United cargo revenue falls 33.1% YoY

United Airlines posted record third-quarter revenue of $14.5 billion, an increase of 12.5% year over year. The news was not as bright for its cargo operations, which saw revenue fall 33.1% YoY to $333 million. [caption id="attachment_59467" align="alignright" width="300"] (Photo/United Airlines)[/caption] THE BIG PICTURE: United’s earnings are in line with those reported by Delta Air Lines last week and reported by major carriers throughout Q1 and Q2 of this year. The continu ing trend is increased overall revenue despite decreased cargo revenue, which is being affected by high capacity and low demand. BY THE NUMBERS: Q3 was overall a good quarter for the carrier, which reported: 766 million cargo revenue tonne miles, up 4.5% YoY; Pre-tax income of $1.6 billion; Pre-tax margin of 10.8%; Diluted earnings per share of $3.65; and Overall capacity up 15.7% YoY. For the first nine months of 2023, United’s revenue was $40.1 billion, up 23.1% YoY. Additionally: Cargo revenue was $1.1 billion, down 35.7% YoY; and There were 2.3 billion cargo revenue tonne miles, down 0.5% YoY. WHAT THEY’RE SAYING: President Brett Hart attributed United’s Q3 success to its diverse revenue streams. “It’s evident in the numbers United and one other airline are expected to account for 98% of the total industry revenue growth this quarter and over 90% of the industry’s total pre-tax profitability,” Hart said in today’s earnings call, not naming the “other airline.” United’s Q3 success was despite fuel price increases . “Fuel remains volatile and worked against us in the quarter,” Chief Financial Officer Michael Leskinen said in the call. “Our average fuel price for the quarter ended 30 cents higher than the midpoint of our July expectation and more than accounts for the entirety of the reduced outlook for the third quarter.” This was Leskinen’s first earnings call as CFO, a role he assumed in September. STATE OF PLAY: Like most other carriers, United has halted flights to Israel due to the latest war between Israel and Hamas. We are “heartbroken by the horrific attacks on Israel and the escalating conflict in the region that has millions of innocent people in harm’s way,” Hart said. The carrier added extra flights to Athens, where customers can connect to flights to Israel, Hart said. “Our operation in Tel Aviv has been impacted by the recent events in the region and is materially impacting our outlook,” Leskinen said. “This market represents approximately 2% of our capacity.” United flights to Israel have been suspended through October, though the suspension may be adjusted as safety dictates. “We’re closely monitoring the situation on the ground, staying in close touch with [U.S.] State Department officials so that we can resume service as soon as possible,” Hart said. “We look forward to a cessation of violence in the region and, as we’ve done in past crises around the globe, we expect United to continue to play a meaningful role in the humanitarian response.” While Hart did not specify what humanitarian aid United was offering, the carrier’s earnings report noted that it transported more than 110,000 pounds of relief supplies in response to the wildfires in Maui in August. Through Miles on a Mission, United and MileagePlus members donated 55 million miles to relief efforts in Maui, the report said. NOTEWORTHY: United pilots, represented by the Air Line Pilots Association International , ratified a four-year contract with the company in September. “This contract enables us to continue providing great career opportunities at United,” Hart said. “At this point, we’ve ratified agreements for four out of our five major workgroups. Flight attendants represented by [the Association of Flight Attendants ] are in active negotiations and we look forward to sharing an update when we have one.” FUTURE LOOK: Regrowing its China network post-pandemic has been slow for the carrier, but it is making headway. “While most of our network is recovered to 2019 capacity levels or beyond, our China network has been last to recover,” Hart said. “At the start of the quarter, we were operating four flights a week in San Francisco to Shanghai, this month increasing that to a daily flight. Next month, we’ll be the first U.S. airline to return to Beijing with a daily flight from San Francisco. We believe this measured approach to bringing China capacity back online is appropriate as demand slowly recovers.” THE BOTTOM LINE: “Even in a tough industry environment, we’re producing strong absolute results, producing the best relative results in our history,” Hart said. “We believe we have a lot of runway ahead of us.” MARKET REACTION: Shares of United Airlines ( NASDAQ: UAL ) were down 9.67% from market open to $36.24 as of market close today. United has a market capitalization of $12.96 billion.

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