United Airlines Takes a Hard Landing

United Continental Holdings Inc. (NYSE: UAL) reported third-quarter 2012 results before markets opened this morning. The airline posted adjusted diluted earnings per share (EPS) of $1.35 on revenues of $9.9 billion. In the same period a year ago, the company reported EPS of $2.00 on revenues of $10.17 billion. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $1.47 and $9.97 billion in revenues.

On a GAAP basis, United’s EPS totaled $0.02, compared with $1.69 a year ago.

The company’s chief revenue officer noted:

In September, we entered the next phase of aircraft redeployment, as we continue to match the right aircraft to the right routes. Early results of our redeployment efforts are promising, and we are eager to optimize our global network and realize the full revenue potential of our merger.

United’s passenger revenue fell by 2.6% compared with the same period a year ago, and costs per available seat mile, an industry-standard metric, rose 6.6% year-over-year. The company cut routes by 1.1%. Fuel costs rose 1% compared with a year ago. The average fare for the quarter was $279.16, slightly lower than the $279.71 total in the same period a year ago.

Like most airlines, United is reducing its number of flights to rein in costs. The flip side is that revenues take the hit for the discontinued flights. Falling fuel prices could help the airlines in the current quarter, as well as the traditionally strong holiday travel season.

United’s shares are down 1.8% in premarket trading, at $19.91, in a 52-week range of $15.51 to $25.84. The consensus target price for the shares was around $26.80 before today’s report.

Paul Ausick