United Airlines shares rally despite PR nightmare
On the public relations front, United Airlines had a brutal April, with the violent removal of a passenger and the death of a giant rabbit. But thanks to a batch of favorable business statistics, the carrier's flagging stock price has enjoyed a strong rebound this month.
On Tuesday, shares in United's parent, United Continental Holdings (UAL), hit a record high of $78.55, with the stock maintaining that altitude in Wednesday trading. That marks a 10 percent advance for May, lifting the stock above where it was trading immediately after the April 9 incident.
In a report covering April, the carrier said it expected second-quarter 2017 consolidated passenger unit revenue to rise between 1 and 3 percent, versus the prior-year period. Last month, United said its aircraft were fuller, up 2.6 percentage points, and revenue was higher, by 7.7 percent. It also had fewer flight cancellations than any other month in the airline's history, and went 145 hours without a flight cancellation, a record.
In part, United appears to be benefiting from the healthier U.S. economy. In spring 2016, by contrast, worries about a slowdown in China, slumping economic performance in emerging-market nations and sliding commodities prices sent stocks lower.
Other major airlines also have seen their stocks bounce back this month. Industry leader American Airlines (AAL) is up 11 percent; No. 2 Delta Air Lines (DAL), ahead 7 percent; and Southwest Airlines (LUV), 10 percent. The exchange-traded fund that tracks the air carriers, US Global Jets (JETS), has climbed 5 percent.
All this came in the face of horrible PR for United and its big competitors. In early April, security men dragged a bloodied passenger off a plane when he refused to give up his seat. Videos of the encounter went viral, and prompted United to reach an undisclosed settlement with the customer, David Dao. Later in the month, a three-foot rabbit riding in the cargo hold died after a flight from London to Chicago.
April was a tough month for the airline industry, with a days-long cascade of cancellations and delays that hit Delta. At a House hearing in April, lawmakers berated airline executives over poor passenger conditions, such as too many fees and packed seating. U.S. House Transportation Committee Chairman Bill Shuster, R-Pennsylvania, told them that "something is broken."