United Airlines Reports Strong Second-Quarter Profit, But Third-Quarter Forecast Falls Short
United Airlines, one of the largest carriers in the world, has reported a strong second-quarter profit, thanks to strong demand for international travel. However, its third-quarter forecast fell short of estimates, citing an oversupply of flights that has weighed on airfares.
Second-Quarter Results
United’s second-quarter profit rose more than 20% from last year, with earnings per share (EPS) of $4.14, beating analyst estimates of $3.93. Revenue also increased by 5.7% to $14.99 billion, although it was slightly below expectations.
The company’s adjusted EPS for the quarter was $3.96, up from $3.24 in the same period last year. United’s revenue growth was driven by strong demand for international travel, particularly from Europe and Asia.
Third-Quarter Forecast
However, United’s third-quarter forecast fell short of estimates, with the company expecting to earn between $2.75 and $3.25 per share on an adjusted basis. This was lower than the $3.44 per share analysts had expected.
The company cited an oversupply of flights as the main reason for the disappointing forecast, saying that it expects to continue to see a moderate decline in unit revenues in the third quarter.
Industry Trends
The airline industry has been facing challenges in recent months, with many carriers struggling to balance demand with supply. United and Delta Air Lines, another major carrier, have been standouts in the industry, reporting strong profits despite the challenges.
The carriers have been capitalizing on high demand for international travel and premium offerings, such as bigger lounges and more spacious seats. However, the industry as a whole has been impacted by an increase in domestic capacity, which has weighed on airfares.
United’s Strategy
United has been working to address the oversupply of flights by trimming its schedules and canceling loss-making capacity. The company expects to see an inflection point to moderate the supply in mid-August.
"We see multiple airlines have begun to cancel loss-making capacity, and we expect leading unit revenue performance among our largest peers in the second half of the third quarter," said United CEO Scott Kirby.
Competition
United is not the only carrier facing challenges in the industry. Spirit Airlines recently cut its second-quarter forecast, citing weaker-than-expected revenue for fees like seating or luggage. Southwest Airlines and American Airlines, which report results on July 25, previously reduced their second-quarter estimates.
Conclusion
United Airlines’ second-quarter results were strong, driven by strong demand for international travel. However, the company’s third-quarter forecast fell short of estimates, citing an oversupply of flights that has weighed on airfares. The airline industry as a whole has been facing challenges, with many carriers struggling to balance demand with supply. United has been working to address the oversupply of flights and expects to see an inflection point to moderate the supply in mid-August.
FAQs
Q: What was United Airlines’ second-quarter profit?
A: United’s second-quarter profit rose more than 20% from last year, with earnings per share (EPS) of $4.14.
Q: What was the reason for United’s third-quarter forecast falling short of estimates?
A: United cited an oversupply of flights as the main reason for the disappointing forecast, saying that it expects to continue to see a moderate decline in unit revenues in the third quarter.
Q: How is the airline industry performing overall?
A: The airline industry has been facing challenges in recent months, with many carriers struggling to balance demand with supply. United and Delta Air Lines have been standouts in the industry, reporting strong profits despite the challenges.
Q: What is United Airlines doing to address the oversupply of flights?
A: United has been working to address the oversupply of flights by trimming its schedules and canceling loss-making capacity. The company expects to see an inflection point to moderate the supply in mid-August.
Q: What is the impact of the oversupply of flights on airfares?
A: The oversupply of flights has weighed on airfares, making it challenging for carriers to maintain profitability.
Author: www.cnbc.com
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