United Airlines Returns To Profitability

United Airlines Returns To Profitability

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Here’s an exciting update that shows how much better things are getting for airlines in the United States.

United Airlines should be profitable in July

In an SEC filing, United Airlines has today revealed that it expects July to be the first month since January 2020 where the carrier has positive adjusted pre-tax income. As it’s described:

United Airlines, Inc. (“United”), a wholly-owned subsidiary of United Airlines Holdings, Inc. (“UAL” and, together with United, the “Company”), expects to generate positive adjusted pre-tax income in the month of July 2021, which would be the first month with positive adjusted pre-tax income since January 2020, before the start of the crisis. The COVID-19 pandemic caused the most severe drop in demand for travel in the history of aviation and this expected performance would mark an important financial milestone as the Company is turning its focus to the future of United Airlines.

As you can see, United’s 18 month streak of losing money appears to be coming to an end. While the pandemic only really shut down the United States in March 2020, international travel was already heavily impacted starting earlier than that, which is why United didn’t make money in February 2020.

It’s not entirely clear to me whether the math on “pre-tax income” accounts for the $2.8 billion in payroll support that United has received with the third round of the CARES Act. With this, United can’t furlough any employees through at least September 30, 2021, and it also means that much of United’s payroll expenses are covered by taxpayers.

The filing simply states the following:

Excludes special charges (credits) and the unrealized gains and losses on investments, the nature of which are not determinable at this time

Separate from this regulatory filing, United Airlines CEO Scott Kirby announced that today (Monday, June 28, 2021), will be United’s first single day of profitability since the start of the pandemic.

It seems to me like the timing of this filing isn’t a coincidence. United Airlines is expected to announce a huge aircraft order tomorrow, so from an optics perspective I can see the logic in United talking about how it’s once again profitable, before committing to spending tens of billions of dollars on new planes.

United Airlines is finally once again profitable

This is an impressive accomplishment

It’s fantastic to see that the worst is finally behind us, and that hopefully airlines across the board will return to profitability soon. Overall airlines have done a good job adapting to the situation, and I’m sure it hasn’t been easy.

As it stands, airlines in the United States are currently much better positioned than airlines in Europe, Asia, etc., given that domestic travel demand here is almost back to pre-coronavirus levels. We keep seeing new pandemic records set, and we’re now consistently seeing over two million air travelers per day.

As the financial situation for airlines in the United States changes, I can’t help but wonder if airlines will return to consistent profitability, or if we could see United (and other airlines) go back to losing money this fall and winter:

  • Currently travel demand is overwhelmingly leisure-oriented, and on top of that people are more excited than ever before to go on vacation
  • Summer (and in particular July) is a time when leisure travel is typically at its peak
  • No one knows how coronavirus will evolve in the fall and winter, given that there’s some seasonality to the spread of it, and we don’t know variants will evolve, and how well vaccines will work against them
  • Historically airlines have relied on business travel in the late fall and winter, yet as of now business travel isn’t anywhere close to having recovered
  • On top of that, international travel isn’t anywhere close to pre-coronavirus levels, so we’ll have to see how that plays out in fall and winter
  • Then payroll support runs out at the end of September, and unless it’s extended, the airlines will be on the hook for paying employees in full

So I hope that as airlines return to profitability they stay that way, but I don’t think that’s a sure bet.

How will travel demand evolve in the fall and winter?

Bottom line

Today is United Airlines’ first “profitable” day since the start of the pandemic, and July is expected to be the company’s first month of positive adjusted pre-tax income. It’s not entirely clear to me if this math factors in the third round of payroll support, as United got $2.8 billion through that. This announcement comes one day ahead of an anticipated huge aircraft order from the Chicago-based airline.

It’s fantastic to see United return to profitability, and I hope it stays that way. While domestic leisure travel is more or less recovered, international and business travel are a different story. This could get tricky in the fall and winter.

Are you surprised to see the timeline with which United is returning to profitability?

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  1. Avinash KOLHATKAR

    I travelled from Mumbai India to Michigan in February this year and scheduled back in August by UA. I personally liked and impressed by the services, and in flight behaviour of the staff. I am happy that they are heading towards excellence. I wish UA that they will soon become an Icon of USA.

  2. Ray

    I think it is too early to draw any conclusions from this report. People are burning stimulus cash given them while they continued to work and have spent time in lockdown. Once summer passes and you see how business and international travel respond will be the true indicators. Right now I am still doing very little business travel due to supply issues as are most others in my industry.

  3. Lester Zaiontz

    Yeah, but have you checked United's fares? Considerably higher than the other guys. How long will that last?

  4. Steve

    I fly AA and SW almost exclusively but plan on flying united a lot more next year, i like their new routes and their lack of "oasis" where they are removing leg room and IFEs. I think its a perfect airline to choose as my amex plat benefit as i dont need incidental extras on AA where i get status. Going to fly them a lot more, their turnaround has been impressive.

  5. Gail Daniel

    I am very glad to hear this. During the pandemic they were the nicest of all airlines to fly on. They have great people and very good service. I choose to always use United.

  6. Chris

    I am no fan of UA but well done to them. Let’s hope this is a sign of things to come.

  7. Devel

    Darin , and where do you think that tax payers money goes to?
    It goes back into the economy since airline employees will spend it at your local restaurants groceries, car dealers etc etc.
    Then if not for the airlines who will transport customers to Vegas, Miami LA etc etc helping the local economies survive?
    Everything is interconnected in our economy.

  8. Ryan

    United already sent out a memo they will not forlough in the fall…

  9. Andy

    I’m curious—do you happen to know which US airlines have returned to profitability? The only other one I’m aware of is Southwest.

  10. Darin

    Excellent! Maybe they can stop taking taxpayer money then? The hubris of announcing massive orders and positive cash results as they continue to collect our money is absurd. I sincerely hope the Delta variant doesn't continue to worsen, but if it does, or if there is ever another event that stifles air travel, I hope everyone involved learned a lesson.

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Steve

I fly AA and SW almost exclusively but plan on flying united a lot more next year, i like their new routes and their lack of "oasis" where they are removing leg room and IFEs. I think its a perfect airline to choose as my amex plat benefit as i dont need incidental extras on AA where i get status. Going to fly them a lot more, their turnaround has been impressive.

Chris

I am no fan of UA but well done to them. Let’s hope this is a sign of things to come.

Avinash KOLHATKAR

I travelled from Mumbai India to Michigan in February this year and scheduled back in August by UA. I personally liked and impressed by the services, and in flight behaviour of the staff. I am happy that they are heading towards excellence. I wish UA that they will soon become an Icon of USA.

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