United Airlines' Q3 profit guidance is lower than Wall Street's expectations, as US airlines have significantly reduced ticket prices to attract domestic travelers.
According to Futu Securities, United Airlines (UAL.US) announced its Q2 2024 financial performance with Q3 profit guidance lower than Wall Street's expectations, due to US airlines' significant reduction in ticket prices to attract domestic travelers.
According to the financial report, United Airlines Q2 revenue was USD 14.986 billion, an increase of 5.7% year-on-year and basically in line with market expectations. In terms of business segmentation, passenger revenue was USD 13.68 billion, an increase of 5.2% year-on-year; cargo revenue was USD 0.414 billion, an increase of 14.4% year-on-year; and other revenue was USD 0.892 billion, an increase of 9.6% year-on-year. Operating profit was USD 1.929 billion, an increase of 27.2% year-on-year; net income was USD 1.323 billion, an increase of 23.1% year-on-year; diluted EPS was USD 3.96, higher than the same period last year of USD 3.24. Adjusted EPS was USD 4.14, better than the market expectation of USD 3.93 but lower than USD 5.03 in the same period last year.
Q2 available seat miles (ASMs) were 79.678 billion miles, up 8.3% year-on-year; passenger revenue per available seat mile (PRASM) was 17.17 cents, down 2.9% year-on-year; total revenue per available seat mile (TRASM) was 18.81 cents, down 2.4% year-on-year. Q2 unit cost decreased by 4.8% year-on-year, but unit cost excluding fuel increased by 2.1% year-on-year. The aviation fuel price was USD 2.76 per gallon, higher than USD 2.66 per gallon in the same period last year.
United Airlines expects adjusted EPS to be between USD 2.75 and USD 3.25 in Q3, lower than the market expectation of USD 3.38. United Airlines, like its competitor Delta Air Lines, warns that the price cuts taken by low-cost airlines to fill excess seats this summer are putting pressure on the entire aviation industry.
It is reported that US airports reached a historic high in passenger traffic this summer, but all airlines filled the vacant seats through price reductions. Airline executives and analysts say that budget airlines catering to cost-conscious passengers are leading the trend of discounts, but larger peers are not immune to the impact of ticket price wars.
United Airlines said that after mid-August, the magnitude of ticket price reductions may weaken. The company said it plans to reduce its domestic capacity by three percentage points in Q4, but did not provide more details.
"United Airlines has been preparing for the adjustment of domestic capacity for the entire industry-now it is clear that there are only 30 days left before the turning point," said United Airlines CEO Scott Kirby. TD Cowen analyst Thomas Fitzgerald said in a report that United Airlines is one of the airlines most likely to gain a "substantial" market share as US domestic airlines withdraw.
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