United Airlines shares fall after dour forecast

By Rajesh Kumar Singh and Abhijith Ganapavaram

(Reuters) -United Airlines shares fell on Tuesday after the company forecast a loss in its current quarter, even as it said the “bigger picture” was positive with consumer demand remaining strong.

The comments did little to reassure investors, and United’s shares were down 5.6% at $46.11 in morning trade.

United forecast on Monday an unexpected loss of between 60 cents and $1.00 per share in the current quarter, citing lower demand as well as higher costs from a potential contract deal with pilots.

In January, the company had forecast an adjusted profit between 50 cents and $1.00 per share for the quarter.

At JPMorgan’s investor conference, United’s Chief Executive Scott Kirby attributed the miss to a “bad” forecast, reaffirming the company’s full-year outlook.

“Everyone up here hates that we missed the forecast,” he said. “The bigger picture is the outlook looks really strong.”

JPMorgan analysts said investors were still likely to be spooked by the current-quarter guide. BofA Global Research analysts said a likely widening gap between booking and travel dates could also further pressure ticket prices.

Kirby acknowledged that the revision to the original guidance had put a question mark on the credibility of the company’s outlook for the rest of the year.

United’s total revenue per available seat mile, a proxy for pricing power, is estimated to be up 22% to 23% in the first quarter from a year earlier, slower than the 25% growth expected previously, United said.

The company however said its outlook for the second quarter has improved, with total operating revenue now expected to be up in the “mid-teens” versus last year.

“The company is seeing stronger revenue in the peak months and more discounting in off-peak months,” TD Cowen analyst Helane Becker wrote in a note.

United’s rival Delta Air Lines Inc on Tuesday reaffirmed its first-quarter outlook.

(Reporting by Rajesh Kumar Singh in Chicago and Abhijith Ganapavaram in Bengaluru; Editing by Krishna Chandra Eluri and Jan Harvey)