Fourth-quarter profit at United Airlines jumped 46 per cent and the carrier signalled that average fares would inch higher early this year, but its shares fell in extended trading Tuesday after executives spelled out aggressive growth plans.
Like its rivals, United is benefiting from strong demand for travel, which is filling more seats.
United is showing more ability to handle fare wars with discount carriers including Spirit Airlines. A key measure of average prices, revenue for every seat flown one mile, inched 0.2 per cent higher in the fourth quarter. United predicted the figure would rise around 1 per cent in the first quarter.
Airlines are also dealing with higher fuel costs - they were up more than 20 per cent from a year ago at United. But United executives sounded confident that they can hold other costs flat or lower on a per mile basis over the next three years.
United reported a US$580 million profit in the fourth quarter, and adjusted earnings of $1.40 per share beat analysts' expectations by 6 cents per share, according to surveys by Zacks Investment Research and FactSet.
The Chicago-based airline predicted 2018 earnings of $6.50 to $8.50 per share, compared with analysts' forecasts of around $6.96 per share.
In a meeting with investors, United executives said they planned to increase passenger-carrying capacity by between 4 and 6 percent each year through 2020.
That kind of growth - faster than United expanded last year - could spook investors, who worry that a glut of seats will lead to more fare wars and eat into profits.
"They are big numbers," said Michael Linenberg, a Deutsche Bank analyst.
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Shares of United Continental Holdings ended regular trading Tuesday up $1.10 at $77.97. After the financial results were posted, the shares continued to rise in after-hours trading, but they started to sag around the time that the growth plan was discussed and fell $5.02, or 6.4 per cent, to $72.95.
At a meeting with investors in New York, the airline's president Scott Kirby gave a detailed analysis of what is right and wrong with United's network. He said United enjoys higher profit margins than competitors at international gateway airports on the East and West coasts but lags badly at mid-continent hubs such as Chicago and Houston.
That can be fixed, Mr Kirby said, partly by rebuilding service to smaller but high-fare markets from which it retreated in recent years - he mentioned Rochester, Minnesota, as an example.
The CEO Oscar Munoz boasted about the airline's best-ever operational results, which he said improved the customer experience.
Once a laggard in on-time rankings, United has finished with above-average numbers each of the last nine months for which figures are available, according to the US department of transportation.
United also announced a few tweaks to its service. For example, sometime this year it will let customers on bare-bones Basic Economy tickets select a seat - for an extra fee.
