Could United Airlines Earnings Ever Have Been Good Enough?

United Continental Holdings Inc. (NYSE: UAL) reported first-quarter 2017 results after markets closed Monday afternoon. The airline reported adjusted quarterly earnings per share (EPS) of $0.41 on revenues of $8.42 billion. In the same period a year ago, United reported EPS of $1.23 on revenues of $8.2 billion. First-quarter results compare to the consensus estimates for EPS of $0.38 on revenues of $8.36 billion.

The past week has been a rough one for United. An incident involving a passenger in Chicago has led to changes in the way United will handle overbooked flights and effectively triple payments to passengers who voluntarily give up seats on such flights. No one expects the changes to be the end of the story, and investors are likely being cautious based on almost certain lawsuits from passengers the airline has treated harshly.

Adjusted to excluding fuel-hedging losses, fuel cost averaged $1.71 a gallon, an increase of 41.3% a gallon year over year. Total fuel expense for the quarter equaled $1.56 billion, 28% compared with $1.22 billion in the same quarter last year.

Passenger revenue per available seat mile (PRASM) was flat year over year and consolidated yield rose 0.4% year over year in the first quarter. The declines were below the company’s forecast due to stronger late bookings and yields in November and December.

Cost per available seat mile(CASM, the unit cost) including special charges, third-party business expenses, fuel and profit sharing increased 7.9% compared to the first quarter of 2016 due mainly to higher fuel prices. Consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, increased 5% year-over-year, driven mainly by higher labor expense.

United’s president and CEO, Oscar Munoz, said:

In the first quarter of 2017, our financial and operational performance gives us a lot of confidence about the foundation we are building. It is obvious from recent experiences that we need to do a much better job serving our customers. The incident that took place aboard Flight 3411 has been a humbling experience, and I take full responsibility. This will prove to be a watershed moment for our company, and we are more determined than ever to put our customers at the center of everything we do.

Available seat miles rose 3.7% compared with the same quarter last year and passenger revenue increased by 0.8% per available seat mile.

The company did not offer second-quarter guidance, but consensus estimates call for revenues of $9.79 billion and EPS of $2.25. In the second quarter of 2016 revenues totaled $9.4 billion and EPS came in at $2.61..

Shares traded up about 1% at $71.50 in Monday’s after-hours session. The stock’s 52-week range is $37.41 to $76.80. Prior to this release the 12-month consensus price target on the company’s shares was $83.38.