There were a pair of Chicago-related business news stories that I thought deserved a little of attention. In the first United Airlines has had its best quarter in seven years:
Shares of UAL Corp. rose to their highest since January after the company easily topped analysts’ second-quarter forecasts, posting its most profitable quarter in seven years as earnings doubled from year-ago levels. The parent of United Airlines said it earned $274 million ($1.83/share) on revenue of $5.21 billion, up from $119M ($0.93) on revenue of $5.11B last year. Analysts had expected earnings of $1.39/share and revenue of $5.12B, on average. The Chicago-based carrier, which emerged from bankruptcy in February 2006, has prospered in part by cutting domestic capacity and increasing the focus on its more profitable international network. International passenger revenue climbed 16% in the quarter, while North American revenue fell 2%. The company reduced operating expenses by 3.6% to $4.68B, spending less on fuel and salaries. Although fuel costs dropped 3.5% in the second quarter, the company said they are likely to rise in Q3. Calyon Securities analyst Ray Neidl said it looked like the airline’s cost-cutting efforts were taking effect, calling the strength of the numbers “a surprise.” The stock rose more than 4% to close at $4.23.
I wish there were a little more detailed analysis available. What this story means may depend on who you are. The management side of the story is that cutting back on U. S. operations, particularly shorter-haul flights, has resulted in fewer seats and, consequently, raised the value of the seats that remained, creating an operation that was more profitable. The employees’ side of the story is that the turn-around is the result of rakebacks of employee pay and benefits while the benefits mostly accrue to management in the form of increased stock value and dividends.
McDonald’s, headquartered in the Chicago suburb of Oak Brook, reported a loss:
McDonald’s (MCD) reported an expected second-quarter loss Tuesday as plans to license restaurants in Latin America and the Caribbean to a franchisee dented the company’s bottom line.
Excluding a $1.6 billion charge tied to the sale of 1,600 restaurants, earnings were in line with the company’s recently announced projection amid strong sales worldwide.
The world’s largest fast-food chain recorded a second-quarter loss of $711.7 million, or 60 cents a share, which included a charge of $1.31 a share due to the previously disclosed licensing agreement. A year earlier, the Oak Brook, Ill., company recorded a profit of $834.1 million, or 67 cents a share.
I thought there was a dreary commonality to these stories. These are two of Chicago’s biggest companies. No bold initiatives. No entrepeneurship. Little creativity.
It took a hundred years but we’ve gone from being the “City of Big Shoulders” to the “City of Green Eyeshades”.
