United Air Sees Profit on Horizon Despite Renewed Virus Fear

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Jul 21 2021, 2:57 AMJul 21 2021, 5:23 AMJuly 21 2021, 2:57 AMJuly 21 2021, 5:23 AM

(Bloomberg) -- United Airlines Holdings Inc. expects to end a year and a half of losses this quarter despite rising investor anxiety about whether Covid-19 infections will upend a travel resurgence.

The forecast for an adjusted pretax profit in the third quarter and another in the fourth quarter excludes any benefit from billions of dollars in federal airline aid, United said in a statement Tuesday as it reported earnings. While the carrier didn’t quantify how much it expected to earn, any profit would top the second-half losses expected by Wall Street.

“Our airline has reached a meaningful turning point: We’re expecting to be back to making a profit once again,” United Chief Executive Officer Scott Kirby said in the statement.

The improved outlook underscores the robust rebound in domestic travel buoying U.S. airlines, as families reunite and take summer holidays after more than a year of largely staying close to home. Yet the industry is also in a precarious position as a virulent coronavirus variant spreads in the U.S., Europe and Asia, making future demand for seats difficult to predict -- and vulnerable to infection trends.

Airline stocks have seesawed as a result, with a Standard & Poor’s index of major U.S. carriers surging on Tuesday after a tumble the day before. United fell less than 1% to $46.06 after the close of regular trading. The stock has climbed 7.1% this year, trailing the index’s 8.9% advance. Delta Air Lines Inc., which last week also forecast a third-quarter profit, posted the smallest gain.

Long-distance international flights and business travel accelerated faster than expected in the second quarter, United said. The airline expects a fuller resumption of corporate trips later this year, coinciding with the usual tapering of leisure travel in the fall. The airline sees a full recovery in 2023, it said in the statement.

The Chicago-based company is predicting profits even as the airline industry faces higher prices for jet fuel compared with a year ago. United said its cost per gallon rose 67% in the second quarter to $1.97.

The second-quarter loss narrowed to $3.91 a share, 7 cents worse than the average of analyst estimates compiled by Bloomberg. Sales more than tripled to $5.47 billion. Analysts had predicted $5.35 billion.

United said it would fly 74% of its 2019-level capacity in the third quarter. That’s a jump of 39 percentage points from the second quarter, reflecting the rebound in demand and wider border openings that have allowed vaccinated Americans to travel to Europe.