United Airlines Sees Record Profit but Warns of Q1 Dip

United Airlines reported a $2.618 billion net profit for 2023, up from $737 million in 2022. At 165 million, the airline carried the highest-ever number of passengers in its history and had a strong December month. In its outlook for Q1 this year, United is more prudent and expects revenues to be up and earnings per share down by $0.85 to $0.35 cents, it said on Monday. Full-year diluted earnings per share were $7.89 or adjusted $10.05, which was better than the $10 to $12 targeted at the start of the year. “Despite unpredictable headwinds, we delivered on our ambitious EPS target that few thought possible – and set new operational records for our customers,” CEO Scott Kirby says in the earnings release. United generated $53.7 billion in full-year revenues, up from $45 billion in 2022. Passenger revenues totaled $49 billion versus $40 billion. This isn’t just the result of flying more passengers (164.9 million versus 144.3 million) but especially from strong demand for premium and Economy cabins. In Q4, premium revenues were up by 16 percent year on year and economy by 20 percent. Full-year cargo revenues were almost one-third lower to $1.5 billion from $2.2 billion, and other revenues were up 15.4 percent to $3.2 billion. Total operating expenses increased by 16.2 percent to $49.5 billion. Salaries were up by 29 percent to $14.9 billion, the result of newly signed labor agreements with the pilot and mechanist unions. As reported by Delta Air Lines, outside maintenance costs and distribution expenses also increased by almost one-third, while fuel was 3.5 percent cheaper at $12.7 billion. United ended the year with an operating profit of $4.211 billion versus $2.337 billion in 2022. The pre-tax income was $3.4 billion with a 6.3 percent margin, while the adjusted pre-tax income reached $4.3 billion at 8.0 percent. United ended 2023 with $16.1 billion in available liquidity and $29.3 billion in net debt. It will pay $681 million in profit sharing to employees. Strong December, softer Q4 Back in October, United warned of a softer Q4, pending the suspension of flights to Tel Aviv following the unrest in Israel. It shows in the results. Total revenues were up by 9.9 percent to $13.6 billion from $12.4 billion, with passenger revenues to $12.4 billion from $11.2 billion. Passengers carried grew to 41.8 million from 38.2 million. The last two weeks of December were the busiest travel period in United’s history, when it carried 8.2 million passengers or 483.000 flights per day. To the satisfaction of Kirby, on-time performance was the best for express and consolidated flying and second-best for mainline operations. But with 14.6 percent higher operating expenses of $12.6 billion (especially salaries and distribution costs), the operating profit at $998 million versus $1.377 billion was 27.5 percent down year on year. The pre-tax income was $0.8 billion at a 5.7 percent margin, with adjusted income also $0.8 billion but at a 6.2 percent margin. The net profit was $227 million, down from $247 millon in Q4 2022. Q1 guidance United only offers guidance for Q1, expecting total revenues per available seat mile (TRASM) to be flat and costs per available seat mile excluding fuel (CASM-ex) up in the mid-single digits. The airline expects that the continued grounding of the Boeing MAX 9 fleet will have an impact of 3 percentage points on CASM-ex during the quarter and is included in the guidance. As mentioned, adjusted EPS will be lower, but should reach between $9 and $11 for the full year. Overall, Scott Kirby is positive that demand will continue: “Looking ahead, we expect these trends to continue and United is incredibly well positioned to capitalize on them and to deliver on our short and long-term financial targets.” United Airlines expects to grow its mainline fleet from 963 aircraft by the end of this quarter to 1.044 by the end of 2024. The number of Boeing MAX should grow from 175 to 233, and that of the Airbus A321neo fleet from 8 to 31. This includes the first A321XLRs, which Airbus expects to deliver to customers from early Q2. The Boeing 787 fleet will grow from 71 to 78. In October, United placed orders for 50 787s and 60 A321neo's. The carrier intends to phase out 7 Airbus A319/A320ceo aircraft to bring the fleet to 163. The regional fleet will remain static at 413 aircraft.

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