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United 1Q profit falls 38 per cent

Associated Press Associated Press 21/04/2016

United Airlines has reported a 38 per cent drop in first-quarter profit as higher taxes offset some of the gains from cheaper jet fuel.

Revenue fell 5 per cent partly due to a slump in business travel during the weeks around Easter and spring break.

United continues to find it hard to boost revenue, even heading into the peak (northern) summer months.

The company said a key figure - revenue for each seat flown one mile - fell 7.4 per cent in the first quarter. It expects the figure to drop a similar amount - between 6.5 and 8.5 per cent - in the second quarter compared with a year earlier.

Analysts expected a decline of about 5.4 per cent for the second quarter, according to a survey by FactSet.

Besides the drop in last-minute business travel, United blamed the revenue challenges on the strong US dollar and lower oil prices, which forced airlines to cut fuel surcharges on international tickets.

Parent Chicago-based United Continental Holdings said on Wednesday that first-quarter net income of $US313 million ($A401.67 million) fell from $US508 million a year ago.

The decline was partly because the company paid $US181 million in income taxes compared with $US3 million in the same quarter last year, when it was able to reduce taxes because of heavy losses in prior years.

Net income was 88 US cents per share. Excluding what United considers non-repeating items, the airline said that it earned $US1.23 per share, beating Wall Street expectations. Analysts surveyed by FactSet expected $US1.18 per share.

Revenue slipped about $US400 million to $US8.2 billion, matching the analysts' consensus prediction.

Fuel spending dropped 35 per cent, a savings of $US646 million, as airlines continue to benefit from falling oil prices. Labour costs rose 8 per cent and were double the fuel bill.

Separately, United announced on Wednesday that it had agreed to appoint a new chairman and add two new directors who were nominated by two big investment funds that were unhappy with the company's financial performance.

In the past year, United has struggled with a decline in the amount passengers pay for every mile they fly. It shares that problem with American and Delta.

But United's challenges go deeper. Chief executive Oscar Munoz admits customer service needs to get better. Its on-time rating trailed Delta, American and Southwest last year.

United saw a larger-than-expected drop in last-minute business travel during the weeks around Easter and spring break, which investors feared could be a harbinger of a broader downturn in corporate travel.

Munoz has promised that the airline will improve its operations and its financial performance. He said on Wednesday the company would be more transparent and improve its relations with employees.

Earlier in the day, he greeted workers during an open house at United's new club inside Chicago's O'Hare Airport.

"People were almost in tears because they have never been in a (United) club," he said. "We have never invited them. How dare we have a home where we don't invite our own family members into?"

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