United Continental Holdings Inc. (UAL) Chief Financial Officer Andrew Levy said on Wednesday, Sept. 6, the carrier will have $400 million less that projected in third quarter revenue.
Shortly before an appearance from Levy at an investor conference, United cut its third-quarter passenger revenue per available seat mile forecast to negative numbers: down between 2% and 5%.
Previous guidance had been for flat PRASM, between up 1% and down 1%.
United shares were down about 1.5% midday Wednesday.
About 150 basis points of the revenue guidance cut are due to Hurricane Harvey, Levy said Wednesday. In terms of exogenous events' impact on United, Harvey had "the largest operational impact in history," he said.The hurricane struck Houston, United's second-largest hub. United said it expects to operate its full schedule of 410 Houston departures on Friday.
"We lost a lot of revenue," Levy said. "We had to walk away form a large amount of revenue during what is an important time of year for us," he said, referring to Labor Day weekend.
"Local demand for obvious reasons went away," he said, while United retained some but not all of the traffic that would have connected over Houston.Besides 150 basis points of Harvey impact, Levy said, implementation of basic economy fare is responsible for 100 basis points of decline; fare competition with ultra-low-cost carriers is responsible for 100 basis points; and declines in the Pacific are responsible for 50 basis points.
In the Pacific, he said, United is seeing "continuing lower demand out of China than we expected to see." United has cancelled San Francisco-Hangzhou service effective Oct. 14.
United cut its pretax margin guidance to between 8% and 10%. Previous guidance was between 12.5% and 14.5%.
United also cut capacity guidance to between 3% and 3.5%. Previously, it had projected a capacity gain of 4%.
Levy also said the carrier is revising an order for Airbus A350s. The carrier had planned to take 35 A350s starting in 2018, but now plans to take 45 A350-900s between 2022 and 2027. If United decides to fully replace its Boeing 777-200ER fleet with A350, it could increase the Airbus order, Levy said.
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