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United expects stronger quarterly earnings; cuts aircraft delivery estimates

Published 04/16/2024, 04:08 PM
Updated 04/17/2024, 03:56 AM
© Reuters. FILE PHOTO: A United Airlines passenger jet lands at Newark Liberty International Airport, New Jersey, U.S. December 6, 2019. REUTERS/Chris Helgren/File Photo

By Rajesh Kumar Singh

CHICAGO (Reuters) -United Airlines Holdings on Tuesday forecast stronger-than-expected earnings in the current quarter, after reporting a narrower-than-expected loss in the first quarter, on robust demand for travel.

United's shares were up about 6% in after-hours trading.

The airline, a prominent customer of Boeing (NYSE:BA), has been hit by the planemaker's safety crisis. Boeing's troubles forced it to scale down its total aircraft delivery estimates for this year by 25% to 66 jets.

The Boeing situation is rippling through the industry, compelling airlines to adjust their fleet plans at a time travel demand is projected to hit record levels.

"We've adjusted our fleet plan to better reflect the reality of what the manufacturers are able to deliver," United CEO Scott Kirby (NYSE:KEX) said.

United received just seven planes, which were all MAX aircraft, in the first quarter, sharply lower than 23 a year ago, according to the planemaker's delivery data. It expects to receive another 29 MAX and five 787 planes from Boeing in the remainder of the year.

The airline had to ground its Boeing 737 MAX 9 fleet following a January mid-air cabin panel blowout on an Alaska Airlines flight, resulting in a $200 million hit in the first quarter.

The Jan. 5 incident has placed a question mark over certification of the larger variant MAX 10, which was due for deliveries this year and was to be the cornerstone of United's fleet.

United said it has converted a portion of MAX 10 aircraft orders into MAX 9 for deliveries from 2025 through 2027. It has also retained the right to convert more MAX 10 orders into MAX 8 or MAX 9 as needed.

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As a result, it expects to take deliveries of on average 100 narrowbody aircraft per year between 2025 and 2027. This includes 35 Airbus A321neo jets that it will secure from aircraft lessors.

In the short run, a small number of jets that were previously scheduled to enter service in the June quarter would be pushed into the third quarter. The change, however, is expected to have minimal impact on its capacity plans, it said.

The aircraft delays have reduced its aircraft utilization, leaving the company overstaffed. United has paused pilot hiring and offered voluntary unpaid leave to its pilots.

It reported robust demand for domestic and transatlantic flights, along with a pickup in corporate travel spending. Last week, rival Delta Air Lines (NYSE:DAL) forecast the highest second-quarter revenue in its history.

United expects an adjusted profit in the range of $3.75 to $4.25 a share in the June quarter, compared with analysts' expectations of a profit $3.76 a share, according to LSEG data.

Adjusted loss for the first quarter came in at 15 cents a share, narrower than Wall Street's estimate of a loss of 57 cents per share. United reaffirmed its 2024 profit estimate of $9-$11 a share.

It will discuss the results on a call with analysts and investors on Wednesday morning.

Latest comments

What a negative tone for such a good result and forecast. EPS is 74% better than Wall Street's estimate! Aircraft delivery has been offset by extra deliveries through leasing Airbus aircraft this year. Without the grounding of the MAX planes, UAL would have shown a positive EPS btw. And then the sneaky one sentence on DAL (who is performing well too) just shows this author his real intentions/agenda...
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