Topic of the Week: First Quarter Earnings Show a Struggling United, JetBlue

Apr 25, 2014

More Reading on This Topic: American, Delta, JetBlue, United

For quarter earnings are out for the big guys, and the results are pretty easily divided into winners and losers.

Losers
United lost $489 million (excluding special items) on $8.7 billion in revenue for a -5.6 percent net margin. Unit revenue was down 2.0 percent year over year.

JetBlue earned $4 million (excluding special items) on $1.3 billion in revenue for a 0.3 percent net margin. Unit revenue was up 0.9 percent year over year.

Winners
American earned $402 million (excluding special items) on $10.0 billion in revenue for a 4.0 percent net margin. Unit revenue was up 2.9 percent year over year.

Southwest earned $126 million (excluding special items) on $4.2 billion in revenue for a 3.0 percent net margin. Unit revenue was up 3.1 percent year over year.

Delta earned $281 million (excluding special items) on $7.7 billion in revenue for a 3.7 percent net margin. Unit revenue was up 3.2 percent year over year.

So what do you think? Will the winner keep winning and the losers keep losing or will we see some changes?

Brett

43 responses to “Topic of the Week: First Quarter Earnings Show a Struggling United, JetBlue”

Bill from DC

Apr 25, 2014 at 7:39 am

not sure I see B6 as a loser for finishing in the black. IMO if you finish in the black on ops (before special items) in the airline business, i think you’ve done a good job especially with the current cost of fuel and the competitive environment created by the big 6/5/4/3 bankruptcies and mergers.

Reply
David SF eastbay

Apr 25, 2014 at 7:41 am

What really matters for United and Jetblue is do they know why they lost money and do they know how to turn things around.

The ‘winners’ need to figure out what they did right and not screw things up.

Reply
Southeasterner

Apr 25, 2014 at 8:25 am

Pay attention to those Southwest labor costs. Increased by 8%! It looks like labor is going to surpass fuel as their largest cost next quarter.

Reply
1. Airline guy
  
  Apr 25, 2014 at 11:10 am
  
  so what your saying is that southwest should join the race to the bottom companies, cut back employment contract out more work for lower pay, and help assist the further destruction of the American way of life by destroying wages and benefits all in the name of increasing profit margins for investors and senior management and make tons of money like spirit and Allegiant amongst others just so you can get your wonderful $20 faire from A to B? Well that’s just wonderful. its sad how those out there feel that as long as they don’t lose anything who cares about the other people. I’m just saying
  
  Reply
  1. Southeasterner
    
    Apr 25, 2014 at 12:50 pm
    
    Ummm ok.
    
    Or you could just ask the question why labor costs increased by 8% on revenue growth of just over 2%.
    
    For all I know management could have given themselves a huge bonus at the end of the year, which would also irritate me as a shareholder.
    
    Reply
  2. Chase
    
    Apr 25, 2014 at 5:02 pm
    
    This argument is thrown around as if unskilled jobs in customer service, ramp, inflight, etc were always intended for long-term careers. That simply is not the case, and would not be the case without the union protections. I’m not going to start a war over union existence, but blaming customers and not the ultra-competitive environment these companies operate under is absurd. This is a business operating in a capitalistic economy, not a communist candy shop in existence for the sole benefit of ‘the common man.’
    
    Reply
    1. LT_DT
      
      Apr 25, 2014 at 7:06 pm
      
      I don’t think it’s fair to characterize customer service as an unskilled job. It It many cases, they have to learn complex software and, more importantly, how to deal with people. It seems to me that the difference between a CSA who knows his or her job and one who doesn’t is pretty clear to spot, and that wouldn’t be be the case if it was truly unskilled work. I would think that the same rationale would apply to inflight and ramp. There’s a big difference between the average Southwest flight attendant and the average ExpressJet one (just to pick on a carrier that doesn’t seem to emphasize “soft skills” as much as Southwest does).
      
      Reply
Sean M.

Apr 25, 2014 at 8:47 am

I wonder how much United is missing having US Airways in the Star Alliance. I’m a US Airways FF, and starting January 1, I have taken 10+ segments on American metal, where those would have been on United metal if US Airways was still part of Star Alliance. I’m sure losing US Airways has hurt United and helped American’s numbers.

Reply
1. JH
  
  Apr 25, 2014 at 10:21 am
  
  That can’t be an excuse here for UA since US was still part of Star Alliance until March 31
  
  Reply
  1. Sanjeev M
    
    Apr 25, 2014 at 1:38 pm
    
    If anything, US leaving Star is putting those Star-loyal flyers back onto United. I’d say this is a boost to IAD/IAH feeder flights to the Southeast US (CLT replacement) and the EWR/ORD flights to the northeast (PHL replacement). Yes lot of the US business went to AA. CLT was and still funnels a lot of low-yield connections and Florida, and UA is probably not concerned about losing that.
    
    I was hoping UA uses IAD to be more aggressive in the South, but they can’t seem to get much working other than international feeders because the domestic O&D clearly prefers DCA, even if that means the US nonstops or connecting on DL through ATL.
    
    Reply
Sanjeev M

Apr 25, 2014 at 8:48 am

Q1 is traditionally weak so let’s keep that in mind. Lot of the media coverage has been focused on the weather events hitting UA particularly hard due to the locations of their hubs and more use of regional aircraft vs DL/AA/WN. The numbers just go to show that margins in this industry pale in comparison to most other industries.

Reply
1. Airline guy
  
  Apr 25, 2014 at 11:22 am
  
  YES ABSOLUTELY!!!!!
  Sooner or later United is just going to have to face the music and learn that there excessive use of 50 seater jets is really hurting them big time!! there going to have to bite the bullet and combine more of the RJ flying on to main line metal with larger planes. however one thing that will be really sad to see is a possibility of off loading some regional contract flying hurting some jobs at regonals. but from what I recall that there is a so call pilot shortage so perhaps the mass reduction of 50 seat jet flying could help other stronger Regional companies perhaps. but over all my good friends that I know will be affected with cut backs pay and benefit concessions along with layoffs. I know I’ve been though it all before with frontier so I know many are worried of there jobs.
  
  Reply
2. Seatback
  
  Apr 25, 2014 at 12:08 pm
  
  AA (ORD/JFK/PHL/CLT) and Delta (MSP/DTW/JFK) were also significantly exposed to the extreme weather and both reported excellent results.
  
  Reply
Neil S.

Apr 25, 2014 at 9:20 am

I’ve seen the harsh winter argument. But DL has hubs at JFK/LGA, DTW, and even ATL was destroyed this winter with ice storms.

I’m no expert, but it sure seems like UA has some other issues going on.

And given how much people whine about Skypesos, and how SkyTeam is worse than *A – it’s interesting to think about.

Reply
Ben Shockley

Apr 25, 2014 at 9:30 am

United is too focused on cutting cost and not growing revenue. Their service continues to suffer and their corporate accounts are unhappy. Delta knows that growing revenue is the path to profitability. AA is a little disorganized and they still have to get through the merger and their service will suffer at some point. Southwest no longer has a fuel cost advantage and is going to struggle to compete. They don’t want to be in thd GDS because they don’t want anyone comparing them. They are not a LCC any longer and they need to figure out who they want to be.

Reply
1. Skedguy
  
  Apr 25, 2014 at 11:03 am
  
  Notice how the airlines that are improving their on board product (DL & AA) are profitable but the major that has destroyed on board product (UA) is being rewarded appropriately. Wasnt it Gordon Bethune (former CO Pres) who said you can keep take things of a pizza until no one wants to pay for it anymore. I gues UA’s cheap pizza is being valued accordingly.
  
  Reply
Barry V.

Apr 25, 2014 at 9:36 am

Not surprised that UA lost money. Their product is terrible…and that’s a complement ( I’m trying to be civil). In reading the reviews, I’m NOT the only one who feels that way. BRING BACK CONTINENTAL…..PLEASE!!!

Reply
Frank Garon

Apr 25, 2014 at 9:45 am

United was, is, and always will be a garbage airline. Now they’ve taken the late, great Continental along with them on their ride to the bottom. Darn shame, IMHO…

Reply
1. RAW
  
  Apr 25, 2014 at 12:07 pm
  
  Well, it’s run by Continental brass. The fish stinks from the top.
  
  Reply
John G

Apr 25, 2014 at 9:47 am

UA is having real trouble combining the cultures of CO and the old UA. Whether they admit it or not, the old UA people in general have poor attitudes, poor service, and poor quality. CO was a better product, and had better employees. Unfortunately, this is still two airlines in many ways, and the UA people are getting even unhappier.

AA, DL, and WN also got creamed with winter weather, and still made money. B6 can be excused because they are more exposed with their Northeast-heavy schedule. UA can’t.

Reply
1. MeanMeosh
  
  Apr 25, 2014 at 12:01 pm
  
  “UA is having real trouble combining the cultures of CO and the old UA. Whether they admit it or not, the old UA people in general have poor attitudes, poor service, and poor quality. CO was a better product, and had better employees. Unfortunately, this is still two airlines in many ways, and the UA people are getting even unhappier.”
  
  The irony is, you’ll hear pretty much the mirror image of that complaint from pm-UA partisans about how CO has destroyed “their” airline. And that, I think, is the major malfunction here, a very much “us vs. them” mentality on both sides, which management has done a poor job of, well, managing. Add in a completely out-of-touch CEO, and you get…today’s UA.
  
  Reply
  1. Ken Schmidt
    
    Apr 27, 2014 at 7:06 am
    
    You would think after the disaster that was Penn Central back in the 70’s with it’s Red v. Green teams eating away at it’s core, Management schools today would teach how to avoid such disasters. Instead, they focus on meaningless terms and ideas that serve only to cover up such problems.
    
    Merger integration is more than making sure schedules and computers mesh properly together.
    
    Reply
    1. Art Hirschfeld
      
      Apr 28, 2014 at 11:17 am
      
      The Penn Central comparison is just about spot on! The only difference is that they combined three companies, New York Central, Pennsylvania, and the New Haven railroads. It is also interesting that UA is doing a sort of reverse Pan Am move, slowly destroying the domestic system and trying to be more and more just international.
      
      Reply
John G

Apr 25, 2014 at 9:49 am

Interesting that AA and UA have similar costs…$9.6 billion for AA and $9.3 billion for UA, but AA’s revenue is $1.3 billion higher.

Reply
Robert S.

Apr 25, 2014 at 9:54 am

I would not consider B6 a loser for this QTR. They finished in the black, and the percentage of their operation impacted by the rough winter weather is likely higher that any of the others on which you reported. United is another story.

Reply
A

Apr 25, 2014 at 10:05 am

It’s good to see AA is turning thing around and hasn’t DL been on a tear lately? Or at least as much of a tear you can have in the airline business. Surprised B6 is getting considered a “big guy.” As for all the UA hate, I wouldn’t know what their issues are. I haven’t flown them since CO went goodbye.

Reply
1. Noah
  
  Apr 25, 2014 at 10:42 am
  
  DOT Defines “Major Airline” as over $1 Billion in revenue, which JB has had for a few years now.
  
  Approx number of daily flights (marketed) yesterday:
  DL 5448
  UA 5343
  AA 3605 / US 3212
  WN 3448 / FL 318
  AS 876
  B6 848
  NK 270
  HA 224
  F9 237
  VX 177
  
  There is a clear drop off between UA/DL/AA/WN and AS/B6 and NK/HA/F9/VX
  
  Reply
  1. CF
    
    Apr 25, 2014 at 10:48 am
    
    Noah – Yep, and Alaska didn’t publish until today. Now we can see that they were once again rock stars.
    
    Alaska earned $89 million (excluding special items) on $1.2 billion in revenue for a 7.3 percent net margin. Unit revenue was up 1.7 percent year over year.
    
    Reply
JayB

Apr 25, 2014 at 10:35 am

I don’t put too much stock in a particular quarterly report. People above my pay grade get paid handsomely to help, or should I say confuse me.

Always interesting to see one airline investing in another airline, like DL with Virgin Atlantic and to see how one’s refinery is doing. I believe I see DL’s 1Q loss for the Philly refinery was $41mil.

But, there’s always something “unpredented,” something else “negatively impacted by,” but something showing the company’s great “strength and resilience,” plus the “great opportunity ahead.” Whatever.

I did glean some interesting revenue stats, which I compared with those of UA.

Domestic mainline DL 3.7bil UA 2.9 bil, DL’s up 7%, UA basically flat.
International mainline DL 2.5 bil UA 2.9 bil generally both down.
Regional DL 1.5 bil UA 1.5 bil. basically both down 5%, which I guess we can attribute to weather.

Anyway, thanks Cranky.

Reply
1. CF
  
  Apr 25, 2014 at 10:40 am
  
  JayB – Very true. That’s why I do find it worthwhile to read analyst reports because they are the ones who have set up expectations. In this case, it’s JetBlue and United disappointing while the others did not.
  
  Separately, the refinery is a tough one to nail down. They say it should be profitable on its own soon but we’ve heard that many times. The thing you can’t measure is the impact it has had on jet fuel supply. Had Delta not restarted this refinery, there would have been much tighter supply and higher fuel costs. So there is a benefit above and beyond here. Just not sure how to quantify it. Of course, the big winners are the other airlines that receive the benefit but don’t have to deal with the baggage.
  
  Reply
  1. Airline guy
    
    Apr 25, 2014 at 11:36 am
    
    you know what I was thinking perhaps southwest could possibly explore this option in due time perhaps.
    
    Reply
  2. Southeasterner
    
    Apr 25, 2014 at 1:11 pm
    
    ” The thing you can’t measure is the impact it has had on jet fuel supply.”
    
    Actually it’s very easy to measure. When Delta revamped Trainer and it came back online other refiners producing jet fuel cut back production, specifically in the Gulf Coast (NY-PA are directly linked by pipelines). You also had Midwest refiners increase production, taking advantage of increased crude production which pushed more Gulf Coast production to the East Coast.
    
    So overall the supply of products in the U.S. keeps growing but demand remains stagnant which means unsophisticated, smaller refineries like Trainer get pushed out of the market because their costs are too high, which is exactly why they wanted to close it in the first place.
    
    The reality is keeping Trainer open forced other refineries to cut-back to avoid over-supply of the market. Before Trainer came online Jet fuel spot prices were around $0.14 less per barrel than diesel, today that differential is only $0.05. Diesel is now trading $0.72 per barrel higher than gasoline compared to $0.11 before Trainer. Lot’s of global dynamics at play but Trainer didn’t contribute to keep prices down. It just kept an inefficient refinery open.
    
    Reply
Eric

Apr 25, 2014 at 10:47 am

Ok, I know we fondly remember the CO of 1999 but, to be fair, the service levels of CO in 2009 were nothing like Gordy’s airline a decade earlier. Management had decided that many of the freebies and creature comforts added little to the bottom line and those cost items were disappearing before the merger took place.

New UA’s focus on costs is, ironically, wrecking its unit revenue by making it’s product (hard and soft) uncompetitive . Over-reliance on single class RJ’s in markets where AA/US and DL offer 2 class larger RJ’s (or mainline) is killing them. Yes, UA is waking up and finally making changes to the regional fleet but…as usual…they are several years late to the party. Their hubs (with the exception of IAH) are in highly competitive markets where premium customers have plenty of premium options. My concern is that once UA’s product is competitive with it’s peers….their peers will be moving on to the Next Big Thing.

I worked at the old UA in the mid 00’s; using words like ‘innovative’ and ‘adaptable’ to describe the culture is an equivocation for ‘wait and see’ and ‘bystanders’. Combining a company culture committed to stasis with one obsessed with cost and you get……well…..new UA.

Reply
1. Airline guy
  
  Apr 25, 2014 at 11:52 am
  
  absolutely!
  I honestly believe with UA that they face an really sad state of affairs when it comes to there existing operations. to my understanding UA has more E-145/140s, CRJ-100,200s in operation than any airline out there and flying them on competitive routes just to give the passenger an option to get there. I also believe that there also focused more on the cost cutting and the amount of frequency within a route in order to stay competitive instead of the value of an premium package on certain routes and destinations unlike delta has more options on more of its routes with more larger aircraft in operation with lower frequency to some destinations than UA. but the bottom line should be a better RASM and a lower CASM and by cutting more 50 and less seater aircraft while improving a two class cabin in there 70+ RJs should help perhaps.
  
  Reply
Marv Zwerin

Apr 25, 2014 at 11:53 am

Having flown too many segments on UA in the past 12 months, the ONLY times I’ve found the crew pleasant and attentive has been on those planes staffed by the old CO flight attendants. On one occasion, after telling one FA that I thought the service was the best I’d experienced on a UA flight in the last 5 years, her response was, literally, “what do you expect. We’re the old Continental crew.” If flying out of SFO offered me many other choices to the cities I regularly visit, I’d take it. In fact, I’ve virtually switched to Virgin for all flights; SFO-LAX, SFO-IAD, SFO-SEA and have found that the service, civility of the cabin crew and the overall passenger experience at Virgin is light years ahead of that at UA.

Reply
1. Seatback
  
  Apr 25, 2014 at 12:16 pm
  
  Oddly enough, VX has the second rudest flight attendants, after NK, according to reports published this week.
  
  Reply
  1. Courtney
    
    Apr 25, 2014 at 6:32 pm
    
    I’d agree with this – I am also a SFO “hub captive” United flier – it simply has by far the best network out of SFO for business travel – but the VX hard product is light years ahead. However, every time I fly them there’s at least one or two FA’s who are incredibly snotty and rude! However, they may be similar to UA’s except for the fact that on UA I don’t notice anymore…
    
    Reply
Jason

Apr 25, 2014 at 7:15 pm

I noticed the URL for this Topic of the Week is “…-jetblue-pilots-choose-to-unionize/” … last minute “equipment change”?

Reply
1. CF
  
  Apr 26, 2014 at 8:06 pm
  
  Jason – Yep, good eye. I was going to make that the topic of the week but I figured it wouldn’t actually be interesting to all that many people so I made the switch. Feel free to discuss that too though!
  
  Reply
[BLOCKED BY STBV] How The Airlines Have Structurally Changed For The Better, In One Chart | The Stengel Angle

Apr 28, 2014 at 9:05 am

[…] about benefits for everyone, air carriers and consumers alike. Given the recent reports from many North American carriers reviewing their first quarter 2014 financial performance and that merger activity has seemingly hit its peak, I thought it would be a good time to review […]

Reply
James A

Apr 29, 2014 at 4:42 pm

You forgot to mention Hawaiian.
They also had another quarterly loss. That ambitious international push has come with red ink.

Reply
1. CF
  
  Apr 29, 2014 at 8:45 pm
  
  James A – Yep, that one too.
  
  Hawaiian lost $0.9 million (excluding special items) on $525 million in revenue for a negative 1.7 percent net margin. Unit revenue was up 4.4 percent year over year.
  
  Reply
[BLOCKED BY STBV] Protocol Agreement Reached per USAPA – Airline Pilot Central Forums

Apr 30, 2014 at 8:02 am

[…] each held Diamond on Delta since 2009. None of them will ever fly UAL again because of UAL labor. http://crankyflier.com/2014/04/25/to…e-to-unionize/ If United does not get their sheet together they will revisit bankruptcy—this is very […]

Reply