United’s cargo revenue down 1.8% in first quarter

United Airlines today reported $12.5 billion in operating revenue for the first quarter of 2024, an increase of 9.7% year over year. The carrier’s cargo revenue fell 1.8% compared with Q1 2023 to $391 million. [caption id="attachment_91875" align="alignright" width="300"] (Courtesy/United Airlines)[/caption] “Cargo revenue decreased 1.8% year over year, and we’re hopeful that this is the last year-over-year decline we’ll see in the near term,” Chief Commercial Officer Andrew Nocella said on today’s earnings call. THE BIG PICTURE: Throughout 2023, major carriers reported YoY air cargo revenue loss in the double digits, attributing the reduced revenue to increased capacity due to recovering passenger demand coupled with decreased cargo demand — all a result of normalization from the highs of 2022. United’s 2023 cargo revenue fell 31% YoY and its Q4 cargo revenue fell 14.8% YoY. A YoY cargo revenue decrease of just 1.8% in Q1 2024 could be a sign that the industry has at last normalized. BY THE NUMBERS: In Q1, United transported about 135,624 tonnes of cargo, including approximately 4,672 tonnes of medical shipments and 199 tonnes of military shipments, according to today’s earnings report. Also in Q1: Cargo revenue ton miles were 852 million, up 16.6% YoY; Adjusted EBITDA was $845 million, up 26.7% YoY, with a margin of 6.7%; Adjusted net loss was $50 million; and Adjusted diluted loss per share was 15 cents. WHAT THEY’RE SAYING: United executives attribute the company’s net loss to the impact of the Boeing 737 Max 9 groundings. The FAA grounded the carri er’s 79 B737 Max 9 aircraft in January after a door partially blew off midflight on a Max 9 operated by Alaska Airlines , forcing an emergency landing. United estimated an impact of about $200 million from the grounding. “We saw meaningful year-over-year margin improvement in the first quarter and, if the Boeing Max 9 hadn’t been grounded, we would’ve been profitable for the quarter,” Chief Executive Scott Kirby said on the earnings call. Following the Max 9 grounding, the FAA opened a formal investigation into Boeing’s production line and suppliers. STATE OF PLAY: The FAA is also conducting a formal evaluation of United’s operations to ensure the carrier is complying with safety regulations. The evaluation, launched last month, was initiated in response to various safety incidents involving United’s fleet, including: An external panel was missing from a plane landing in Oregon; A Boeing 737 Max rolled off the runway and onto the grass in Texas; and A Boeing 777-200 lost a tire after takeoff in California and had to land shortly after. These incidents pertained to passenger flights that carried belly cargo. “Safety is at the core of everything we do,” Kirby said. “Through the FAA review, I’m confident that we will uncover opportunities to make our airline even safer.” The safety review could delay “certain certifications,” United President Brett Hart said “As a result of this, we expect a small number of aircraft scheduled for delivery in the second quarter to be delayed,” Hart said on the call. “We expect this to have a minimal impact to our 2024 capacity plans.” FLASHBACK: United ranked 19th on Air Cargo Next ’s Freight 50 list of top cargo carriers, flying 4.4 billion cargo tonne kilometers in 2022. NOTEWORTHY: The carrier reported that it achieved the second-best on-time departure for any first quarter in the company’s history. It also achieved the second-best on-time arrival and departure metrics amongst U.S. airlines for the second quarter in a row, according to the earnings report. “We’ve got significant opportunities within our technology organization to help drive efficiencies throughout the full airline,” Chief Financial Officer Mike Leskinen said on the earnings call. “One that I’ll highlight is moving a lot of our mainframe computing into the cloud. That’s something [where] you don’t save the cost of moving to the cloud until you shut the mainframe down. ... We’ve moved 70%, 80%, 90% to the cloud, but we still have to maintain that mainframe with 10% or 20% of the systems on that mainframe.” FUTURE LOOK: The company continues to expect full-year 2024 adjusted diluted earnings per share of $9 to $11, according to the earnings report. MARKET REACTION: Shares of United Airlines ( NASDAQ: UAL ) were up 17.45% from market open to $48.74 as of market close today. United has a market capitalization of $15.9 billion.

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