don’t have any connection to their business,” said Michael Boyd, president of the Boyd Group, an aviation consulting firm based in Evergreen, Colo. “It’s clear at this point that United has a severe management problem.”
