United’s new forecast shows demand is up
United Airlines Holdings Inc. raised its outlook for thirdquarter sales and said it may fly slightly more than previously planned, boosting shares across the industry as the carrier cited strong demand holding steady even as the summer travel season comes to an end.
Operating revenue will be up about 12 percent in the period compared with the same quarter in 2019, according to a filing Wednesday. United had previously forecast an increase of about 11 percent. The airline also sees an adjusted operating margin of about 10.5 percent, higher than its prior estimate of 10 percent.
“We’re seeing a really strong September,” Patrick Quayle, United’s senior vice president for global network, planning and alliances, said at a Cowen Inc. transportation conference. “It does not appear summer has come to an end, it is that strong.”
United’s revised forecast marks a step forward in the industry’s choppy recovery from an early pandemic slump. U.S. airlines have faced a variety of challenges, including soaring fuel costs and staff shortages, that have hampered their ability to take full advantage of a rebound in travel demand.
Premium leisure demand and higher fares are fueling improvement, along with a strong surge in travel following the reduction of coronavirus-related restrictions in parts of Asia Pacific, including Singapore and Korea, Quayle said. While the number of corporate passengers remains below 2019, revenue is in line or higher than it was, he said.
Separately, United said Tuesday in a memo to employees that it was looking to increase daily operations at New York’s John F. Kennedy International Airport after resuming service there last year. The carrier threatened to suspend flying at the airport at the end of October if regulators don’t move to reassess the effect of several infrastructure improvements at JFK and expand operations.
United leased the rights to 40 daily takeoffs and landings at JFK to Delta Air Lines Inc. in transactions in 2014 and 2015, when it left the airport to consolidate transcontinental flying at its nearby Newark, N.J., hub. The long-term nature of the leases means United has no access to them, the airline confirmed.
The airline said in the new filing that it would fly in the third quarter as much as 90 percent of 2019 levels. It had previously predicted about 89 percent. That comes after widespread capacity reductions by U.S. carriers in recent months as they struggled to ease flight disruptions that snarled operations earlier in the summer.
United said in July that it would hold flying capacity this year to 13 percent below prepandemic levels, and that capacity in 2023 will be no more than 8 percent higher than 2019, far short of the 20 percent jump United had previously planned. The airline said then that the reductions won’t change its expectations for continued profit — including for the full year — based on solid pricing and even stronger demand.
Operating costs for each seat flown a mile, excluding fuel, have been in line with or slightly better than original expectations and will now rise about 16 percent in the quarter from 2019. That compares with a prior prediction of as much as 17 percent. Revenue on the same basis will increase 25 percent, in line with an earlier outlook.