United Airlines reports its highest-ever quarterly earnings, buoyed by growth in high-margin international travel. United earned more than $1 billion in the second quarter, despite a series of storms that interrupted operations at its Newark hub and resulted in the cancellation of 3,800 flights. The company also updated its outlook for 2023 with a range of $11-$12 per share, compared with earlier guidance of $10. The new range is well above the consensus of analysts estimated that the average is about $9.80, a substantial increase.
United benefits from a significant increase in international travel, up 44% year-on-year, accounting for 41% of the airline’s total passenger revenues. Company revenues rose to $14.18 billion, up 17% from a year ago.
International bookings have become stronger after lifting pandemic-related restrictions, despite a nearly 9% increase in international yields during the second quarter. Demand is strong enough to overcome the price increase. Passenger comfort that the pandemic is over in international destinations has rekindled travel demand post-pandemic.
Capacity remains limited by supply chain constraints and pilot shortages, meaning load factors will be high, and planes are expected to remain full beyond the peak summer travel season. United raised its outlook for third-quarter profitability to $3.85 to $4.35 per share, higher than the current Wall St. consensus of $3.70.
United is also gearing up for a major service expansion in the Asia-Pacific region this coming fall. The airline will offer direct flights to Manila and additional non-stop services to Hong Kong, Tokyo, and Taipei. Excluding mainland China flying, United’s transpacific network will be 50% larger than all other US airlines combined.
The Bottom Line
United’s outlook is improving markedly with the resurgence in international travel. The question is whether pent-up demand will remain high, grow even more, or level out in 2024 and 2025. Nonetheless, even leveling out at record high levels would be positive, and we expect United to continue strong financial performance in 2023 and 2024.