United sees glut of transatlantic flights hurting results
A United Airlines Boeing 787 taxis as a United Airlines Boeing 767 lands at San Francisco International Airport, San Francisco, California, February 7, 2015. REUTERS/Louis Nastro/File Photo
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By Jeffrey Dastin
(Reuters) - A glut of seats on transatlantic flights may weigh on United Continental Holdings Inc's (NYSE: UAL) results through all of 2017, the president of the third largest U.S. carrier by traffic said on Tuesday.
Attacks in Europe have hurt travel demand, and a weaker sterling has dampened sales to British travelers in dollar terms, United said in a regulatory filing earlier on Tuesday.
United and other established airlines have also been forced to cut prices as Gulf carriers such as Emirates [EMIRA.UL] and budget airlines like Norwegian Air Shuttle ASA
As a result, President Scott Kirby told analysts on a conference call, it was unclear whether a key revenue measure would stop declining in 2017 for transatlantic flights.
Kirby's remarks came a day after United released third-quarter results, which showed a 6 percent drop in pretax income, partly due to higher wages.
For Europe, the measure, called passenger unit revenue, is expected to fall between 7.5 percent and 10.5 percent in the fourth quarter, according to the filing. It compares passenger revenue to flight distance and number of seats.
For Norwegian alone, the number of one-way flights across the Atlantic has risen 44 percent to 2,916 this year, according to schedules as of Sept. 9 from air travel intelligence company OAG.
That is dwarfed by United's more than 22,000 transatlantic flights, but the competition is undermining efforts by legacy carriers to shrink capacity and firm up prices.
Transatlantic service has only accounted for 19 percent of United's flight capacity this year.
Passenger unit revenue for flights to Asia, which account for about 16 percent of United's capacity, will grow in 2017, Kirby said. For Latin America, the measure will rise between 2 and 5 percent in the fourth quarter, according to the filing.
United's biggest market, the United States, is improving as well.
Some 43 percent of domestic routes posted a rise in unit revenue in the third quarter from a year ago, Kirby said. Corporate travelers are also booking more expensive last-minute fares.
The airline plans to fine-tune how it prices flights relative to demand, he said.
Kirby, who joined United from American Airlines Group Inc (NASDAQ: AAL) in late August, said the company lacks an automated process for measuring how demand forecasts compare to actual results.
"As great as people are, you can't do that as well as a robust system with thousands and millions of data points," Kirby said.
(Reporting By Jeffrey Dastin in New York; Editing by Chizu Nomiyama and Richard Chang)
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