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United Airlines shares surge on higher profit and strong demand forecast

Date: October 18, 2022

By Leslie Josephs, CNBC

  • United said unit revenues were up more than 25% from 2019 levels. 
  • Airlines have been upbeat about consumer demand despite high inflation.

United Airlines forecast another profit for the end of the year and said consumer appetite for travel is showing no signs of slowing down, despite high airfares.

Shares jumped more than 8% in afterhours trading on Tuesday.

“Looking forward through the end of the year, the airline expects the strong COVID recovery trends to continue to overcome the recessionary pressures in the macroeconomic environment,” United said in an earnings release. “The airline now expects fourth quarter adjusted operating margin to be above 2019 for the first time.”

The Chicago-based carrier posted a third-quarter profit of $942 million, down 8% from three years ago, and $12.88 billion in revenue, which was ahead of analysts’ estimates and up 13% from 2019.

Adjusting for one-time items, United’s earned $2.81 per share, easily topping the $2.28 analysts polled by Refinitiv were expecting.

United said it expects adjusted earnings per share of as much as $2.25 for the fourth quarter, far ahead of analysts’ estimates of 98 cents, according to Refinitiv.

The strong summer travel season and sunny outlook for the rest of the year shows consumers are willing to pay up for trips, a turnaround from early in the pandemic when Covid-19 restrictions devastated travel demand. Delta Air Lines last week said it brought in record revenue for the third quarter and forecast another profit for the fourth quarter.

The upbeat outlooks from airline executives contrasts with other sectors that have struggled this year, including parts of the retail industry and some streaming platforms that were beneficiaries of lockdowns early in the pandemic.

Here’s how United performed in the third quarter compared with what Wall Street expected, based on average estimates compiled by Refinitiv:

  • Adjusted earnings per share: $2.81 versus an expected $2.28
  • Total revenue: $12.88 billion versus expected $12.75 billion.

U.S. airline executives have recently noted strong demand to Europe well past the summer peak and into the fall, and are keeping more capacity in those markets in response, CNBC reported last month.

Airlines remain constrained in how many flights they can offer as aircraft deliveries run late because of supply chain problems and other issues, and carriers scramble to hire and train new staff, particularly pilots.

Limited supplies of flights is keeping fares up. United said its third-quarter revenue per available seat mile was up more than 25% from three years earlier. For the current quarter, it expects that metric to be up by as much as that amount compared with 2019.

Meanwhile, the carrier said its fourth quarter capacity will likely be down about 10% compared with 2019, similar to its capacity in the third quarter.

United executives will hold a call with analysts on Wednesday at 10:30 a.m. EDT.

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