A United Airlines Boeing 737-MAX 8 departs San Diego International Airport en route to New York on August 24, 2024.
Kevin Carter | Getty Images
United Airlines The airline said Tuesday it had initiated a $1.5 billion stock buyback as the carrier reported higher-than-expected earnings for the busy summer travel season and forecast higher airfares through 2025.
Shares of United Airlines rose nearly 13% on Wednesday, leading the way Standard & Poor's 500 It rose and closed at $72.02, the highest level since February 2020, before Covid-19 was declared a pandemic. Other airline stocks also rose sharply, outpacing the broader market.
United said domestic unit revenues rose in August and September compared with last year as airlines cut back on a glut of flights that drove down prices.
“We believe revenue strength in the first quarter will be possible due to the significant schedule changes and business model changes that high-margin airlines will continue to implement,” Andrew Nocella, United's chief commercial officer, said on Wednesday's earnings call.
United expects to earn between $2.50 and $3.00 adjusted per share in the fourth quarter, compared with $2.00 per share a year earlier and an estimate of $2.68 by analysts polled by LSEG.
United expanded capacity by 4.1% in the third quarter. The carrier said comp revenue rose 13% in the quarter. Premium revenue, including business class tickets, rose 5%; Sales of basic, no-frills economy tickets were up 20%. United had revenue of $14.84 billion, up 2.5% from the previous year and above analyst estimates. It recorded net income of $965 million, down 15% from last year.
After adjusting for one-time items, United reported earnings per share of $3.33, beating Wall Street expectations and United's July estimate of $2.75 to $3.25 per share.
Here's what United reported for the third quarter compared to what Wall Street expected, based on average estimates compiled by LSEG:
Earnings per share: $3.33 adjusted vs. $3.17 expected Revenue: $14.84 billion vs. $14.78 billion expected
The stock buyback will be United's first since before the Covid-19 pandemic. US airlines received more than $50 billion in government aid during the pandemic travel downturn that banned stock buybacks and dividends, although airlines are still struggling for financial stability.
Southwest Airlines It announced a $2.5 billion stock buyback program last month.
“Like other airlines and other leading companies, we have initiated a strategic and thoughtful stock repurchase program,” United CEO Scott Kirby said in a memo to employees Tuesday. “More importantly, my commitment to you is that investing in our people and our business will always be my top priority even as we create this stock repurchase program.”
United's flight attendants union, which has yet to reach a new labor agreement with the company, criticized the airline's decision to resume buybacks.
“This money that United just promised Wall Street goes back to the flight attendants who have worked throughout the pandemic and through this tax recovery on all of us,” Sarah Nelson, president of the Association of Flight Attendants-CWA, which represents flight crews at United, Spirit, Alaska and other airlines, said in a statement. On the front lines.”
