Investing.com -- Shares in United Continental Holdings Inc (NYSE:UAL) fell considerably in after-hours trading, after the third-largest airlines company in the U.S. saw its profits tumble by nearly 40% over the first quarter of the year.
During the opening quarter of Fiscal Year 2016, United reported earnings of $313 million or 0.88 per share, down sharply from net profits of $508 million or 1.32 per share over the same period a year earlier. The Chicago-based airlines company, however, blamed the significant decline on a comparatively high annual tax burden from the previous year. In last year's opening quarter, United lowered its effective tax rate to 0.5%, due primarily to an existing income tax valuation against its deferred income tax assets. By comparison, the company's effective tax rate last quarter rose to 36.6%, representing a combination of federal, state and foreign taxes.
As a result, United finished the three-month period in late-March with pre-tax earnings of $688 million, up considerably from $600 million a year earlier. The figure represents United's highest first quarter in terms of pre-tax earnings ever. While the company topped analysts' forecasts with adjusted earnings of $435 million or 1.23 per share, its revenues still plunged by 4.8% to $8.2 billion.
“I am extremely proud of United’s nearly 86,000 aviation professionals for their contributions to these strong results – including the improvements in our reliability, customer satisfaction and financial performance,” said Oscar Munoz, president and chief executive officer of United Airlines. “As we accelerate United’s path forward, we will continue to focus on running a great airline today while innovating for tomorrow."
In addition, United settled a potential proxy fight with a pair of activist investors when it named Barney Harford, the former CEO of Orbitz Worldwide and Ed Shapiro, managing director of PAR Capital Management, to its Board of Directors. As part of the settlement, United also agreed to name former Air Canada CEO Robert Milton as its nonexecutive chairman at the company's annual meeting later this year.
Moving forward, United lowered its forward guidance for the current quarter by reducing a key industry metric following a series of weak bookings in April. For the quarter, United expected that its Revenue Per Passenger Per Miles Flown metric will decline by 6.5 to 8.5%.
Shares in United fell 1.69 or 2.88% to 56.92 in after-hours.