United Air Boosts Profit Outlook Again as Travel Demand Sizzles

(Bloomberg) -- United Continental Holdings Inc. boosted its 2018 profit outlook for the third time this year, overcoming higher oil prices as strong travel demand buoys a financial turnaround at the No. 3 U.S. airline.

Earnings will climb to at least $8 a share this year, United said in a statement Tuesday, having previously predicted as little as $7.25. The carrier improved its outlook despite an increase in jet-fuel prices of more than 30 percent over the last year.

United is gaining pricing power in what industry executives have called the strongest travel market since before the global financial crisis a decade ago. Robust demand has helped United win over skeptical investors who were initially unnerved by the company’s plan to beef up flights at its major hubs. United is also enhancing premium offerings and wooing budget travelers with “basic economy” fares that offer cheaper prices with fewer frills.

“United is building momentum,” Chief Executive Officer Oscar Munoz said in the statement. “Our growth plan has been essential to our success, and we’re more confident than ever we’ll achieve the ambitious adjusted earnings-per-share target of $11 to $13 we laid out for 2020.”

The shares advanced 4.7 percent to $87.47 in late trading. United has gained 24 percent this year through the Tuesday close, the only increase on a Standard & Poor’s index of nine U.S. airlines.

Storm Impact

Adjusted third-quarter earnings rose to $3.06 a share, compared with the $3.10 average of analyst estimates compiled by Bloomberg. Tropical storms during the quarter reduced earnings by 7 cents a share. Sales increased 11 percent to $11 billion, compared with the $10.9 billion expected by Wall Street.

Faced with a fuel bill that rose by $763 million in the third quarter, United said it passed along all the increased cost to passengers. Last week, Delta Air Lines Inc. said its customers were covering 85 percent of the burden last quarter. For the full year, United said it would push about 90 percent of the added cost onto travelers. Pricier fuel has also curtailed under-$100 walk-up domestic tickets, which airline executives term “junk” fares.

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