Despite grounding of Boeing plane, United Q2 profit rises

UNITED Airlines glided through the first part of summer, as strong travel demand pushed average fares higher, but the grounding of Boeing 737 Max jets will become a bigger challenge in the months ahead.

United said on Tuesday that its second-quarter profit soared 54 per cent, to USD1.05 billion. The results beat expectations, and United slightly raised its forecast of full-year profit.

The Chicago-based airline, however, faces uncertainty because of the grounding of Boeing 737 Max jets after two deadly accidents.

United is dipping into the used-plane market to bolster its fleet. The airline said that it recently signed an agreement to buy 19 used Boeing 737-700 jets, which will start showing up last December.

The airline counted on the Max becoming a bigger part of its fleet, growing from 14 planes to 30 by the end of September, and 28 more of them next year. That plan is now in jeopardy, as Boeing has halted Max deliveries with no clear idea yet when the plane will be certified to fly again.

The missing planes will leave a huge gap in United’s schedule and cut into the airline’s revenue. United has already cancelled more than 8,000 flights by taking the Max out of its schedule through November 3, and the number will grow the longer the planes remain grounded.

In this January 23 photo, employees walk up a ramp toward where a United Airlines jet is parked at a gate of the Newark Liberty International Airport in Newark, New Jersey. – AP

Without those planes, Boeing is slowing down its expansion plans. The airline had expected to boost passenger-carrying capacity by four per cent to six per cent this year, but on Tuesday it said it will grow more modestly, between three per cent and four per cent.

The slower growth in capacity, combined with strong demand, means that airline pricing power “remains quite strong,” said Cowen airline analyst Helane Becker.

United’s slower growth also reflects the airline’s decision earlier this year to suspend flights between New York and New Delhi after Pakistan closed its airspace to civilian flights because of rising tension with India. Pakistan lifted restrictions on Monday, and a United spokesman said the airline is considering resuming the flights to India in the coming weeks.

The second-quarter profit was up from USD683 million a year earlier.

United said that excluding special gains and charges, it earned USD4.21 per share in the quarter. The average estimate among 16 analysts surveyed by Zacks Investment Research was USD4.07 per share.

United does not publish average fares, but a stand-in figure — revenue per seat for each mile flown — rose 2.5 per cent over last year’s second quarter.

That was at the top end of United’s guidance to investors and helped propel total revenue six per cent to USD11.4 billion, slightly higher than analysts expected. – AP