United Continental (UAL) +1% AH after reporting revenue passenger miles (RPM) fell 2.1%...

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Pony01 Comments (44)
 
I can't understand the high valuations on United's stock; especially when compared to Delta or even USAIR for that matter. True, they have the largest revenues (all data based on the 1st 6 months according to Airline Weekly - one of the best airline newsletters published) 18.5 billion with Delta a close 2nd at 18.1 billion. However, analytically they had less than 1/2 the net profit of Delta (Delta 547 million/United 259 million): And United's operating margin is 2/3rds of Delta's (Delta 6%/United 4%). My prediction for the third quarter isn't any better for United. The negative divergence with Delta in these three categories will be even greater than in the first 6 months. Non-analytically, United is doing average in its merger with Continental - compared to other US airline mergers - still without a single pilot contract and seniority list. Delta's merger with Northwest will be case-studied for years as to airline mergers done correctly. Delta is the clear leader in the US airline industry: Buying the Trainer Refinery, 1st to lie-flat seats, employee pay and benefits, overall debt reduction, and strengthening their alliances (see Alaska Air announcement 8 Oct 12). United is lauded for its route structure, which is one heck of an asset. However, some of their route decisions are questionable: Read the Wall Street Journal article about flying 757s to some European cities where Delta and USAIR are flying wide bodies. Not really a big deal except when high altitude winds force United to land in Canada for fuel at a much higher level than others. I'm predicting the stock price premium on United will be reduced in the short to medium turn and potentially wiped-out. Senior management at United is just not as good as at Delta. That will be the difference.
9 Oct 2012, 10:59 AM Reply Like