Perennial underperformer United Continental (UAL) on Tuesday laid out its plan to improve operations and close a substantial margin gap vs. its rivals. Reaching that destination will be no easy task.
A United team led by CEO Oscar Munoz said on an investor call that they believe they can increase operating income by $3.1 billion by 2018 via cost reductions and revenue enhancements. United also said it expects second quarter passenger revenue per available seat mile to drop between 6.5% and 7.5%, relatively good news compared to previous guidance that the commonly-used industry metric could fall upwards of 8.5% during the quarter.
The upbeat investor call and improved guidance was cheered by Wall Street, sending United shares up nearly 3%, or $1.21, in mid-afternoon trading. But shares of the company are down more than 20% on the year, and investors would be well advised to avoid getting overly excited about United's future projections.
Indeed United has seemingly been announcing turnaround plans and promising of better days ahead as far back as the company's mid-1990s employee takeover, and most of those initiatives have fallen short of expectations. The airline is also fighting structural issues relative to rivals like Delta Air Lines (DAL) and American Airlines Group (AAL) , including substantial exposure to the slumping energy sector thanks to its Houston hub.
Part of United's confidence this time around comes from the fact that a good portion of the planned improvements would come from the airline simply taking steps that its competitors already have in place. United has had its fair share of issues over the last year, ranging from a proxy fight, labor strife, a federal probe into dealings with government officials, a CEO ouster and then Munoz's health issues and eventual heart transplant.