United Airlines on Wednesday reported that its second-quarter profit rose 23% to $1.32 billion, as record crowds at U.S. airports helped the carrier overcome sharply rising costs for fuel and labor.
However, United warned that third-quarter results will fall short of Wall Street expectations.
Like rival Delta Air Lines, United said it was concerned that carriers are adding more flights than necessary, creating a glut of seats that is keeping prices from rising.
Airlines are trimming their schedules for mid-August and beyond, which will help reduce the oversupply of flights while increasing the airlines’ pricing power.
Since the start of the second quarter on April 1, the number of travelers screened at U.S. airports has increased more than 6% over the same period last year, according to figures from the Transportation Security Administration. The nine busiest days in TSA’s history have occurred during that span, although two were after the second quarter ended June 30.
However, Delta reported last week that its second-quarter profit fell 29%, and it gave a weaker-than-expected forecast for its third-quarter profit.
United said Wednesday that it expects to earn $2.75 to $3.25 per share in the third quarter, which is below the average $3.38 forecast among analysts in a FactSet survey.
Both airlines indicated that demand for premium travel – sitting in the front cabin – is strong, but pricing is weaker for cheaper seats in the main cabin because airlines collectively have added too many flights. Delta executives called out budget airlines such as Spirit and Frontier for expanding too rapidly.
It’s not just the little guys, however. TD Cowen analyst Thomas Fitzgerald said he is concerned that “aggressive discounting” this summer by American Airlines is hurting revenue trends. And United’s passenger-carrying capacity in the second quarter was 8.3% higher than in the same period last year.
Chicago-based United said its second-quarter profit worked out to $4.14 per share, excluding one-time gains and losses. Analysts expected $3.93 per share, according to a FactSet survey.
Revenue was $14.99 billion, slightly below the analysts’ forecast of $15.04 billion.
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