Overview: United Continental Holdings' 2Q earnings (Part 2 of 11)
Revenue segments 2Q14
United’s total revenue increased by 3.3% to $10,329 in 2Q14 driven by the 3.6% growth in passenger revenue. Cargo revenue decreased by 1.7% despite high volumes in the Pacific and Atlantic region due to lower yield—yield is the average fare paid per passenger per mile—primarily in the Pacific region. Other revenues increased by 1.7% as sales of aircraft fuel to a third party increased. There was an increase in contract services and a 7.9% per passenger increase in ancillary revenue. United (UAL) and its legacy peers, American Airlines (AAL) and Delta Air Lines (DAL) derive 57%–65% of its revenue from domestic region. Its low-cost peers Southwest (LUV) and JetBlue (JBLU) derive more than 90% from domestic region.
Passenger revenue accounted for 87% of the total revenue in 2Q14. The increase in this segment was driven by higher yield. Corporate revenue, which contributes to yield improvement, increased by 6% in 2Q14. The drivers of corporate revenue include the PerksPlus product, a points-based loyalty program for small to medium sized businesses, and a 3% increase in revenue from large corporate accounts despite the decrease in corporate revenue in April due to the shift of the Easter holiday.
The revenue increase can also be attributed to expansion in network. United launched nine domestic markets and 14 new domestic routes in 2Q14. Non-stop flights were launched from Houston to Munich, and Newark to Santiago and the Dominican Republic apart from new seasonal services from Chicago and Washington. To improve revenue from the Pacific region, United launched services to Chengdu, China, and Tokyo. Several other routes including Houston to Santiago, Chicago to Belize City, Denver to Panama, Houston to Punta Cana, and San Francisco to Kelowna were introduced.
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