By The Associated Press
MINNEAPOLIS — United Airlines turned in its best quarter in years, a $273 million moneymaker that benefited from returning business travelers and tight cost controls.
For once, United executives answered questions about what they might do with the cash they have on hand, instead of which airplanes they could mortgage. The answer: Pay down debt.
The quarter that ended June 30 brought UAL Corp.’s first profit in almost three years. The adjusted profit was the company’s largest second-quarter profit since 1999.
One thing that helped was baggage fees and other so-called “ancillary revenue.” United President John Tague said the airline collected over $14.50 per passenger in baggage fees and charges for other things such as a more desirable coach seat.
United is getting some $400 million a year in baggage fees, but Tague said on a conference call that he personally thinks they could eventually collect $1 billion in baggage fees alone. He noted that United charged for about 40 percent of the luggage it carried. Other bags — generally on international flights and those checked by elite frequent fliers — got on the plane for free.
“It’s my own view that over time you’ll probably see bag fees become ubiquitous,” he said.
The results at United, the nation’s third-biggest airline, showed several signs of a recovering economy. Per-seat revenue rose 26.9 percent, to 13.02 cents per available seat mile. Cargo revenue increased 57 percent.
United and Delta Air Lines Inc. are the two biggest U.S. airlines flying to Asia, a key destination for business travelers. Passenger revenue on United’s Pacific flights jumped 52.4 percent, to $789 million.
Quarterly revenue rose 28.4 percent to $5.16 billion.
A year ago UAL earned $28 million because of gains on fuel hedging. This time, the profit — $1.29 per share — came from flying.
“Our performance across the board is vastly different than we reported to you just a year ago,” Chief Financial Officer Kathryn Mikells said on a conference call.
Not counting special charges, Chicago-based UAL said it would have earned $430 million, or $1.95 per share. Analysts surveyed by Thomson Reuters expected $1.74 per share on revenue of $5.12 billion.
UAL shares rose $1.01, or 4.8 percent, to close at $22.19.
On Monday, Delta Air Lines Inc. reported a $467 million profit, slightly above Wall Street expectations. Its shares fell after its executives talked about growth plans. Most analysts believe that airlines have suffered because they’re too quick to add seats or flights, throwing supply-and-demand out of whack and forcing down prices.
United said its full-year capacity would be up no more than 1 percent.
“We understand we need to maintain supply discipline through the business cycle, and our guidance is consistent with that philosophy,” Mikells said.
United didn’t predict its full-year results, but Mikells noted that its workers would get profit-sharing payments if it makes money for the full year. “We feel pretty good right now about our trajectory for the second half of the year,” she said. For the first half of the year, United has earned $191 million.
United still expects to close its combination with Continental Airlines Inc. by the end of the year, its executives said. The two airlines said they have a deal with pilots for a transition agreement that will cover them after the deal closes but before they’ve worked out a full joint union contract and seniority list. Pilots at both airlines are members of the Air Line Pilots Association.
UAL’s unrestricted cash almost doubled to $4.91 billion. Mikells said it will pay off some of its $11.8 billion in debt, which includes leases. Earlier this month United paid off a $75 million private loan, she said.
The airline’s headcount shrank 2.7 percent from a year ago, to 42,600 full-time equivalent employees.