United Airlines remains optimistic about its full-year outlook despite warning of a wider-than-expected loss in the first quarter due to the grounding of Boeing 737 MAX 9 airplanes. The news comes as a relief to investors, with United’s shares rising by approximately 8% in extended trading. The company, along with Delta Air Lines and American Airlines, has experienced increased demand for premium travel following the pandemic, which is expected to continue driving revenue from high-margin premium offerings.
According to Christopher Raite, a senior analyst at research firm Third Bridge, “Overall demand for travel remains strong and is expected to grow in the years ahead.” This positive sentiment aligns with United’s projection of generating an adjusted profit of $9-$11 per share in 2024, surpassing the $9.58 per share estimated by Wall Street analysts.
However, United anticipates an adjusted loss in the first quarter, ranging from 35 to 85 cents per share, assuming all MAX 9 planes remain grounded until the end of January. Analysts had predicted a quarterly loss of 21 cents per share. The grounding of the MAX 9 jets follows a safety incident on an Alaska Airlines flight, where a cabin panel fell off, necessitating an emergency landing. The U.S. aviation regulator has yet to provide a timeline for the planes’ return to service.
The grounding will impact United’s non-fuel operating costs in the first quarter, with an estimated decrease of about 3 percentage points. United and Alaska jointly possess 70% of the MAX 9 fleet and have been forced to cancel numerous flights since the incident occurred. The Federal Aviation Administration (FAA) has stated that the MAX 9 planes will remain grounded until they are deemed safe to fly again. Currently, United has 79 grounded jets.
In addition to the MAX 9 grounding, the FAA has recommended inspections of door plugs on Boeing’s 737-900ER aircraft model due to reported issues with bolts. United, which operates 136 of these jets, has already inspected two-thirds of them and has not encountered any problems thus far.
Despite these challenges, United reported an adjusted profit of $2 per share in the fourth quarter, surpassing Wall Street estimates of $1.70 per share. This achievement can be attributed to strong holiday travel demand.
United will provide further updates on the safety inspections of the grounded planes during a call with analysts and investors on Tuesday morning. The airline’s ability to navigate these obstacles and maintain a positive outlook for the future will be closely monitored by industry observers and investors alike.
In conclusion, United Airlines remains resilient in the face of adversity caused by the grounding of Boeing 737 MAX 9 planes. While the first quarter may bring wider losses than anticipated, the company’s long-term outlook remains positive, driven by increased demand for premium travel and a belief in the continued growth of the travel industry. As United works towards resolving the safety concerns surrounding its grounded planes, investors eagerly await updates during the upcoming call with analysts and investors.
