Company plans to cut capacity by reducing domestic capacity in fourth quarter by 3 percentage points to bolster pricing power.
Company recognizes softening of airline industry due to overcapacity, especially in domestic market.
United Airlines faces challenges to profitability due to lower capital expenditures, Boeing plane delays, and industry oversupply.
United forecasts lower-than-expected profit in third quarter of 2024 with expected adjusted profit range of $2.75 to $3.25 per share.
In the current turbulent times for the airline industry, United Airlines is facing challenges in maintaining its profitability. Despite posting mixed second-quarter results, the company's future plans are hampered by lower capital expenditures and slow deliveries of Boeing planes. Peter McNally, Third Bridge Global Sector Lead for industrials, materials, and energy, explains that the industry is grappling with an oversupply of capacity during peak demand season which is negatively impacting revenues outlook. United's future relies on receiving new planes from Boeing and reducing capacity in order to maintain profitability. The company has reiterated its second-quarter results, stating that it recognizes the softening of the airline industry due to overcapacity, especially in the domestic market. As summer bookings cool down, United is expected to face a challenging period in the fall. However, United and Delta Air Lines have been standouts in an otherwise struggling U.S. airline industry by capitalizing on international travel demand and premium offerings such as larger lounges and more spacious seats.
United has forecasted a lower-than-expected profit in the third quarter of 2024, with an expected adjusted profit range of $2.75 to $3.25 per share. The company plans to cut capacity in response to the challenges it is facing, reducing its domestic capacity in the fourth quarter by 3 percentage points to bolster pricing power. United reaffirmed its full-year profit estimate of $9 to $11 a share.
The airline industry as a whole is facing pressure due to increased supply without corresponding demand, leading to lower airfares at the price-sensitive end of the market. Industry capacity growth is estimated to moderate from high-single to low-single digits in the second half of the year, which should support ticket prices. United and its competitors are hoping that this inflection point will help moderate supply and increase pricing power in the coming months.
United Airlines forecasts a lower-than-expected profit in Q3 2022, with an expected adjusted profit range of $2.75 to $3.25 per share.
Accuracy
United reaffirmed its 2024 profit estimate of $9 to $11 a share.
Deception
(100%)
None Found At Time Of
Publication
Fallacies
(85%)
The article contains an appeal to authority and a potential false dilemma. The appeal to authority is present when the author cites analysts' expectations and comments from CEO Scott Kirby. The potential false dilemma comes in the form of presenting only two options for United Airlines: either increase capacity and face lower airfares or reduce capacity to maintain pricing power, without considering other possible strategies that might balance demand and pricing.
. . . carriers are facing higher labor and other operating costs and have been relying on higher airfares to protect profits.
United expects an adjusted profit in the range of $2.75 to $3.25 per share in the quarter ending September 30...
Analysts say capacity growth should moderate from high-single to low-single digits in the second half of the year, which should underpin ticket prices.
United reaffirmed its 2024 profit estimate of $9 to $11 a share.
