United Airlines (UAL) Q4 2022 Earnings

United AirlinesFourth-quarter profit and the forecast for early 2023 beat Wall Street estimates thanks to strong travel demand and higher fares.

Consumers’ appetite for air travel and willingness to pay higher fares have helped airlines return to profitability despite higher costs for fuel, labor and other costs associated with strengthening their networks. Meanwhile, delays in aircraft deliveries and training backlogs have limited airline growth and kept fares high.

United reported a profit of $843 million in the final three months of 2022, a 31% increase from three years ago, and revenue of $12.4 billion. That revenue was almost 14% higher than the same period in 2019, despite falling 9% before the pandemic, and helped drive profits despite a 21% increase in unit costs three years ago.

United shares gained nearly 2% in extended trading on Tuesday.

The quarterly update is another sign of a strong end to the year for airlines, despite severe winter storms and disruptions during the popular holiday travel season.

An airport crew member guides a United Airlines flight in Terminal A at Newark Liberty International Airport (EWR) in Newark, New Jersey, U.S., Thursday, Jan. 12, 2023.

Aristide Economopoulos Bloomberg | Getty Images

Last week, Delta AirlinesProfit and revenue beat Wall Street expectations, although higher costs, partly due to an expected pilot labor contract, weighed on its first-quarter profit forecast. Also last week American AirlinesIt increased its profit and sales forecast for the fourth quarter, which reported on January 26.

Here’s how United performed in the fourth quarter compared to Wall Street’s expectations, according to averages compiled by Refinitiv:

  • Adjusted earnings per share: $2.46 vs. $2.10 expected
  • Gross income: $12.4 billion vs. $12.2 billion expected

For the first three months of 2023, United expects to generate 50% more revenue than the same period in 2022. According to Refinitiv, it expects first-quarter earnings per share to be between 50 cents and $1, topping the analyst consensus of 25 cents.

United said it expects to expand its flights by 20% in the first quarter from a year ago.

It projects capacity growth in the high teens for the entire year through 2022. It forecasts full-year unit revenues, or revenue per available seat mile, compared to 2022, which points to a sharp rise in airfares this year. continues to decline as airlines add more flights.

United also said in an investor presentation that staffing problems, aircraft shortages and outdated technology will limit industry capacity this year.

United and others are hoping to increase pilot and crew numbers in the next fiscal year as the airline industry faces labor shortages caused by Covid. On Tuesday, the company celebrated the debut of the Calibrate apprenticeship program, which it launched in November, and the United Aviation Academy, which begins in early 2022. The airline also announced Tuesday that it opened a renovated and expanded flight attendant training facility in Houston.

United has not yet reached a new labor contract with its pilots. Delta and its pilots’ union have reached a tentative agreement on major raises, but pilots have yet to vote on them.

CEO Scott Kirby told CNBC’s “Fast Money” that the airline’s pilots union is working on a new leader after the last leader resigned, which should be finalized by the end of this month. Once a new leader is chosen, Kirby expects negotiations to continue until February 7.

He said a deal on the pilot contract “has to be done pretty quickly once we get back to the table.”

United said in its investor presentation that it expects new contracts with pilots, flight attendants, technicians and airport workers to keep its non-fuel costs stable in 2022.

Kirby also said the industry’s supply constraints reflect a broader infrastructure problem demonstrated in the Federal Aviation Administration’s recent system outage. He said the FAA’s expansion into space and drones is straining resources it would normally use to support flight infrastructure.

“They had to rob Peter to pay Paul,” Kirby said. “They don’t have enough resources.”

Kirby said he is in Washington twice a month lobbying for more resources.

The combined executives will hold a meeting with analysts and the media at 10:30 a.m. on Wednesday.

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