Finance

United Expects Profitable Q3 with Business Travel Demand ‘Inflection’

Second-quarter domestic business travel demand at United Airlines recovered “faster than we had hoped,” with continued growth forecast throughout the rest of the year, CEO Scott Kirby said during an earnings call on Wednesday.

While business travel was down 90 percent compared with pre-Covid-19 levels for much of the quarter, it “inflected sharply” in June and improved to being down only 60 percent, EVP and chief commercial officer Andrew Nocella said. United expects two more “inflection points” for business travel demand, with the first occurring after the summer, when the carrier’s executives project business travel volume to recover to more than half of pre-Covid-19 levels. The second will be in January 2022, when companies begin their new budget cycles, he said.

United also is seeing improved sentiment from its corporate customers, with more than 90 percent in a recent internal survey indicating they planned to have travel for business, including internationally, in the second half of this year, Nocella said. Earlier this year, only 55 percent said so, he said.

For the second quarter, United’s total operating revenue was $5.5 billion, down 52 percent compared with the second quarter of 2019, with capacity was down 46 percent.

With the expected business travel demand recovery and continued strength in domestic leisure travel, United projects its capacity in the third quarter will be down about 26 percent compared with the third quarter of 2019. It also is forecasting positive pre-tax adjusted income for the third quarter, which will be the first time that has happened since the fourth quarter of 2019.

Both business travel demand and long-haul international demand are “headwinds [that] are going to flip to tailwinds” over time, Nocella said. United’s Newark hub, for example, was the carrier’s worst in terms of revenue in the second quarter, but it is shaping up to be one of the best in the third quarter, he said.

“With the robust demand we see and our return to profitability, we don’t just see the light at the end of the tunnel; we’re exiting the tunnel,” Kirby said. “As we exit the tunnel, there’s still a steep hill to climb to get back to and exceed our pre-Covid margins.”

Recovering long-haul international travel demand to Asia amid continued border restrictions will be among the steepest parts of that hill, as Nocella said it likely will be 2023 before the carrier sees a “normal” schedule to the region. United’s European schedule, meanwhile, is “quickly ramping up” and likely will be normal by spring 2022, he said.

“We think the summer of 2022 across the Atlantic has the potential to be our best season ever, with pent-up demand and easing border restrictions,” Nocella said.

Similar to Delta Air Lines CEO Ed Bastian’s predictions last week, Kirby said he did not expect the rapidly spreading delta variant of Covid-19 to derail the recovery. The carrier has not yet seen any impact on bookings, and while there could be a “temporary pullback” in reopening, it would be short-lived, he said.

“We think the most likely outcome is that the continued recovery in demand continues largely unabated,” Kirby said. “The evidence is overwhelming that someone who’s vaccinated is highly protected against severe disease, hospitalization and death.”

Customer surveys at the end of June showed that 84 percent of MileagePlus members were fully vaccinated, he added.

United reported a net loss of $434 million in the second quarter, compared with a net loss of $1.6 billion in the second quarter of 2020.

RELATED: United Q1 earnings

Most Related Links :
Business News Governmental News Finance News

Need Your Help Today. Your $1 can change life.

[charitable_donation_form campaign_id=57167]

Source link

Back to top button