Boeing 777ER United Airlines. Plane to Fiumicino Leonardo da Vinci Airport.
Massimo Insabato | Mondadori Portfolio | Getty Images
United Airlines expects to turn a profit in 2022 for the first time since the pre-pandemic era as bookings surge and passengers appear willing to pay more to fly.
Shares of United rose more than 6% in after-hours trading on Wednesday after publishing an upbeat outlook.
The forecast suggests airlines are at a tipping point in the pandemic recovery, as a drop in Covid cases has spurred renewed demand for travel and a public that is still thriving despite inflation hitting household budgets did not shy away from higher ticket prices.
For the second quarter, United forecasts a 10% operating margin and a 17% increase in revenue per passenger mile, with higher fares helping to meet an expected increase in spending.
The Chicago-based carrier is the second major US airline to report results and provide an outlook for the peak spring and summer travel season, when airlines generate the bulk of their annual revenue. Delta Air Lines reiterated last week that it expects to return to profitability this year.
Despite strong demand, United faces the challenge of adding capacity. Its 52 Pratt & Whitney-powered Boeing 777s, some of the largest planes in its fleet, have been grounded since an engine failure in February 2021 and will not return until mid-May at the earliest, CNBC reported earlier this month. And deliveries of new Boeing 787 Dreamliners have largely been suspended over the past 18 months due to manufacturing defects.
The airline is also facing a pilot shortage, particularly with regional airlines servicing its hubs, a problem across the industry.
Here’s how United performed in the first quarter versus Wall Street expectations, based on average estimates compiled by Refinitiv:
- Adjusted loss per share: $4.24 vs. $4.22 expected.
- Total sales: $7.57 billion versus $7.68 billion expected.
United’s revenue was $7.57 billion for the first quarter, well below the $9.59 billion reported three years earlier but more than double the $3.22 billion dollars a year ago.
Adjusted for one-time items, it posted a loss of $4.24 per share.
The company paid $2.88 a gallon for fuel in the first quarter, up from $2.05 in 2019 and $1.74 last year. Excluding fuel, costs increased by 18% compared to the same period in 2019.
For the second quarter, United expects its non-fuel costs to increase 16% from 2019.
Airline bookings broadly surged after Covid cases peaked and then eased this winter, easing the bumpy start to 2022 for airlines. Airline executives expect that after more than two years of the pandemic, many travelers who have been locked down will continue to spur travel demand even as airfares have risen.
United plans to fly 87% of its 2019 schedule in the second quarter. Along with Delta, United has been more cautious about adding capacity compared to competitors like American Airlines and fast-growing low-cost carriers like Spirit Airlines.
“As the Company’s Pratt & Whitney-powered Boeing 777 aircraft are expected to gradually return to service, the Company will continue to expand capacity based on its ability to best serve customers while keeping an eye on profitability over the long term.” by not sacrificing operational reliability,” United said in a earnings release.
However, some airlines, such as Spirit, Alaska Airlines and JetBlue Airways, are cutting their spring and summer flight schedules to allow room to deal with disruptions such as inclement weather or staff shortages.
American Airlines’ new CEO, Robert Isom, told employees last week that reliability is paramount this season. Customers of American and other airlines have faced massive closures and cancellations over the past year as the airlines grappled with routine disruptions and staffing shortages.
United executives will discuss the results with analysts and the media at 10:30 a.m. ET on Thursday. American Airlines will release its results before the market opens on Thursday and will hold a conference call at 8:30 a.m. ET.