Boeing 777ER United Airlines. Plane to Fiumicino Leonardo da Vinci Airport.
Massimo Insabato Mondadori portfolio Getty Images
United Airlines expects to make a profit in 2022 for the first time since the pandemic, as bookings increase and passengers appear willing to pay more to fly.
Shares of United rose more than 6% in after-hours trading on Wednesday after announcing an optimistic outlook.
The forecast suggests airlines are at a turning point in the recovery of the pandemic, as the decline in the Covid case stimulates renewed demand for travel and the public, which has not yet deviated from higher ticket prices, despite inflation hitting budgets of households.
For the second quarter, United forecasts an operating margin of 10% and the highest quarterly sales in its history, with revenue per passenger mile increasing by 17% compared to 2019, as higher prices help cover the increase in costs.
The Chicago-based airline is the second major U.S. carrier to report results and provide forecasts for the peak spring and summer travel seasons, when airlines generate most of their annual revenue. Last week, Delta Air Lines reiterated that it plans to return to profitability this year.
Despite strong demand, United is facing the challenge of adding capacity. Its 52 Boeing 777s, powered by Pratt & Whitney, one of the largest aircraft in its fleet, were shut down after 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 been suspended for much of the past 18 months due to manufacturing defects.
The airline is also facing a shortage of pilots, especially for the regional carriers that supply its centers, a problem throughout the sector.
Here’s how United performed in the first quarter compared to what Wall Street expected, based on average scores compiled by Refinitiv:
- Adjusted loss per share: $ 4.24 versus expected $ 4.22.
- Total revenue: $ 7.57 billion compared to the expected $ 7.68 billion.
United reported a loss of $ 1.4 billion in the first quarter on revenue of $ 7.57 billion. That revenue level is well below $ 9.59 billion three years earlier, but more than twice the $ 3.22 billion a year ago.
Adjusting for disposable items, it reported a loss of $ 4.24 per share.
The company paid $ 2.88 a gallon for fuel in the first quarter, compared to $ 2.05 in 2019 and $ 1.74 last year. Excluding fuel, its costs jumped 18% compared to the same period in 2019.
For the second quarter, United expects fuel-free costs to increase by 16% compared to 2019.
Airline bookings have generally risen since the Covid case peaked and then declined this winter, easing a difficult start to 2022 for carriers. Airline executives expect that after more than two years of a pandemic, many passengers who have been closed will continue to feed the demand for travel, although fares have risen.
United plans to take off 87% of its schedule for 2019 in the second quarter. Together with Delta, United is more cautious in adding capacity than competitors such as American Airlines and fast-growing budget airlines such as Spirit Airlines.
As the company’s Pratt & Whitney-powered Boeing 777 is expected to gradually return to service, the company will continue to add capacity based on its ability to best serve customers and look at long-term profitability. “Not sacrificing operational reliability,” United said in a statement on the profits.
However, some carriers, such as Spirit, Alaska Airlines and JetBlue Airways, are cutting spring and summer schedules to move to deal with disruptions such as bad weather or staff shortages.
New Airlines CEO Robert Izom told employees last week that reliability was paramount this season. Customers of American and other carriers faced huge deals and cancellations last year after carriers struggled with routine outages and staff shortages.
United executives will discuss the results with analysts and the media in a conversation at 10:30 a.m. ET on Thursday. American Airlines will report its results before the market opens on Thursday and will hold a call at 8:30 a.m. ET.
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