United’s profit climbs as carrier says fares will edge up

Fourth-quarter profit at United Airlines jumped 46 percent and the carrier signaled that average fares would inch higher early this year, but its shares fell in extended trading Tuesday after executives spelled out aggressive growth plans.

Like its rivals, United is benefiting from strong demand for travel, which is filling more seats.

Chicago-based United, which has a major hub in Houston, is showing more ability to handle fare wars with discount carriers including Spirit Airlines. A key measure of average prices, revenue for every seat flown one mile, inched 0.2 percent higher in the fourth quarter. United predicted the figure would rise around 1 percent in the first quarter.

Airlines are also dealing with higher fuel costs — they were up more than 20 percent from a year ago at United. But United executives sounded confident that they can hold other costs flat or lower on a per-mile basis over the next three years.

United reported a $580 million profit in the fourth quarter, and adjusted earnings of $1.40 per share beat analysts’ expectations by 6 cents per share, according to surveys by Zacks Investment Research and FactSet.

The airline predicted 2018 earnings of $6.50 to $8.50 per share, compared with analysts’ forecasts of around $6.96 per share.

In a meeting with investors, United executives said they planned to raise passenger-carrying capacity by between 4 and 6 percent each year through 2020.

That kind of growth — faster than United expanded last year — could spook investors, who worry that a glut of seats will lead to more fare wars and eat into profits.

At a meeting with investors in New York, the airline’s president, Scott Kirby, gave a detailed analysis of what is right and wrong with United’s network. He said United enjoys higher profit margins than competitors at international gateway airports on the East and West coasts but lags badly at mid-continent hubs such as Chicago and Houston.

That can be fixed, Kirby said, partly by rebuilding service to smaller but high-fare markets from which it retreated in recent years.