United Plans to Compete More With Low-Cost Carriers

Following comments from United Airlines officials Tuesday about competing with low-cost carriers by increasing capacity and lowering ticket prices, the company’s shares fell more than six percent in after-hours trading.

According to Reuters.com, United executives revealed the airline’s plan to match the prices of low-cost carriers, which could result in a lower profit margin. As it attempts to engage in a fare price war, the comments have investors concerned about United’s bottom line.

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Officials from United also announced capacity is expected to increase between four and six percent in 2018, and would likely grow at a similar rate in both 2019 and 2020. The airline’s hope is that increased capacity would give United a competitive edge against low-cost carriers.

United reported a fourth-quarter net profit of $580 million, a substantial increase over the $397 million earned during the same period the previous year.

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While net profit is up, the airline’s profit margins are being weighed down by higher labor costs, costlier fuel and the ongoing pricing battle with smaller carriers.

For investors focusing on the airline industry, United wasn’t the only carrier which saw the prices of its shares fall Tuesday. During after-hours trading, shares of Delta Air Lines and American Airlines also dropped more than five percent.