United Keeping `Painful’ Discounts to Fend Off Low-Fare Airlines | Bloomberg

United Continental Holdings Inc. vowed to keep discounting fares amid an expanding price war that contributed to a projected $400 million blow to third-quarter sales.

The third-largest U.S. carrier will continue fighting low-cost carriers with cheap tickets at major hubs despite the short-term pain, Chief Financial Officer Andrew Levy told investors Wednesday. The clash is adding to pressure from the impact of Hurricane Harvey, weak pricing on trans-Pacific flights and a rocky start for new no-frills fares, which are all weighing on revenue.

“We don’t like where the fare structures are right now. And we don’t like the effect it has on short-term earnings,” Levy said at a Cowen & Co. conference in Boston. “It is painful, difficult, but we’re going to see it through.”

While good news for travelers, the multiple financial blows prompted United to chop its third-quarter forecast for revenue from each seat flown a mile, a benchmark gauge of airline pricing power. The measure is now expected to fall 3 percent to 5 percent, the carrier said. The company previously said it would fall no more than 1 percent and could even rise as much as 1 percent. United also raised its estimate for fuel prices.

The shares fell 2.4 percent to $59.65 at 1:27 p.m. in New York after dropping as much as 5.5 percent for its biggest intraday slide since July 19. The slide was the biggest on a Standard & Poor’s index of five U.S. airlines, which in aggregate was little changed.

‘Competitive Pricing’

United wasn’t the only carrier lowering its outlook for the quarter. Southwest Airlines Co. said revenue for each seat flown a mile, or unit revenue, will be down 1 percent to “slightly up.” The previous forecast called for a gain of 1 percent. Chief Financial Officer Tammy Romo said the change was largely due to the “current competitive pricing environment.”

via United Keeping `Painful’ Discounts to Fend Off Low-Fare Airlines – Bloomberg.