Home TRAVEL Despite grounding of Boeing plane, United Q2 profit rises: Travel Weekly

Despite grounding of Boeing plane, United Q2 profit rises: Travel Weekly


United Airlines glided through the first part of summer, as
strong travel demand pushed average fares higher, but the grounding of Boeing
737 Max jets will become a bigger challenge in the months ahead.

United said Tuesday that its second-quarter profit soared
54%, to $1.05 billion. The results beat expectations, and United slightly
raised its forecast of full-year profit.

The Chicago-based airline, however, faces uncertainty
because of the grounding of Boeing 737 Max jets after two deadly accidents.

United is dipping into the used-plane market to bolster its
fleet. The airline said that it recently signed an agreement to buy 19 used
Boeing 737-700 jets, which will start showing up in December.

The airline counted on the Max becoming a bigger part of its
fleet, growing from 14 planes to 30 by the end of September, and 28 more of
them next year. That plan is now in jeopardy, as Boeing has halted Max
deliveries with no clear idea yet when the plane will be certified to fly

The missing planes will leave a huge gap in United’s
schedule and cut into the airline’s revenue. United has already canceled more
than 8,000 flights by taking the Max out of its schedule through Nov. 3, and
the number will grow the longer the planes remain grounded.

Without those planes, United is slowing down its expansion
plans. The airline had expected to boost passenger-carrying capacity by 4% to
6% this year, but on Tuesday it said it will grow more modestly, between 3% and

The slower growth in capacity, combined with strong demand,
means that airline pricing power “remains quite strong,” said Cowen
airline analyst Helane Becker.

United’s slower growth also reflects the airline’s decision
earlier this year to suspend flights between New York and New Delhi after
Pakistan closed its airspace to civilian flights because of rising tension with
India. Pakistan lifted restrictions Monday, and a United spokesman said the
airline is considering resuming the flights to India in the coming weeks.

The second-quarter profit was up from $683 million a year

United said that excluding special gains and charges, it
earned $4.21 per share in the quarter. The average estimate among 16 analysts
surveyed by Zacks Investment Research was $4.07 per share.

United does not publish average fares, but a stand-in figure
— revenue per seat for each mile flown — rose 2.5% over last year’s second
quarter. That was at the top end of United’s guidance to investors and helped
propel total revenue 6% to $11.4 billion, slightly higher than analysts expected.

The nation’s third-largest airline by revenue raised the
lower end of its forecast range for full-year earnings to between $10.50 and
$12 per share. It previously forecast $10 to $12 per share.

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