UAL Corp., the parent of United Airlines, said Monday its preliminary results show that second-quarter earnings will be more than double Wall Street forecasts, driven by strong revenue and cost cuts.
The No. 2 U.S. airline, which emerged from bankruptcy in February, said it expects net income for the quarter will be $119 million, or 93 cents per share, including a one-time severance expense of $22 million.
Excluding the severance expense, profit would be $141 million, UAL said.
Wall Street analysts have estimated earnings of 44 cents a share, excluding items, according to Reuters Estimates.
"Not shocking. They topped my estimate but not by a lot," said Ray Neidl, analyst at Calyon Securities, who said his forecast was higher than many other analysts'.
"If they did not make a profit in the second quarter, something would be been wrong, because it looks like it's going to turn out to he a strong quarter for all the airlines, particularly the legacy carriers," Neidl said.
AMR Corp., parent of No. 1 U.S. carrier American Airlines, and discount carrier Southwest Airlines Inc. last week both reported second-quarter results that topped Wall Street expectations, as industry-wide capacity reductions and fare increases boosted revenues.
The UAL forecast "underscores that we're in good revenue environment," said Helane Becker, an airlines analyst with The Benchmark Co.
UAL said it expects operating revenue to be up 16 percent to $5.1 billion for the quarter and sees its operating margin rising to 5.1 percent from 1.1 percent in the 2005 quarter.
"We expect to report results that exceed current second-quarter consensus expectations because of the continuing benefits of our restructuring, strong revenue growth, and our cost control efforts," UAL Chief Executive Glenn Tilton said in a statement.
UAL said it had an effective tax rate of zero for the quarter and said cash and short-term investments at the end of the quarter are estimated at $5.1 billion.
UAL in the year-earlier second quarter had a loss of $26 million, excluding reorganization and special items.
The company will release final second-quarter results on July 31.
United Airlines, whose cost reduction program includes cutting as many as 1,000 jobs by the end of this year, said it expects to achieve a portion of its planned 2007 savings ahead of schedule in 2006.
It said average costs for jet fuel in the second quarter are estimated at $2.16 per gallon, and it has 28 percent of its requirements hedged for the third quarter at an average price of $1.66 per gallon, excluding taxes, using crude oil swaps.
