United Continental (UAL) was supposed to be the loser among the soon-to-be big-three airlines. Not today, however.
Bloomberg United’s shares have gained 4.9% to $38.17 today at 1:53 p.m., while Delta Air Lines (DAL) has dropped 0.1% to $27.97, AMR Corp. (AAMRQ) has advanced 0.4% to $12.25 and US Airways (LCC) is down 0.7% at $24.23.
United’s rise is being attributed to its investor day presentation where it outlined its plan to cut costs. Bloomberg has the details:
United Continental Holdings Inc. climbed to the highest price since 2008 after the world's biggest airline said it would cut $2 billion in annual spending.
Half the savings will come from a 7 percent reduction in fuel expense as it flies newer, more efficient planes such as Boeing Co.'s (BA) 787 Dreamliner and existing aircraft are equipped with winglets to boost conservation. At a presentation in New York today, the Chicago-based carrier also said it expects to boost fee revenue by $700 million a year…
United's plan, which includes an unspecified return of cash to shareholders in 2015, was outlined after a series of operational issues snarled flights and drove away some customers and four public computer disruptions since the airline switched to a new reservation system in March 2012.
S&P Capital IQ’s Jim Corridore calls it a great plan with one tiny problem-execution. He writes:
UAL today is outlining plans to cut costs, increase profitability and enable the return of cash to shareholders by 2015. UAL will redeploy aircraft out of some Asia markets to more profitable routes, plans to cut fuel consumption, and improve productivity. UAL aims to improve profitability from current levels by 2X-4X over the next four years. We are very positive on these stated goals, but where UAL has run into problems over the past two years is in execution of its stated plans. We would like to see some traction on these plans.
But who cares about execution when there are trading profits to be made?
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