By Rajesh Kumar Singh
CHICAGO (Reuters) -United Airlines forecast stronger earnings in the current quarter on Wednesday as it expects rising travel demand and improved pricing power to produce the highest quarterly revenue in the company’s history.
The Chicago-based airline expects an adjusted profit in the range of $3.00 to $3.50 per share in the quarter through December. The midpoint of the forecast is $3.25 per share, compared with analysts’ average estimate of $2.86, according to LSEG data.
United’s third-quarter adjusted profit came in at $2.78 a share, topping analysts’ expectations of $2.63 a share.
The company’s shares were up about 1.5% in after-hours trading.
UNITED, DELTA LEAD PACK
Its earnings report comes a week after rival Delta Air Lines forecast record earnings in the December quarter.
Both United and Delta have consistently outperformed the broader airline industry since the pandemic by focusing on high-margin revenue streams that tap into the financial strength of premium, corporate, and international travelers.
This has led to a growing divide in the earnings of U.S. carriers. While Delta and United are generating most of the industry’s profits, more domestic-focused, budget-oriented carriers are grappling with softer demand and greater pricing pressure.
United generated $15.2 billion in revenue in the third quarter, an increase of 2.6% from a year ago. Its premium revenue was up 6%, while loyalty revenue, generated through its frequent flyer program, increased 9%.
With travelers willing to pay for more comfortable and swankier seats, United said it plans to invest another billion dollars to enhance customer experience.
United CEO Scott Kirby has been emphasizing the need to cultivate brand-loyal customers to ride out economic downturns. As part of the strategy, the airline is heavily investing in expanding and upgrading its airport lounges. It is also outfitting its fleet with Elon Musk’s Starlink internet service and has added seatback screens with Bluetooth connectivity.
“Customers are increasingly choosing an airline that can deliver value for them across the full travel experience,” Kirby said in a statement.
A sharp reduction in airline seat capacity in the domestic market has driven up ticket prices, bolstering the industry’s revenue outlook. With bankrupt Spirit Airlines shrinking its operations and most carriers moderating plans to expand capacity to prevent discounting pressure, analysts and industry executives expect airfares to hold up.
While operational issues at Newark airport hurt United’s total revenue per seat mile, a proxy for pricing power, in the third quarter, it expects a meaningful improvement in the current quarter.
The company will discuss its financial results on a call with analysts and investors on Thursday morning.
(Reporting by Rajesh Kumar Singh; Editing by Chris Reese and Rod Nickel)
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