United Airlines announced its intentions to reduce domestic flight capacity by as much as 4%. This amendment goes into effect in the third quarter of this year. The airline has been facing weak domestic demand. At the same time, it is enjoying booming performance in its international and premium travel sectors.
Even with the cuts to capacity, United has held off on changing its full-year profit outlook. The company’s guidance for adjusted earnings per share for the year is between $–7– $9. That projection remains solid, despite the specter of a possible recession hanging overhead. Here’s where cautious optimism is warranted. Cautious optimism surrounds United Airlines after they reported a solid revenue beat of $13.21 billion. This figure is an increase of more than 5% compared to last year, though it came in just shy of analyst estimates of $13.26 billion.
Additionally, United Airlines did an analysis of their performance recently and realized that unit revenue from domestic flights are down. That’s a stark contrast to its 3.9% decline during the first quarter. However, unit sales from international routes experienced an increase of more than 5%. This increase is indicative of ongoing demand from U.S. travelers for international travel. Perhaps that is not a surprise, given the sudden surge in the airline’s earnings — a $387 million profit for a $1.16 per-share profit. This is a dramatic improvement from last year’s third quarter net loss of $124 million, or 38 cents/share for the same quarter a year ago.
The airline’s adjusted earnings of 91 cents per share exceeded Wall Street’s expectations of 76 cents, showcasing its ability to navigate challenges within the sector. At United Airlines, that’s manifesting itself with international and premium-cabin revenues jumping in the first quarter. Meanwhile, domestic coach sales went in the opposite direction.
Looking forward, United Airlines has recently lowered guidance for second-quarter adjusted earnings per share to a range of $3.25-$4.25. The airline largely credits this outlook with robust demand for high-fare, premium-cabin bookings and for international traffic. Still, the company is remaining conservative about what its performance might look like going forward. It also warned that a deeper-than-expected dip in bookings could require it to cut its 2025 forecast, bringing its anticipated earnings of $11.50 to $13.50 a share down to a range of $7 to $9.
United Airlines is preparing to reduce domestic flights this summer. At the same time, airline’s leadership is committed to continuing to evolve with the competitive realities of the marketplace. The decision to reduce capacity highlights concerns about domestic travel demand while underlining the airline’s commitment to maximizing profitability through international routes and premium offerings.
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