United Earnings Call – Putting Puzzle Pieces Together

United Air Lines reported its first-quarter earnings earlier this week.  The good news is that United was one of the few airlines that beat the first quarter consensus estimates, with an adjusted EPS of $0.92, which handily beat the street estimates that ranged from $0.72 to $0.75.  United posted a profit of $387 million in Q1 2025, compared with a loss of $124 million in 2024.  The carrier expects to earn between $3.25 and $4.25 per share in the second quarter.  First quarter revenue was $13.21bn, in line with estimates of $13.23bn.

United showed strength in the premium market, which, like Delta, differentiates the two majors from the rest of the industry.  Revenue grew 5%, as did capacity, with a stable load factor for the quarter.  Premium revenue rose 9% YoY, and corporate revenue was 7% higher.  United also sees forward bookings over the last two weeks as stable, which is a positive sign.  International revenue remained resilient, with transatlantic revenue up 5% and transpacific revenue up 9%. The carrier was also able to repurchase $451mm of shares during the quarter, leaving about $1 billion of its current share repurchase authorization.

Future guidance

for the full year was provided in two scenarios.  United’s first scenario re-affirmed its full year guidance of EPS between $11.50 to $13.50 per share.  But the company also offered a recession scenario in which full year EPS could drop to between $7 and $9 per share.  The latter numbers reflect typical performance in prior recessions, where typically revenue movements of 10%-13% have occurred.  The difference is that United is projecting profitable operations even through a recession, driven by premium revenues and successful cost cutting efforts.  Profitable airlines during a recession are very rare occurrences and some in the industry believe that combination to be implausible.