Yahoo Finance Where Else Is United Spending to Improve Its Performance in 2016?
United Continental's 4Q15 Cargo, Passenger Revenues Dipped
Snapshot
As discussed earlier in this series, United Continental Holdings (UAL) plans to invest in capital and business expansions, as well as technology improvements, pension plan funds, and share repurchases.
United Global program
For no-discount flight operators like United Continental (UAL), corporate customers are their bread and butter and the main source of their profits. United Continental lost passengers due to a string of mishaps in the past year, including technology glitches, outages, and continuing integration problems related to the Continental merger. The airline has lagged behind its peers and has ranked last among the other major carriers in many key performance areas.
As a result, United Airlines has launched a new United Global Performance Commitment for its corporate customers in 2016. Under this new program, the airline would compensate eligible corporate accounts with credits for upgrades and fees if it failed to meet its operational targets for the year.
Fleet updates
United Continental also declared its intentions to invest approximately $1.7 billion in its fleet in 2016, most of which could be used to replace a sizable portion of its existing fleet. According to the fleet restructuring program, United would add another 14 737s, five 787-9s, United Airline’s first 777-300ER, and nine used A319s. United would also add 40 Embraer E175s to its fleet this year and would take delivery of 40 new Boeing 737-700 aircraft beginning in mid-2017.
The airline expects to reduce more than half of its 250 50-seat aircraft by 2019. This would go a long way in improving United’s fuel efficiency. It also complements United’s aim of reducing its regional market capacity and shifting to the better growing mainline market. The airline also expects this move to help it increase its average gauge by approximately 5%, as well as reduce its average departures by approximately 1% in the coming year as compared to 2015.
The PowerShares Dynamic Leisure & Entertainment Portfolio ETF (PEJ) invests 5% of its holdings in UAL. It also invests 5% of its holdings in Delta Air Lines (DAL), 2.7% of its holdings in Alaska Air Group (ALK), 2.5% in Allegiant Air (ALGT), and 2.4% in JetBlue Airways (JBLU).
Browse this series on Market Realist:
