United expects a profitable third quarter with business travel demand

United expects a profitable third quarter with business travel demand “Inflection”

United expects a profitable third quarter with business travel demand

United Airlines’ domestic business travel demand rebounded in the second quarter, with continued growth expected throughout the year. CEO Scott Kirby spoke during Wednesday’s earnings call.

EVP and chief Commercial Officer Andrew Nocella stated that while business travel declined by 90 percent in comparison to pre-Covid-19 levels during the quarter, it “inflected strongly” in June, and fell only 60 percent. United anticipates that there will be two additional “inflection points” for business travel demand. The first is expected to occur after summer when United’s executive team projects business travel volume returning to over half its pre-Covid-19 level. He said that the second inflection point will occur in January 2022 when budget cycles are re-established by companies.

United is also seeing a rise in corporate customer sentiment. More than 90% of respondents to a survey indicated that they plan on traveling for business purposes, both internationally and domestically, Nocella stated. He said that earlier this year only 55% of respondents said it.

United reported $5.5 billion in operating revenues for the second quarter. This is a 52 percent decrease compared to the first quarter 2019. The company’s capacity fell 46 percent.

United expects that its third-quarter capacity will fall by 26 percent due to the anticipated recovery in business travel demand and the continued strength of domestic leisure travel. This is in contrast with the third trimestre 2019. The company also forecasts positive pre-tax adjusted earnings for the third quarter. This will mark the first such achievement since the fourth quarter 2019.

Nocella stated that both business travel demand as well long-haul international traffic are “headwinds” that will eventually turn to tailwinds. He said that United’s Newark hub was among the worst for revenue growth in the second quarter but is expected to improve in the third quarter.

Kirby stated that “with the strong demand and return to profitability we see, we don’t see the end of the tunnel. We’re actually exiting the tunnel.” To return to our pre-Covid margins, it’s still an uphill climb as we exit the tunnel.

The steepest part of the hill will be recovering long-haul international demand for Asia, despite continued border restrictions. Nocella stated that it will likely be 2023 before United sees a normal schedule in the region. He said that United’s European schedule is being “quickly ramped up” and will likely be standard by the spring of 2022.

Nocella stated that “we think the Atlantic summer 2022 has the potential for being our best ever,” citing pent-up demand as well as easing border restrictions.

Kirby stated that he didn’t expect Covid-19, which is rapidly spreading in the delta region of Delta Air Lines, to slow down the recovery. This was similar to Ed Bastian, CEO Delta Air Lines. He said that the carrier has yet to see any effect on bookings and although there may be some temporary pullback in reopening it, this would not last long.

Kirby stated that Kirby believes the best outcome to be that there is a continued rise in vaccine demand. The evidence shows that a person who has been vaccinated is protected from severe illness, hospitalizations and even death.

He added that customer surveys conducted at June’s end showed that 84% of MileagePlus customers were fully immunized.

United posted a loss of $434million in its second quarter, as compared to a loss of $1.6billion in 2020’s second quarter.

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Publiated at Wed 21 July 2021, 19:53:35 +0000

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