United Airlines announced on Wednesday a lower-than-expected profit forecast for the current quarter, along with plans to cut capacity, reflecting the ongoing struggles of U.S. carriers to increase earnings despite high travel demand. This news follows a trend in the industry, with Delta Air Lines also recently falling short of Wall Street estimates, and American Airlines and Southwest Airlines lowering their revenue forecasts for the June quarter. Despite a surge in summer travel, increased seat availability in the domestic market has led to a decrease in airfares, impacting airlines’ ability to protect profits.
In response to the challenges facing the industry, United Airlines anticipates a shift in capacity levels in mid-August, with U.S. carriers projected to reduce their seats by 3 percentage points compared to last year. United plans to reduce its domestic capacity in the fourth quarter by 3 percentage points as well, in order to strengthen its pricing power. CEO Scott Kirby stated their expectation for leading unit revenue performance among their largest peers in the latter half of the third quarter, signaling a positive outlook for the airline’s future performance.
Analysts believe that the industry’s capacity growth will moderate in the second half of the year, which should help support ticket prices. United Airlines expects adjusted profit in the range of $2.75 to $3.25 per share for the quarter ending September 30, lower than analysts’ previous expectations. Despite the challenges, United has reaffirmed its 2024 profit estimate, providing some confidence in the company’s long-term outlook.