United Airlines Q3 profit outlook disappoints amid industrywide discounting pressure

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United Airlines Q3 profit outlook disappoints amid industrywide discounting pressure

Published Thu, Jul 18, 2024 · 08:14 AM
United Airlines
FILE PHOTO: United Airlines planes are parked at their gates at O’Hare International Airport ahead of the Thanksgiving holiday in Chicago, Illinois, U.S., November 20, 2021. REUTERS/Brendan McDermid/File Photo
Major airlines have scheduled about 6 per cent more seats in the domestic market this month than a year earlier, data from consultancy Cirium shows. PHOTO: REUTERS
Major airlines have scheduled about 6 per cent more seats in the domestic market this month than a year earlier, data from consultancy Cirium shows. PHOTO: REUTERS
Major airlines have scheduled about 6 per cent more seats in the domestic market this month than a year earlier, data from consultancy Cirium shows. PHOTO: REUTERS
Major airlines have scheduled about 6 per cent more seats in the domestic market this month than a year earlier, data from consultancy Cirium shows. PHOTO: REUTERS
Major airlines have scheduled about 6 per cent more seats in the domestic market this month than a year earlier, data from consultancy Cirium shows. PHOTO: REUTERS
UNITED Airlines Holdings on Wednesday (Jul 17) forecast lower-than-expected profit in the current quarter as the industry grapples with excess seat capacity in the domestic market, which has undermined airlines’ pricing power.

The Chicago-based carrier expects an adjusted profit in the range of US$2.75 to US$3.25 per share in the quarter to September. Analysts expected the company to report a quarterly profit of US$3.44 a share, according to LSEG data.

United’s shares were down about 1 per cent in after-hours trading.The company said it expects that mid-August will mark a shift in the industry’s capacity as US carriers are estimated to reduce their seats by 300 basis points from a year ago.

United will also reduce its planned domestic capacity in the fourth quarter by 300 basis points to bolster pricing power, it said.

“Looking forward, we see multiple airlines have begun to cancel loss-making capacity,” said CEO Scott Kirby. “We expect leading unit revenue performance among our largest peers in the second half of the third quarter.”The company will discuss the quarterly results on a call with analysts and investors on Thursday morning.

United’s comments echoed those of rival Delta, which last week forecast a significant improvement in its pricing power from August onward. Like United, Delta has forecast a lower-than-expected profit for the third quarter.

Airlines are enjoying a summer travel boom, with more than three million people passing through US airport security checkpoints on Jul 7, according to the Transportation Security Administration.

However, a rush among carriers to capitalise on summer travel demand has caused overcapacity, undermining their pricing power.

Major airlines have scheduled about 6 per cent more seats in the domestic market this month than a year earlier, data from consultancy Cirium shows.

The average round-trip ticket price for a US domestic flight was US$543 in May, down 1 per cent month-on-month and 3 per cent lower from a year earlier, according to data from Airlines Reporting Corporation.

American and Southwest Airlines have cut their revenue forecasts in the second quarter, citing pressure to offer price discounts.

Analysts and industry officials say a moderation in industry capacity in the second half of the year should underpin ticket prices. Airlines have been relying on higher airfares to offset a run-up in operating costs.

United reaffirmed its 2024 profit estimate of US$9 to US$11 a share.

Its adjusted earnings in the June quarter came in at US$4.14 a share, compared with analysts’ expectations of US$3.93. REUTERS