Buoyed by strong travel demand, particularly in the premium sector, United Airlines reported its Q4 2024 profit beat expectations and it expects 2025 to be even more profitable. Interestingly, the numbers show a divergence in growth, with United continuing to experience weakness in the Pacific market.
United Airlines Reports Healthy Q4 2024 Profit, Forecasts Optimstmic Growth In 2025
After stock markets closed yesterday, United reported its Q4 2024 earnings, which were strong:
- Revenue up 8% – $14.70 billion revenue for the quarter (versus analyst expectations of $14.44 billion)
- Profit up 64% – $985 million
- Adjusted pre-tax margin – 8.1%
- Earnings of $3.26 per share, (versus $3.00 expected)
- Revised 2025 Q1 earnings per share of 75 cents to $1.25 (versus 54 cents expected)
United benefited from sustained demand, domestic capacity reduction, and lower fuel prices, down from an average of $3.13/gallon in 2023 to $2.41/gallon in 2024.
United Airlines CEO Scott Kirby said that more growth and increased profitability are expected:
“United had a unique strategy coming out of COVID and our people have delivered for customers leading to a structurally and permanently changed industry. 2024 was a strong year across the board for United as we’ve become the leading global airline and we enter 2025 with demand trends continuing to accelerate which puts us on the path to double-digit pre-tax margins.”
United also reported a 6% increase year-over-year in passengers providing a perfect score of 10 on the customer satisfaction scale the Net Promoter Score, a key barometer of customer satisfaction.
Weak Pacific Demand – A Permanent Realignment?
While United posted strong numbers overall, a breakdown reveals its Pacific yield shrunk 2.3% compared to the same period in 2023, while it increased in all other international markets. This came despite (or perhaps because of) a 6.9% increase in available seat miles (ASM).
United did not break down its profitability route-by-route in the Pacific (nor was it expected to), so it is not clear whether this weakness lies more broadly or may be concentrated in Mainland China and the South Pacific, where increased competition and a weak Australian and New Zealand dollar have dampened demand. The Japanese Yen also remains weak, placing downward pressure on demand for passengers originating in Japan.
I’m not one to ever call anything “permanent” in the airline industry and while geopolitical tensions between the United States and China coupled with China’s slow recovery from the pandemic will dampen demand between the two nations conceivably for years to come, I do predict East Asia will finally bounce back.
Furthermore, if the Ukraine – Russia war ends in the months ahead and Russian airspace is reopened, look for several routes to India to return that are simply not profitable at this time due to routing restrictions.
CONCLUSION
United Airlines reported robust revenue and profit that beat Wall Street expectations. Kirby and the rest of United’s C-Suite will shortly address investors in a conference call, which I will be monitoring for any additional nuggets of information. It appears, however, that United is on firm footing and expects growth and profit margins to rise again in 2025.
On a personal note, I must admit I’m feeling a little foolish this morning. Remember back in October when United stock was at $70 and I wondered whether I should buy it? It’s now trading at $116/share in pre-market trading…that stock has performed much better than most of its peers, despite a bull market across the board.
I hold on to the quaint notion that I maintain my independence by avoiding airline stock, but I wish I had bought into United last autumn. Even a sale of 100 shares purchased in October would have netted over $4,000 today.
In any case, the race between Delta and United to lead the industry in profits continues.
> Read More: Should I Buy Airline Stocks?
images: United Airlines
Excessive prices and excessive fees result in a surge in profits .
Excessive is a misnomer, even in this highly regulated industry. The market will bear what it can.
@Matthew … All those who change excessively say : “It’s the ‘market’ , not us ; and besides we cannot afford to pay the hired help”.
This is what Cesar Chavez’ lettuce boycott was all about . It is what Upon Sinclair’s “The Jungle” was all about .
On daylight westward intercontinental flights they charge $ 50. extra for a “scenic view” window seat , and then close the shades . So , those who enjoy viewing Greenland are deprived .
I would like to see United’s earnings adjusted (hypothetically) for the additional labor costs it will incur when they finally settle with the AFA. Therein continues to be the ‘apples to oranges’ when people compare Delta’s earnings to United’s with Delta F/As already getting paid on the ground and in the air with superior pay schedules. Time will tell. Any prognosticators out there who’d like to take a stab at what the ‘adjusted income’ post-settlement might look like?
I exepect that question will be asked today during the investor call.
A comparison could also be made for the time UA renegotiates its credit card revenue agreement with Chase. As the last of the US3 to renew this contract with the credit card partner, US is making billions of dollars less revenue than DL.
This will be a major tailwind for UA when the new contract comes up in a couple of years.
A couple of things I found interesting…
– Corporate revenues were up 7%, but were behind “premium” revenue (up 10%), basic economy (up 20%) and loyalty (up 30%). Corporate revenue is recovering from a lower post-Covid base, but it doesn’t seem like it is growing faster than other segments anymore. This year is supposed to be better for corporate travel but it seems like corporate is just a smaller part of the pie now. I also wonder how much basic economy benefited from some of the ULCCs having issues
– Yields were positive in Latin America despite a 9% increase in ASMs. Latin America seems like it will continue to get more flights from all the airlines
Really is amazing to watch United soar. I’m curious what the newly announced pilot cuts for WN at DEN will mean for United. I haven’t seen that Wn is giving up gates but… reducing your pilot pool doesnt’ seem like bad news for United’s position in DEN. Seems like United is VERY close to their first true fortress hub.
I would consider IAH & probably Newark fortress hubs now. I guess it depends on your definition.
I get what you’re saying, but I view HOU and LGA/JFK as checks on the pricing power of IAH and EWR that a fortress hub normally enjoys. But I understand that they dominate those two airports, just not the metro areas.
Pay your flight attendants!!!!! It’s been 4 years!!! Record profits means it’s time! Get on with it!!!
@Ryan … +1 .
This was discussed on one of the calls today. There seems to be optimism that the new AFA negotiating team will actually be willing to negotiate, hopefully getting the new contract flight attendants have been waiting for.
” Even a short sale of 100 shares would have netted over $4,000 today.”
Shorting the shares would’ve lost money….
That did not come out the way I intended. I rephrased.
I hear you on the stock… I bought some at $49, but only a handful of shares because I didnt think it would do much…I WISH I had bought 100 shares
So I guess we can expect some of this increase in profits to be invested into upping the catering budget to get better quality food, right?
@Aaron … They have already divided the profits for executive and director bonuses . Nothing for the customers , nor anything for those who do the important things .
I was being sarcastic.
They just announced 5% profit sharing for their flight attendants. Scott Kirby’s day as CEO may be numbered
Can you elaborate? Why would his days be numbered?
What makes United Airlines stand apart from DAL and AAL is that UAL took in very impressive revenue from cargo operation.
Good for their success. I wonder what they might have made if they had been able to get more premium revenue. Anyway, the good thing about competition is there always seem to be other airlines, especially EU ones, that charge less for a better product.
It’s a great time to visit Australia and NZ to splash your strong currencies around, people! Get in while it lasts.