United Continental Warns Of Weak Third-quarter

(RTTNews) - Shares of United Continental Holdings Inc. (UAL) plunged 9.3% Friday after the airline gave a disappointing outlook for key revenue in the third-quarter citing lower than expected results in the international markets.

Chicago, Illinois-based United Continental disclosed in a regulatory filing late Thursday that it expects its third quarter 2013 consolidated passenger revenue per available seat mile or PRASM to increase between 2.5% and 3.5% versus the third quarter of 2012. The midpoint of third quarter 2013 consolidated PRASM growth is about 1 percentage point lower than prior guidance primarily due to lower than expected results in the international entities.

The airline noted that transatlantic results were affected by lower than expected yields on certain interline tickets, and approximately 0.3 percentage points of the change in third quarter PRASM guidance is related to a true-up of Transatlantic interline tickets flown in prior periods. Also in September, additional competitive capacity in China resulted in lower than expected yields in the Pacific.

The company expects its third quarter 2013 cargo and other revenue to be between $1.28 billion and $1.33 billion.

The company estimates its third quarter 2013 consolidated system available seat miles or "ASMs" to decrease 1.1% as compared to the same period in the prior year. The company estimates its third quarter 2013 consolidated domestic ASMs to decrease 1.6% and consolidated international ASMs to decrease 0.3% year-over-year.

According to the company, compared to the same period last year, for the next six weeks, mainline domestic advance booked seat factor is up 1.1 points, mainline international advance booked seat factor is up 0.9 points, mainline Atlantic advance booked seat factor is up 3.4 points, mainline Pacific advance booked seat factor is down 1.7 points and mainline Latin America advance booked seat factor is up 0.3 points. Regional advance booked seat factor is up 1.6 points.

The airline expects its third quarter consolidated cost per ASM or "CASM", excluding profit sharing, third-party business expense, fuel and special charges, to increase 6.4% to 7.4% year-over-year.

The company expects to record approximately $220 million of third-party business expense in the third quarter. Corresponding third-party business revenue associated with third-party business activities is recorded in other revenue.

The company pays 15% of total GAAP pre-tax earnings, excluding special items and share-based compensation program expense, as profit sharing to employees when pre-tax profit, excluding special items, profit sharing expense and share-based compensation program expense, exceeds $10 million. Share-based compensation expense for the purposes of the profit sharing calculation is estimated to be $61 million year to date through the third quarter.

In the third quarter, the company expects approximately $620 million of gross capital expenditures and approximately $500 million of net capital expenditures, including net purchase deposits. The increase in net capital expenditures versus July guidance is primarily due to the timing difference of when the Company took delivery of certain aircraft and when the Company completed financing of those aircraft.

UAL expects to end the third quarter with approximately $6.6 billion in unrestricted liquidity comprised of approximately $5.6 billion of unrestricted cash, cash equivalents and short-term investments and $1 billion in undrawn commitments under its revolving credit facility.

UAL currently expects to record minimal cash income taxes in 2013.

UAL closed Friday's trading at $30.91, down $3.16 or 9.28 percent.