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By Nivedita Bhattacharjee
CHICAGO, Oct 24 (Reuters) - United Continental Holdings Inc , which owns United Airlines, missed quarterly profit estimates on Thursday as the airline still struggled to consolidate itself nearly three years after a merger that created the world's biggest airline.
Analysts said the carrier is lagging the industry on important performance points. Despite a handful of airlines yet to report, it appears that United's margin gap to the industry widened by 420 basis points from last year, J.P. Morgan analyst Jamie Baker said in a note to clients.
Shares of the Chicago-based airline fell as much as 4 percent in early trading before reversing and trading up 1.5 percent at $31.43 on the New York Stock Exchange.
"Perhaps the market's forgiveness of United is driven by confidence that management, at some point, will come out swinging with an aggressive plan of action, margin restoration, and corporate share recapture," Baker said in a note before the company hosted its conference call.
For the third quarter, the Chicago-based company earned $379 million, or 98 cents a share, up from $6 million, or 2 cents a share, a year earlier.
However, after excluding $211 million of merger related charges, the company earned $1.51 a share, missing Wall Street estimates by 3 cents, according to Thomson Reuters I/B/E/S.
Revenue came in at $10.23 billion. A year before, revenue was $9.91 billion.
United's consolidated revenue passenger miles decreased 0.3 percent, and capacity decreased 1.1 percent.
Passenger revenue per available seat mile, a key measure of airline health, rose 2.7 percent. Delta said on Tuesday that its comparable number rose 4 percent. Southwest Airlines said on Thursday that quarterly profit rose as fuel costs fell and higher airfares bolstered revenue.
On a conference call with analysts, Chief Executive Jeff Smisek called the results "unsatisfactory."
Hurting results was a demand forecast in its revenue management system, which accepted too many low-yield bookings early in the booking curve. The company is also seeing increased competitive pressure in the Pacific region, particularly in China, he said. Pacific revenue declined 9.4 percent.
"Long-term we continue to like the company, however we believe the absolute short-term will not be pretty," said analyst Helane Becker of Cowen and Co.
United, formed by a merger of UAL and Continental in 2010, has been working to win back customers who turned to rivals after the airline faced severe service-related and operational problems last year.
In August, United was fined $350,000 by the U.S. Department of Transportation for failing to make prompt refunds to consumers. The department also said the airline underreported the number of mishandled baggage reports it received from passengers between January and October 2011.