United Airlines Sees a Return to Profit on Surging Summer Travel
United Airlines Sees a Return to Profit on Surging Summer Travel
(Bloomberg) -- United Airlines Holdings Inc. jumped after forecasting a profit this year, overcoming a first-quarter loss as consumers increasingly ditch their pandemic-era habits and resume air travel.
The carrier’s operating margin in the second quarter will be about 10%, according to a statement Wednesday. Fueled by booming leisure sales heading into the summer and “rapidly returning” business travel, the performance would end a string of nine consecutive quarterly losses.
“The demand environment is the strongest it’s been in my 30 years in the industry,” Chief Executive Officer Scott Kirby said in the statement.
United shares rose 7.5% at 5:01 p.m. after regular trading in New York, while peers including American Airlines Group Inc., Delta Air Lines Inc. and JetBlue Airways Corp. also rallied. United gained 6.3% through Wednesday’s close.
The company joins Delta projecting a return to profitability even as the industry grapples with dramatically higher fuel costs. Carriers had been hopeful this year would mark a rebound from the pandemic slump, before the rising expenses and a brief surge in the Covid-19 omicron variant disrupted operations in recent months.
The carrier, like Delta, is pushing most of the higher fuel costs through into fares. United doesn’t use hedges for its fuel needs.
Airlines have been watching for signs of demand destruction related to higher fares -- if the ticket prices lead consumers to cancel or skip travel plans. Carriers have yet to point to the issue as they tout robust demand.
Lower Capacity
United said last month that it expects 2022 capacity to be lower than 2019 by the “high single digits.” The airline, like most of its peers, is keeping capacity in check while bracing for a busy summer travel season and the potential for operational glitches given tight staffing.
The company will keep second-quarter capacity about 13% below 2019 levels, according to a regulatory filing Tuesday. It didn’t offer an update for its full-year plans.
The curbed capacity will contribute to a 16% increase in unit costs, excluding fuel, this quarter as United and its peers contend with higher wages and airport fees. As for fuel, that remains a growing drag on the industry’s rebound. United expects to pay $3.43 per gallon in the second quarter, rising further from $2.88 a gallon in the first quarter and $1.97 in the second quarter of 2021.
United reported a loss of $4.24 per share for the first three months of 2022 on an adjusted pretax basis. That was 1 cent worse than analysts had expected, according to the average of estimates compiled by Bloomberg. Revenue was $7.57 billion, while analysts expected $7.67 billion.
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