Despite high fuel prices, United Airlines has swung back fully into profit in the second quarter of 2022, also reporting record quarterly revenue.
United Airlines Reports Profit, Record Revenue In 2022 Second Quarter
Jet fuel prices have risen 59.8% compared to the second quarter of 2019. Even so, United has returned to profit, also reporting the highest quarterly revenue in company history. Revenue doesn’t mean much if expenses outpace it, but higher ticket prices offset the inflationary pressure we’ve seen in all segments of the economy.
United expects an economic slowdown, but does not believe it will adversly impact growth, noting the “pandemic recovery is more than offsetting economic headwinds.” For the full year of 2022, United expects to be profitable.
United also reported a record-setting TRASM (Total Revenue Per Available Seat Mile), up 24% versus the same quarter in 2019 and expects 24-26% improvement in the third quarter over third quarter 2019.
Looking toward the future, United said:
We believe the airline industry is uniquely positioned to continue to benefit from the COVID recovery and remain confident in achieving the long-term adjusted pre-tax margin targets of approximately 9 percent in 2023 and about 14 percent in 2026 that are part of the United Next strategy.
Even so, United is reducing is growth outlook in 2022, now planning for a capacity increase of only 8% in 2023 (versus 2019). This is because “running a reliable operation for our customers is our priority.”
Addressing the results, United CEO Scott Kirby noted three challenges that will impact the level of profitability, but be partially offset by increased revenue:
“It’s nice to return to profitability – but we must confront three risks that could grow over the next 6-18 months. Industry-wide operational challenges that limit the system’s capacity, record fuel prices and the increasing possibility of a global recession are each real challenges that we are already addressing. These fundamental challenges have already led to higher costs, higher fuel prices but, also higher revenue, which means we’re as confident as ever we will deliver on our 9 percent adjusted pre-tax margin target in 2023.”
Here’s a summation of United’s 2022 second quarter results:
- Net income of $329 million
- Adjusted net income of $471 million
- Capacity down 15% compared to second quarter 2019
- Total operating revenue of $12.1 billion, up 6% compared to second quarter 2019
- TRASM of up 24% compared to second quarter 2019
- Cost Per Available Seat Mile (CASM) of up 32%, and CASM-ex of up 17%, compared to second quarter 2019
- Operating margin of 7.2%, adjusted operating margin2 of 8.2%
- Pre-tax margin of 3.8%, adjusted pre-tax margin of 5.0%
- Fuel price of approximately $4.18 per gallon
- Payments of long-term debt, finance leases and other financing liabilities of $1.0 billion
- Available liquidity of $22 billion
United executives will address the quarterly results during an investor’s call this morning and Live and Let’s Fly will monitor for any insight shared by Kirby or other C-suite executives.
United Airlines has been the beneficiary of strong demand for air travel, successfully withering inflation to return to “real” profit for the first time since the pandemic began. While it expects a moderate slowdown this autumn, it expects to remain profitable for the entire year of 2022.