What to Look For From UAL


Key Takeaways

  • Analysts estimate adjusted EPS of $1.93 vs. -$3.91 in Q2 FY 2021.
  • Load factor is expected to rise YOY, returning to pre-pandemic levels.
  • Revenue is expected to more than double YOY as customer travel demand surges.

United Airlines Holdings Inc. (UAL) has seen a major recovery in revenue as customers return to air travel following pandemic-related lockdowns that began two years ago. But staffing upheavals have threatened to delay or cancel flights across the industry, including at United Airlines. To meet travel demand, air carriers are is in the midst of replacing thousands of pilots who left the airline during the pandemic-related slowdown. Amid these pressures, United also is working to finalize a pilot union contract after pilots objected to parts of the tentative agreement. Further, aviation fuel costs have reached record highs, adding to rising airfare prices. All of these factors threat to delay the airline’s recovery.

Investors will be watching to see when United Airlines can finally return to profitability when it reports results after market close on July 20, 2022 for Q2 FY 2022. As is customary for the company, it will then hold a conference call the next morning on July 21. For Q2, analysts expect United to return to profitability for the first time since Q4 FY 2019 as revenue more than doubles year-over-year (YOY).

Investors will also look to United Airlines’ load factor, a key metric used by air carriers to gauge what percentage of paid-passenger seating capacity is being filled. Analysts predict that the airline’s load factor will rise sharply YOY, returning to a typical pre-pandemic level.

United’s stock has performed erratically in the last year. It surpassed the broader market on several occasions, most notably in November 2021 and in April 2022, the latter surrounding its most recent earnings release. But the stock also has experienced steep pullbacks on numerous occasions: in November 2021, and also in February, March, and May and June of 2022. As of July 17, United stock has provided a 1-year trailing total return of -18.7%, behind the S&P 500’s total return of -11.4%.

Source: TradingView.

United Airlines Earnings History

Like much of the airline industry, United was hit hard by the pandemic’s impact on air travel. It has posted adjusted losses per share for nine consecutive quarters beginning in Q1 FY 2020. Still, these losses generally have narrowed year-over-year (YOY) in the past several quarters. Now, analysts expect that United will return to profitability, posting adjusted EPS of $1.93 in Q2 FY 2022. This is well behind Q2 FY 2019’s adjusted EPS of $4.21, but nonetheless a critical milestone in the airline’s recovery.

United’s revenue was also dramatically depressed due to the pandemic. It dropped from $11.4 billion in Q2 FY 2019 to just $1.5 billion in Q2 FY 2020. Since that low point, revenue has gradually increased. It reached $3.4 billion by Q4 FY 2020, $5.5 billion by Q2 FY 2021, and $7.6 billion in Q1 FY 2022. The company has struggled to post revenue similar to pre-pandemic levels. That may change. United is expected to report $12.2 billion in revenue for Q2 FY 2022, a 122.1% increase YOY. The $12.2 billion number is higher than every quarter in 2019, the last full year before the pandemic.

United Airlines Key Stats
  Estimate for Q2 FY 2022 Q2 FY 2021 Q2 FY 2020
Adjusted Earnings Per Share ($) 1.93 -3.91 -9.31
Revenue ($B)  12.2  5.5 1.5
Load Factor (%)  84.5 72.0 33.1

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be focused on United Airlines’ load factor, a key metric indicating the percentage of a carrier’s available seats that are filled with paying passengers. A high load factor, as opposed to a low load factor, indicates that a high percentage of seats are occupied by passengers. Because the costs of sending an aircraft into flight are relatively the same whether there are 50 people aboard or 100, airlines have a strong incentive to fill as many seats as possible by selling more tickets. Higher load factors mean an airline’s fixed costs are spread across a greater number of passengers, making the airline more profitable. The pandemic led to a reduction in air travel, leaving airlines with high fixed costs amid falling load factors and revenues, the combination of which has caused steep losses. Continuing to boost its load factor will help United Airlines to return to profitability.

United Airlines saw load factors of close to 84% in FY 2018 and FY 2019, prior to the pandemic. But annual load factor dropped to 60.2% in FY 2020 as travel demand plunged. The lowest quarterly load factor was 33.1% in Q2 FY 2020. Load factor staged a recovery during Q3 and Q4 FY 2020 and again throughout all of FY 2021. It reached 77.0% in the last quarter of FY 2021. So far, the company has not reported a load factor above 80% since the pandemic began. But the airline is expected to break this key threshold in Q2 FY 2022. Analysts estimate a quarterly load factor of 84.5%. This would represent a return to levels seen before the pandemic. For all of FY 2022, analysts estimate an annual load factor of 81.5%, a near-complete recovery.


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