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Cheap oil weighs on revenue at United Airlines

Thursday, January 21, 2016 - 01:27

The drop in fuel prices boosted United Airlines' profit, but hurt sales to energy clients. Leah Duncan reports.

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The drop in fuel prices boosted quarterly profit for United Airlines in the fourth quarter. But it wasn't all good news for the carrier. United warned that it expects unit revenue, which compares ticket sales to flight capacity, to keep falling, as lower prices hurt sales to corporate energy clients around its Houston hub. In response to weaker sales, United said it is shrinking capacity in that region. UBS analyst Darryl Genovesi: (SOUNDBITE) DARRYL GENOVESI, ANALYST, UBS (ENGLISH) SAYING: "When companies find themselves less profitable than expecting, the first thing that goes is the T&E budget. So, travel budgets are down at energy companies, specifically, in 2016 after being down pretty considerably in 2016. United had called out about a thirty percent revenue decline among their energy customers last year, so that looks like it will continue a bit into this year, although I would expect the year-over-year headwind to moderate." But there was a bright spot. CEO Oscar Munoz, who suffered a heart attack late last year, said he will return from medical leave by the end of the first quarter. Over at low cost carrier Southwest Airlines, quarterly profit rose sharply. But the company said it expected unit revenue would be flat in 2016. Shares of Alaska Air moved sharply highly after it reported record results.

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Cheap oil weighs on revenue at United Airlines

Thursday, January 21, 2016 - 01:27