Sign in

    United Airlines Holdings Inc (UAL)

    Q4 2023 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$40.49Last close (Jan 23, 2024)
    Post-Earnings Price$41.06Open (Jan 24, 2024)
    Price Change
    $0.57(+1.41%)

    What went well

    • United Airlines is bullish on the year, expecting positive TRASM growth, with strong domestic demand starting the year "incredibly strong" and a strategic focus on trans-Atlantic and Asia capacity, which is expected to bolster numbers in Q2 and Q3.
    • United is successfully decommoditizing its product with a diversified revenue stream across all cabins, including both Basic Economy and premium products, driving increasing volumes and positive P&L effects. They intend to do more of this, not less.
    • United is particularly bullish about Asia, rebuilding its Asia network to have sustainably higher margins than pre-pandemic, with added capacity expected to perform very well in Q2 and Q3, indicating strong long-term prospects in the region.

    What went wrong

    • United Airlines is removing the Boeing 737 MAX 10 aircraft from its internal plans due to Boeing's inability to meet contractual deliveries, which may impact future capacity growth and fleet modernization.
    • Rising labor and maintenance costs are increasing United's CASM-ex, leading to potential margin pressure if not offset by higher revenues. Investors are concerned about the company's ability to control these costs amid industry-wide inflationary pressures.
    • United is guiding to roughly flat margins at the midpoint for this year, which raises concerns about profitability in the face of increasing costs and potential challenges in maintaining margin premiums over industry trends.

    Q&A Summary

    1. Impact of MAX 10 Delays on Growth Plans
      Q: Are MAX 10 delays impacting United's growth plans?
      A: Yes, due to the MAX 10 grounding, United expects its growth rate to slow in coming years. While the United Next plan remains on track, it will take a little longer to achieve. United is working on alternate plans and cannot count on the MAX 10 delivering as scheduled.

    2. Positive RASM Outlook for 2024
      Q: Will RASM be positive this year?
      A: United expects Total Revenue per Available Seat Mile (TRASM) to be positive in 2024. They are bullish on the year, with strong domestic demand and strategic trans-Atlantic capacity planning. Asia capacity is expected to step down in Q2 and Q3, bolstering numbers further.

    3. CASM-Ex Trends and Cost Pressures
      Q: How will CASM-ex trend this year and what are the cost pressures?
      A: Excluding the MAX impact, CASM-ex is expected to face continued pressure from labor costs, adding about 3 to 4 points, an industry-wide headwind. Maintenance costs are also a headwind of about 1 point, which will be lumpy quarter-to-quarter. The MAX headwind will go away later in the year as aircraft return to service.

    4. Achieving Higher Margins by 2026
      Q: How will United bridge from 8% margins in 2023 to 12–14% in 2026?
      A: United is confident in continued momentum from the United Next strategy, including increases in gauge and connectivity, which have proven effective. They anticipate reaccelerating growth in 2025 and 2026 as aircraft deliveries increase, leading to higher margins.

    5. CapEx Guidance and Free Cash Flow
      Q: How will delays in aircraft deliveries affect CapEx and leverage?
      A: The gap between contractual and expected aircraft deliveries is widening due to MAX delays. CapEx may come in below $9 billion this year, with potentially lower CapEx in 2025 and beyond. United expects free cash flow to cover CapEx in most years, allowing for debt paydown as margins grow.

    6. Basic Economy Revenue Growth
      Q: What's driving the 20% revenue increase in Basic Economy?
      A: The growth is largely due to a market share shift from low-cost carriers. United has refined its Basic Economy product and increased gauge, attracting more market share. They plan to continue expanding this segment to grow their share base even more.

    7. Monetizing MileagePlus Program
      Q: How does United plan to highlight the value of MileagePlus?
      A: MileagePlus is considered a crown jewel for United. They have significant projects underway to enhance customer experience and monetize data. United has ideas on how to bring market attention to the program's value and higher premium multiple, with more details to be shared at the May 1 Investor Day.

    8. Corporate Travel Demand Recovery
      Q: Are there signs of corporate travel recovery?
      A: United has noticed a significant step-up in corporate travel starting January, with close-in yield gains. While it's early, this uptick contributes to a strong domestic RASM outlook, and they are optimistic about a strong year ahead.

    9. Asia Margins and Outlook
      Q: Are Asia margins better than before, and is it sustainable?
      A: United aims for Asia to have sustainably higher margins than pre-pandemic levels. Asia Pacific is currently well ahead, and United is bullish on long-term prospects. They expect added capacity in Q2 and Q3 to perform very well.

    10. Industry Capacity Rationalization Impact
      Q: How will industry capacity cuts affect United's fare structure?
      A: Unproductive capacity exiting the system benefits United and the industry. United will manage revenue to capitalize on opportunities but will continue offering a diversified revenue stream, including both premium and Basic Economy products.

    Related Publications