johnso29

United Continental's Report Is Deceiving
Tim Beyers - January 27, 2011

Shares of resurgent legacy carrier United Continental Holdings (NYSE: UAL) closed up more than 7% yesterday, the result of enthusiasm for an earnings report that isn't nearly as good as it looks.

And it does look good at first glance. Revenue surged 15% and adjusted earnings swung from a $0.60-per-share loss to a $0.44-per-share gain. United Continental's mainline load factor also improved a tenth of a percent to 82.7%. (Confused? Click here to get the skinny on all sorts of airline operating metrics.)

UAL also confirmed big orders with Airbus and Boeing (NYSE: BA). Despite the aircraft's well-documented problems, United Continental plans to acquire 25 of Boeing's fuel-efficient 787s. The implication? We have more than enough funding to expand and modernize our fleet, thank you very much.

Before you clap

Frankly, everything seems fine with UAL's report until you stack it up against what Delta Air Lines (NYSE: DAL) reported last week. Delta also booked a double-digit revenue gain and reversed prior-year losses in Q4. Yet its peer failed to impress the Street the way UAL has. The difference? Delta missed analyst expectations for profit.

Whether that actually means anything is debatable. Wall Street was embarrassingly low in projecting United Continental's Q4 profit, calling for just $0.23 a share. And that's not even the worst part.

(Clears throat) The aforementioned "worst part" ...

More galling is what the Street is choosing to pay attention to. I'll grant that Delta's results weren't great, but at least the carrier produced free cash flow ($52 million in the quarter, according to management's assertions).

United Continental can't make that claim. Not only did the carrier strip cash flow calculations out of its press release (a troubling change from Q3), but what little information we do have shows UAL's liquid resources dipped from $9.1 billion in the third quarter to $8.7 billion in Q4.

Something's burning at United, and it smells like cash. Should investors care? Use the comments box below to let us know what you think. You can also rate United Continental in Motley Fool CAPS.

RockyBoy

Nope. Can't swap with the pot if the trip your dropping or the trip you want to swap for is within 48 hours of report time. You can WS a trip but you cannot swap for one.

Need that changed in 2012 also. I don't see why we can't swap for stuff that is outside of 12 hours away from report. Wouldn't mess up the ability to cover the trip. I understand limiting us within 12 hours of report because they would burn up SC guys, but outside of 12 hours it makes no difference as far as coverage goes as long as the coverage levels allow the swap to go through.

georgetg

Congrats FTB!

I can't wait to see that situation appropriate picture

Cheers
George

Jughead

Thanks - that was it - $175 in the 401K.

All this means is a couple more "early bird specials" for me and the little lady in my retirement at Del Boca Vista. Not that eating dinner at 1630 is wrong.

gloopy

Boeing will think they learned from their outsourcing orgy, do it again, have the same result and squeal to the world court when Airbus sells 600 planes to SWA. The 320 NEO only needs engines and winglets added to it, and maybe tiny little things like slightly more aerodynamic beacons and landing lights, etc. Big deal. The legwork for the winglets is pretty much done anyway. That leaves them 5 years to work out engine only. I think they can handle that long before Boeing can get a clean sheet narrowbody off the ground. Long before.

gloopy

Yeah I would also like to see narrow body fleet only numbers with all training other than recurrent and upgrade backed out. That would give a much truer comparison. Yes there is a cost for training with a lot of fleet types, but there is revenue opportunity there as well and it is not a fair comparison. If DL went to a single fleet type it would have to slash it routes and revenue so this bogus MBA 101 regurgitation about how great SWA is because of one fleet type just isn't relevant in context. I bet if you isolated each fleet type (737, 320, M88) you would see significantly higher per pilot productivity.

gloopy

I doubt a clean sheet 737/797 would deliver much beyond the 20% that the NEO would. Maybe a few percent, but I'd hardly call that obsolete. Maybe the 797 would have the infinite hull life cycles or whatever, but really does anyone think a brand new 320 with 25-30 years on it is "obsolete"? Its all about the efficiency and operating costs and the NEO will have very comparable operating costs especially when you factor in the better part of an additional decade flying gas guzzlers around waiting for their 797. That is a steep off the books price that is nevertheless built in to the 797. Too little too late IMHO. Until we see next-next gen the difference in efficiency between the 320 NEO and the mythical 797 just won't be that significant and the NEO has the lead big time.

LeineLodge

Thanks Rocky. That's why I never argue with the schedulers - They're always right!

Cycle Pilot

We need to change some of our hotels to Hyatt Places! I just stayed one. Really nice hotel. Good internet, inexpensive food, free breakfast, BIG LCD TV's, and overall nice rooms. Plus, the fitness room is well equipped.

Anybody know why we changed hotels in FLL? That was a great location! Somebody told me we're inland now.

Brocc15

What would you do?....
Today is an X day and they give you a "courtesy call" that you are on Short call at 6 am. Commuter, JS booked to get to base the next morning, but you are not on long call till midnight tonight and your flight doesn't get you in until 10 ish. Do you:

a. Call scheduling and tell them the earliest short call you could do is 10 am since you weren't scheduled to start long call till midnight tonight

b. Nothing. They will see you haven't acknowledged at midnight when you start long call.

c. Acknowledge and rush to get to the airport tonight so you can be on 6 am long call.

I'm just curious. I called scheduling and told them I am on an off day and am commuting in in the morning so I could do a 10 am short call. They switched it, no big deal, but I was wondering if because I called I technically could have been acknowledging and therefore had to rush to the airport tonight anyway? I don't doubt I did the right thing, just wondering what implications I COULD have and maybe will have in the future? I'm a little confused about the contract wording. It is a non issue now, but just wanted to make sure I don't have a completely false idea of what's legal and what's not. I know I'm not required to answer my phone on my X day, but the wording in the contract says I can be converted to short call within 10 hours of scheduling's first attempt to contact me. Does that mean since they made an attempt today even though I am off that I can be on short call early?