United Airlines (UAL) reported third quarter earnings that exceeded expectations after the market closed on Wednesday, a week after competitor Delta (DAL) witnessed premium and business travelers contributing to its performance.
United, based in Chicago, reported operating revenue of $15.2 billion, compared to $15.28 billion according to Bloomberg consensus, slightly below expectations but representing a 3% increase from the previous year. United's adjusted earnings per share (EPS) reached $2.78, exceeding the projected $2.66, while available seat miles totaled 87.42 billion, surpassing the anticipated 86.51 billion. The key metric of passenger revenue per available seat mile (PRASM) was $73.77 billion, higher than the estimated $72.71 billion.
Looking forward, United expects its adjusted EPS for Q4 to fall between $3.00 and $3.50, exceeding the projected $2.82. The airline believes its profit margins will increase by at least one percentage point annually.
The U.S. stock declined by more than 3% in the initial trading session on Thursday, but then increased as the airline discussed strategies to enhance its profit margins during the earnings call.
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"We have made investments across all customer price points, including seatback screens, a top-tier mobile application, additional legroom, the lie-flat United Polaris seat, and swift, free, and dependable Starlink internet on all aircraft by 2027. Our customers appreciate the United experience, which is leading to greater loyalty towards United," said CEO Scott Kirby in a statement.
"Over nearly a decade, these investments, along with outstanding service from our team, have enabled United to gain and keep loyal customers, resulting in financial stability despite macroeconomic fluctuations during the first three quarters of the year and substantial growth as the economy and demand rise in the fourth quarter," he added.
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United reported that premium cabin revenue increased by 6% compared to the same period last year in Q3, while revenue from Basic Economy grew by 4% year over year and loyalty-related income rose by 9% year over year.
In the previous quarter, increased revenue from premium cabins and cargo helped boost United's earnings to a new high of $15.2 billion, with the company projecting its annual earnings per share to be between $9.00 and $11.00. United mentioned it will discuss its full-year goals during its earnings call scheduled for tomorrow.
Last week, Delta saidA "notable enhancement" in its revenue forecast caused the airline to adjust its outlook toward the higher end of its estimate, as its high-end services increased by 9% and business sales rose by 8%.
Although the second quarter was positive, United faced challenges.operational issuesearlier this year at one of its biggest facilities, Newark Liberty Airport in New Jersey.
Last month, United saidNewark flights had on-time performance comparable to LaGuardia and JFK airports in the New York City region. Earlier this spring, Newark faced staffing shortages and air traffic control problems that resulted in significant delays and, in certain instances, temporary shutdowns of the air traffic control system.
United passengers steered clear of Newark, resulting in underused capacity for the airline. Although CEO Scott Kirby and Transportation Secretary Sean Duffy state that the issues at Newark are resolved, investors will be seeking more information about one of United's key hubs.
Another major concern affecting the airline industry is the government shutdown and its impact on air traffic control personnel. Last week witnessedsubstantial delays at Nashville International Airportbecause of a shortage of controllers.Burbank Airport had no air traffic controllers in placeat all for several hours, causing San Diego's facility to divert flights.
Delta CEO Ed Bastian mentioned in an interview last week withYahoo Financecurrent staffing levels at air traffic control are not affecting operational performance, such as on-time arrivals and flight cancellations, but if the shutdown extends beyond this week, it could become "a greater source of worry for everyone."
Pras Subramanian serves as the Lead Transportation Reporter at Yahoo Finance. You can track him on X and on Instagram.
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