United Airlines Expects Passenger Revenue to Drop

January 21, 2016, 3:10 PM UTC
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CHICAGO, IL - SEPTEMBER 19: United Airlines jets sit at gates at O'Hare International Airport on September 19, 2014 in Chicago, Illinois. In 2013, 67 million passengers passed through O'Hare, another 20 million passed through Chicago's Midway Airport, and the two airports combined moved more than 1.4 million tons of air cargo. (Photo by Scott Olson/Getty Images)
Photograph by Scott Olson — Getty Images

United Continental Holdings on Thursday reported fourth-quarter profit below analysts’ expectations and said it expects unit revenue to keep sinking as sharply lower oil prices hurt sales to energy clients around the airline’s Houston hub.

United (UAL), the second-largest U.S. airline by capacity, doubled its adjusted profit to $934 million, or $2.54 per diluted share. Analysts, on average, expected United to earn about $959 million, or $2.58 per diluted share, according to Thomson Reuters I/B/E/S.

The company forecast a pre-tax profit margin between 8% and 10% in the first quarter, excluding special items.

It also forecast that passenger unit revenue, which compares ticket sales to flight capacity, will fall between 6% and 8% in the first quarter from a year ago, on an estimated capacity increase between 1.5% and 2.5%.

The unit revenue forecast was worse than expected, Sterne Agee CRT analyst Adam Hackel said.

For months, a strong U.S. currency has lowered the value of U.S. airlines’ foreign sales in dollar terms.

The plummeting price of fuel has helped United’s bottom line but hurt revenue from corporate energy clients near Houston’s George Bush Intercontinental Airport, where United is the largest airline.

Lower fuel prices have also ramped up competition within the United States, enabling large U.S. carriers to chop fares in line with budget airlines that have lower operating costs, such as Spirit Airlines (SAVE).