Barrons News Said Demand For United Airlines Remains Strong

Barrons News Edition has said that Shares gained 1.8% in after-hours trading. United’s stock is up 14% year-to-date.

Total operating revenue increased by 51.1% compared with the first quarter of 2022, and revenue per seat mile rose 22.5%, to $17.39. Capacity grew 23.4% in the first quarter compared with 2022. United’s average fuel price increased 15.6% to $3.33 per gallon.

“We are watching the macroeconomic risks carefully, but demand remains strong, especially internationally, where we are growing at twice the domestic rate,” CEO Scott Kirby said in a statement.

Chicago-based United (ticker: UAL) surprised investors last month when it forecast a loss ranging between 60 cents and $1 per share in the first quarter, citing higher jet fuel prices, capacity growth and lower demand in January and February. At the time, analysts were expecting a profit of 66 cents per share.

The profit warning sparked turbulence for the stock, which slumped around 12% in just two days. With the loss now expected, attention will turn to the second quarter.

For the second quarter, United forecast profit of $3.50 to $4 a share and revenue gains of 14% to 16%. Analysts had forecast second-quarter profit of $3.61 a share, a 150% increase compared with the same period the previous year. Its full-year expectations are higher than the $8.56-a-share estimate of analysts.

The shift in seasonal demand patterns that led to January and February demand being weaker than expected, points to stronger demand in the months ahead.

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Citi analysts said United’s earnings could be a positive catalyst for the stock following its “excessive” selloff, in a note earlier this month. With a view to coming first quarter results, a modestly good second-quarter guide, and the carrier maintaining a strong 2023 guide, “we think United could recoup lost ground over the next month,” they said to Barrons News.

Whether strong demand can continue into the months ahead is a key question facing airline investors this earnings season. Delta Air Lines DAL +2.23% ’ (DAL) earnings last week failed to provide a convincing answer.

United is particularly confident about demand for overseas travel, noting earlier this month that international bookings were up 15% in March compared with a year ago. It is expanding its international capacity by 25% to meet that increased demand, including 23 daily flights to London Heathrow and 27 destinations in the Asian Pacific region.

Also, with all that in mind, any commentary or indication over the prospects for summer travel will be closely watched by investors, and could even shape sentiment across the sector.

United will discuss its first-quarter results and its outlook for the second quarter and beyond at a conference call at 10:30 a.m. Eastern time on Wednesday.

Separately, Southwest Airlines (LUV) resumed operations Tuesday after canceling 13 flights and delaying 2,169 others, or 52% of its daily schedule, according to flight-tracking site FlightAware.

Finally, Southwest temporarily paused flight activity Tuesday morning to “work through data connection issues resulting from a firewall failure.