In a filing, United said it cancelled 22,500 flights during the two-month period, nearly four times the number cancelled in the same period a year earlier. Of the cancellations, about 20,000 involved regional aircraft. Because regional flights are typically shorter than mainline flights, regional cancellations have a disproportionate impact on passenger revenue per available seat miles, which United quantified as a 1.5 point decline on first-quarter consolidated PRASM.
United said it expects first-quarter consolidated PRASM to decline between 0.5% and 2.5%, reflecting the impact of the regional cancellations and of a recent review of the value of sold but unredeemed tickets.
As for its regional completion factor, United said the 87.1% two-month rate was nearly nine points below its mainline completion factor, an indication that regional flights are more likely to be cancelled during severe weather.
Shortly after the market opening on Friday, United shares were down $1.23 to $45.28.
In a note, Deutsche Bank analyst Michael Linenberg said he now expects United to lose $1.50 a share in the first quarter, wider than his previous estimate of loss of 85 cents a share. But Linenberg noted: "We view the cancellations as an extraordinary event, and therefore remain committed to the stock as an attractive investment." He maintains a buy rating and a $50 price target.
Cowen & Co. analyst Helane Becker also called any share price decline "a buying opportunity." She now forecasts a first-quarter loss of $1.20 a share, compared with her previous estimate of a loss of 65 cents. She has an outperform rating and a $56 price target.
JPMorgan analyst Jamie Baker said the United filing suggests a first-quarter loss "meaningfully below consensus." Baker now estimates a loss in the $1.10-a-share range, compared with his previous estimate of a loss of 47 cents a share. But Baker noted that United's "loss could potentially widen once final costs are tallied," and suggested it may approach $1.50. Analysts surveyed by Thomson Reuters had estimated a loss of 73 cents a share.
Baker reminded that United has suspended monthly RASM disclosure, and said that the resulting "renewed guidance vigilance" explains the "unexpected timing" of the guidance shortly before the release of February traffic data. He said he believes United's weather impact will exceed that of American (AAL) and Delta (DAL)because Chicago storm activity resulted in several consecutive days of cancellations, a more severe impact than in other eastern hubs.
Written by Ted Reed in Charlotte, N.C.
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