UAL Sees Return to Profit in Q3 Despite Covid Surge

 - July 21, 2021, 12:33 PM

United Airlines said Wednesday that it expects to turn a profit in the third quarter after posting better-than-expected financial and operational performance in the quarter ending June 30. It would mark the first time the airline avoided a financial loss since 2019, before the onset of the pandemic.

Speaking during the company’s quarterly earnings call, United Airlines CEO Scott Kirby conceded that concerns over Covid-19’s Delta variant could cause a temporary slowing of the overall recovery, but he also predicted that increasing vaccination rates, particularly among the most vulnerable members of the population, would mitigate the negative effect on demand.

“We have not seen any impact at all on bookings, which continue to get stronger and stronger every week,” said Kirby. “We think the most likely outcome is that the recovery of demand continues largely unabated.    

Adding that 84 percent of the airline’s frequent-flier members have received vaccines, Kirby expressed confidence that Covid cases would remain “well below the peak” and that hospitalizations and deaths would not rise “nearly as much” as in early surges. Still, he acknowledged that the political dimension is harder to predict.

“So it's possible we'll have a temporary pullback in the reopening, but given the data science around vaccines, that seems like a lower probability outcome,” added Kirby. “And, regardless, it will be temporary, even if it does happen…If I was going to briefly summarize where things stand right now, I'd say the demand is recovering even faster than we had hoped domestically, both leisure and business demand.”

Kirby further noted that it stands alone among network carriers not to retire widebodies at its coastal hubs, giving it an advantage when pent-up demand for international travel returns with the relaxation of travel restrictions. Also on the earnings call, United chief commercial officer Andrew Nocella noted that coastal hubs suffered more from the pandemic than others, but that “headwinds during the crisis will flip to tailwinds” and places such as Newark will see an acceleration of demand in the third quarter.

“Newark in Q2 was really our worst-performing revenue hub,” said Nocella. “We expect Newark in Q3 to be one of our best.”

He conceded, however, the 52 Pratt & Whitney PW4000-112-powered Boeing 777s that remain grounded since February following an inflight blade failure have hindered its revenue per available seat mile (RASM) performance.

“The dilemma we face from a capacity point of view is the 777 aircraft that are large-capacity domestic movers, and we use those for Hawaii and hub-to-hub,” said Nocella. “So right now we’re flying well below where we’d like to be in Hawaii. It goes without saying that Hawaii is an incredibly strong part of our network and so we would have absorbed that and still done really well in Hawaii even with those extra seats. So we are really disappointed they are missing.”