United Airlines Tops Profit Estimates
United Airlines Holdings Inc has reported a bigger-than-expected increase in second-quarter profit, driven by strong air travel demand and the ability to charge more for seats after the grounding of Boeing Co's 737 MAX reduced capacity.
The three US airlines that operate the MAX - United, American Airlines Group Inc and Southwest Airlines Co - have been cancelling thousands of flights each month since a worldwide grounding in March following crashes in Ethiopia and Indonesia that killed a total of 346 people.
Chicago-based United said that net income rose 54% to $1.05 billion, or $4.02 per share, in the quarter that ended on June 30 from $683 million or $2.48 per share a year earlier. On an adjusted basis, the airline earned $4.21 per share for the quarter. Analysts on average expected a profit of $4.08 per share, according to IBES data from Refinitiv.
The number three US air carrier is in the midst of a three-year plan to claw back domestic market share from rivals by building up connections through its main US hubs, including Chicago, New York and San Francisco, which are cities that attract a lot of travellers who are willing to fly first-class and business-class.
Earnings Per Share
Citing continued strong demand, United lifted its 2019 adjusted diluted earnings per share guidance to $10.5-$12.0 versus $10.0-$12.0 previously.
Still, the earnings per share growth for the year is expected to be slower than in 2018 due to the MAX grounding and closed Pakistani air space, which forced United to cut its 2019 capacity growth target for a second time this year. It now expects capacity to increase between 3% and 4%, versus an original forecast of 4%-6% growth.
Options To Resume Service To India And 737 MAX Issue
Pakistan reopened its airspace to international civil aviation on Tuesday after months of restrictions imposed because of clashes with India, which forced long detours that cost airlines millions of dollars.
United said it was reviewing options to resume service to India in coming weeks.
But the timing of a 737 MAX return remains uncertain.
United has pulled its 14 MAX aircraft from its flight schedule until early November, though many analysts do not expect the aircraft to fly again this year. Boeing has said it will likely take until at least September to fix a fresh flaw in the 737 MAX discovered by the Federal Aviation Administration last month.
When the jets were first grounded in mid-March, United largely avoided flight cancellations by servicing MAX routes with larger aircraft, but as new MAX deliveries remain frozen, it estimates daily cancellations will more than double from about 40 or 45 in July to 95 in October.
United was expecting another 16 MAX deliveries this year.
Total Operating Revenue And Revenue Per Available Seat Mile
Total operating revenue rose 5.8% to $11.40 billion in the quarter while closely watched revenue per available seat mile rose 2.5%, the top end of United's guidance for growth between 0.5% and 2.5%, helped by supply constraints due to the MAX grounding.
United is the first of three US 737 MAX operators to post second-quarter results, with Southwest and American due to report on July 25.