United Shrugs Off Recession Fears as Workers ‘Untethered from the Desk’ Fuel Travel Demand

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As the recession recedes into history, American workers are showing more than ever that they’re ready to get out of the office and into the skies, and United Airlines is welcoming them with open arms. The airline, which boasts the largest domestic route network in the United States, reported strong second-quarter earnings today, increasing its profit by seven percent over last year and pushing its share price upwards. The Chicago-based company said that it expects continued growth in leisure travel and high-margin business travel on international routes in the coming months.

United Airlines stated that despite expensive airfares and concerns about the economy, customer hunger for travel is showing no signs of slowing down in its annual profit prediction.
In early Wednesday afternoon trade, shares were up 7%

According to United’s CEO Scott Kirby, more accommodating companies are altering travel habits, which will help the airline combat the effects of a sluggish economy.
In an interview with CNBC’s “Squawk Box” on Wednesday, Kirby argued that “hybrid employment permits every weekend to be a holiday weekend.” According to him, travelling professionals are now able to fly on days when they wouldn’t have been able to before the epidemic, when they were in the workplace more frequently.

“People weren’t prevented from travelling by a lack of money. It was time,” stated Kirby. They are no longer attached to the desk.

The Chicago-based airline reported third-quarter earnings of $942 million, down 8% from three years prior, and revenue of $12.88 billion, beyond analysts’ expectations and up 13% from the previous year.

After deducting one-time expenses, United earned $2.81 per share, substantially above the $2.28 that Refinitiv analysts surveyed had predicted.

According to Refinitiv, the airline forecast adjusted profits per share of up to $2.25 for the fourth quarter, greatly above analysts’ consensus forecasts of 98 cents. For the first time since the epidemic started, United stated that it anticipates its operating margin for the fourth quarter to be approximately 10% and above 2019.

The robust summer travel season and promising prospects for the remainder of the year show that customers are still eager to spend money on vacation, in contrast to early in the epidemic when Covid-19 limitations shattered demand. Last week, Delta Air Lines reported record third-quarter revenue and predicted another profit for the fourth.

The optimistic predictions from airline CEOs stand in contrast to those of other industries that have struggled this year, including as some segments of the retail sector and other streaming services that benefited from lockdowns early in the epidemic.

Based on the typical forecasts collected by Refinitiv, the following chart shows how United performed in the third quarter compared to what Wall Street anticipated:

Earnings per share after adjustments: $2.81 vs $2.28 projected
Total sales was $12.88 billion as opposed to the $12.75 billion forecast.

According to a report by CNBC last month, U.S. airline executives have recently observed high demand to Europe far through the summer peak and into the autumn and are maintaining greater capacity in those markets as a result.

As a result of supply chain concerns and other delays, aircraft deliveries are still limited in number, and airlines are still struggling to find and train new employees, particularly pilots.

Flight shortages are keeping costs high. According to United, its revenue per available seat mile increased by more than 25% from three years prior to the third quarter. It anticipates that metric to increase by as much as that much from 2019 for the current quarter.

The carrier said that its fourth-quarter capacity would probably be roughly 10% lower than in 2019, which is comparable to its third-quarter capacity.

Additionally, the carrier announced on Wednesday that it intends to employ 15,000 staff this year and an additional 15,000 in 2019. According to business documents, United had 84,100 employees as of the end of 2021, down from around 96,000 at the end of 2019 before the epidemic.

When travel demand fell earlier in the epidemic, airlines pushed employees to take buyouts or other types of leave since the $54 billion in federal funding they received prevented them from initiating layoffs.

On a Wednesday earnings conference, United’s president, Brett Hart, stated that some of the new recruits will take the place of employees who have already departed or will soon leave the firm. However, he said that the “great majority” of the new hires support the company’s expansion strategy.

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