United Airlines Holdings said that as American Airlines drastically reduced ticket prices to attract domestic travelers, even the biggest airlines in the industry were unable to take advantage of record summer travel opportunities, so third-quarter profits will fall short of Wall Street's expectations.
The company said adjusted earnings per share for the quarter will be between $2.75 and $3.25 in a document released Wednesday, which also includes second-quarter results. Analysts expect average earnings per share of $3.38.
United Airlines, like rival Delta Air Lines, warned that low-cost carriers would struggle to fill excess seats this summer, so price cuts are putting pressure on the entire industry. Larger competitors are being forced to follow up with price cuts to stay competitive. Last quarter, United Airlines' basic economy fare revenue increased 38%, while premium economy class sales increased 8.5%.
As of 4:26 p.m., after the end of regular trading on Wednesday, its share price was down 2%. Fare warnings are also hurting American Airlines Group Inc. (American Airlines Group Inc.) Shares are down 2.8%, and the airline will release earnings next week.
Southwest Airlines Co. An alert was issued last month, and unit revenue expectations for the second quarter were lowered on the grounds that it was difficult to adapt to the “current booking model.” American Airlines drastically lowered profits and sales expectations at the end of May after misjudging domestic demand, while the low-cost airline Spirit Airlines Inc. (Spirit Airlines Inc.) said on July 16 that second-quarter revenue would fall short of earlier forecasts.
“inflection point”
United Airlines said that the flight schedule released in mid-August shows that the industry's capacity growth rate will drop by nearly 3 percentage points, and the reduction in ticket prices may weaken thereafter. The airline said it plans to reduce its domestic capacity by 3 percentage points in the fourth quarter, but did not provide further details.
CEO Scott Kirby (Scott Kirby) said in the earnings report: “United Airlines has been preparing for a moment of adjustment of domestic capacity across the industry — it is now clear that the inflection point is just 30 days away.”
United Airlines' second-quarter adjusted profit per share was $4.14, higher than analysts' average estimate of $3.93. Revenue was roughly in line with expectations of $15 billion.
United Airlines maintained its full-year earnings forecast of $9 to $11 per share.