United Airlines quarterly profit beats on strong travel demand, higher fares

United Airlines quarterly profit beats on strong travel demand, higher fares

FILE PHOTO: United Airlines first new livery Boeing 737-800 sits at a gate after arriving at O’Hare International Airport in Chicago, Illinois, U.S., June 5, 2019. REUTERS/Kamil Krzaczynski/File Photo

(Reuters) – United Airlines Holdings Inc (UAL.O) on Tuesday reported a greater-than-expected increase in second-quarter profit, driven by strong air travel demand and the ability to charge more for seats given supply constraints from the Boeing Co (BA.N) 737 MAX grounding.

The three U.S. airlines that operate the MAX – United, American Airlines Group Inc (AAL.O) and Southwest Airlines Co (LUV.N) – are cancelling thousands of flights each month since a worldwide grounding in March following crashes in Ethiopia and Indonesia that killed a total of 346 people.

Chicago-based United said adjusted earnings per share rose to $4.21 in the second quarter ended June 30, from $3.23 a year earlier. Analysts on average had forecast $4.08 per share, according to IBES data from Refinitiv.

The No. 3 U.S. air carrier is in the midst of a three-year plan to claw back domestic market share from rivals by building up connections through its main U.S. hubs, including Chicago, New York and San Francisco which enjoy lucrative premium travel.

Total operating revenue rose percent 5.8% to $11.40 billion in the quarter, while closely watched revenue per available seat mile rose 2.5% in the quarter, the top end of United’s guidance for growth between 0.5% and 2.5%.

Citing continued strong demand, United lifted its 2019 adjusted diluted earnings per share guidance to $10.5-$12.0 versus $10.0-$12.0 previously.

However, the 737 MAX groundings, coupled with the continued closure of Pakistani air space, forced United to cut its 2019 capacity growth target for a second time this year. It now expects capacity to grow between 3% and 4%, versus an original forecast of 4%-6% growth.

The carrier has pulled its 14 MAX aircraft from its flight schedule until early November, though many analysts do not expect the aircraft to fly again this year. Boeing has said it will likely take until at least September to fix a fresh flaw in the grounded 737 MAX discovered by the Federal Aviation Administration last month.

Reporting by Tracy Rucinski; Editing by Matthew Lewis

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