United Airlines is ‘solidly on track’ to achieve its targets set for 2022 and expects a significant improvement of its results, based on a capacity increase of on average five percent. The US carrier announced its Q3 results on October 19, which showed the impact of the Delta variant. United ‘solidly on track’ for strong 2022.
United posted a $473 million net profit for the June-September quarter compared to a $1.841 billion loss for the same period last year. The operating profit was $1.037 billion versus a $1.615 billion loss. Total operating revenues improved to $7.750 billion from $2.489 billion last year, but are still much lower compared to the $11.380 billion in 2019.
Passenger revenues surged to $6.637 billion from $1.649 billion last year, while cargo improved to $519 million from $422 million.
Without the effects of the Delta variant on the appetite for flying and the extension of restrictions, the third quarter would have been even better. United operated at 72 percent capacity compared to 2019 levels, slightly lower than the 74 percent expected at the Q2 results presentation. It is expected to improve to 77 percent in Q4, but revenues will likely still be 25-30 percent down on 2019 levels.
All hopes on surge in traffic in 2022
All airlines hope for a surge in leisure and corporate demand, resulting in increased traffic when the US reopens from November 8 as well as the lifting of restrictions in Europe and indications that the Pacific, its weakest market, will also reopen. It’s the international business where United is counting on, adding ten percent capacity on this segment. The carrier expects to be ‘flying at record levels’ next year to Europe, Latin America, India, Africa, and The Middle East. Last week, United announced its biggest expansion on the Transatlantic from spring 2022 with ten new flights and five new destinations. United will keep capacity on its domestic network flat compared to 2019.
CEO Scott Kirby says in a media statement: “From the return of business travel and the planned re-opening of Europe and early indications for opening in the Pacific, the headwinds we’ve faced are turning to tailwinds, and we believe that United is better positioned to lead the recovery than any airline in the world.”
Some $2.2 billion in structural cost reductions
To support this recovery, United has kept an eye on strict cost-cutting measures. It says it has succeeded in approximately $2.2 billion in structural cost reductions, partly through the voluntary separation of 4.500 employees. On the downside are rising fuel prices, which United calculates to be $2.39 per gallon or to the high end of what Delta expected last week ($2.25-$2.40). Cost per seat mile (CASM) excluding fuel, which is expected to be 12-14 percent higher in Q4 compared to 2019, should be lower in 2022. This is thanks to the ‘cheap’ addition of capacity by re-introducing the 24 Boeing 777-200s with Pratt & Whitney PW4090 engines that have been grounded since the February 19 uncontained engine failure on a flight to Honolulu. Following the investigation, the root cause has been found and the airline is confident that with modifications requested by the FAA, the type will be safe to fly.
The financial results include a $46 million impairment on nine Airbus A319s and ten Boeing 737-700s in its mainline fleet to reflect market conditions. These aircraft are for sale and will not return to service. Another $59 million impairment was made on the regional fleet of 64 Embraer 154LRs plus spare engines.
United’s free cash flow (non-GAAP) in Q3 was a negative $1.485 billion compared to $-2.283 billion last year. Adjusted capital expenditure was $306 million versus $387 million. The airline has $21 billion in liquidity and $69.3 billion in total liabilities. For the first nine months of this year, United received $5.8 billion in payroll support under the CARES act scheme.
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
Richard is contributing to AirInsight since December 2018. He also writes for Airliner World, Aviation News, Piloot & Vliegtuig, and Luchtvaartnieuws Magazine. Twitter: @rschuur_aero.
