United Airlines second quarter profit jumps to US$1b

Business | 17 Jul 2019 2:43 pm

United Airlines glided through the first part of summer, as strong travel demand pushed average fares higher, but the grounding of Boeing 737 Max jets will become a bigger challenge in the months ahead.

United said Tuesday that its second-quarter profit soared by 54 percent, to US$1.05 billion. The results beat expectations, and United slightly raised its forecast of full-year profit.

The Chicago-based airline, however, faces uncertainty because of the grounding of Boeing 737 Max jets after two deadly accidents.

United is dipping into the used-plane market to bolster its fleet. The airline said that it recently signed an agreement to buy 19 used Boeing 737-700 jets, which will start showing up in December.

The airline counted on the Max becoming a bigger part of its fleet, growing from 14 planes to 30 by the end of September, and 28 more of them next year. 

The missing planes will leave a huge gap in United’s schedule and cut into the airline’s revenue. United has already canceled more than 8,000 flights by taking the Max out of its schedule through November 3, and the number will grow the longer the planes remain grounded.

The airline had expected to boost passenger-carrying capacity by 4 percent to 6 pecrent this year, but on Tuesday it said it will grow more modestly, between 3 percent and 4 percent.

The slower growth in capacity, combined with strong demand, means that airline pricing power “remains quite strong,” said Cowen airline analyst Helane Becker.

The second-quarter profit was up from US$683 million a year earlier.

United said that excluding special gains and charges, it earned US$4.21 per share in the quarter. The average estimate among 16 analysts surveyed by Zacks Investment Research was US$4.07 per share.

United does not publish average fares, but a stand-in figure — revenue per seat for each mile flown — improved by 2.5 percent over last year’s second quarter. That was at the top end of United’s guidance to investors and helped propel total revenue by 6 percent to US$11.4 billion, slightly higher than analysts expected.

The third-largest airline by revenue in the US raised the lower end of its forecast range for full-year earnings to between US$10.50 and US$12 per share. It previously forecast US$10 to US$12 per share.-AP

 

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