Earnings Results & Guidance:
- 9.7% rev increase
- United delivered a strong Q1, with meaningful year-over-year margin improvement. They reported a pre-tax loss of $79M, which was a $187M improvement over Q1 last year and better than guidance.
- Without the grounding of the Boeing MAX 9 fleet which negatively impacted earnings by over $200M, United would have been profitable in Q1.
- For Q2, United expects EPS between $3.75-$4.25. They reiterated full-year 2024 EPS guidance of $9-11.
Themes & Trends:
- United is seeing continued positive booking momentum across all customer segments, from price-sensitive to premium. Domestic and transatlantic demand remains strong.
- United’s premium revenue mix and load factors have increased significantly year-over-year, reflecting strong demand for premium products from both leisure and business travelers.
- Corporate/business travel demand rebounded strongly in Q1 across domestic and international markets. United expects this trend to continue.
- United is focusing on building connectivity across its interior hubs, growing premium revenue streams, and rolling out Basic Economy to compete with ULCCs.
Market Conditions:
- United expects the domestic capacity setup to improve sequentially in Q3 and especially Q4. International capacity in Asia-Pacific and Latin America is expected to moderate in 2H24.
- United believes it has built a “moat” around its business through its global network, customer-friendly policies like eliminating change fees, and segmented products to appeal to a wide customer base. Management sees this leading to sustained margin and RASM outperformance.
Aircraft & Fleet:
- Due to Boeing delays, United now expects 66 aircraft deliveries in 2024, down from 101 planned at the start of the year. To smooth out future deliveries, United will convert some MAX 10 orders to MAX 9s and lease additional A321neos.
- United plans to take around 100 narrowbody deliveries per year in 2025-2027. This will reduce capex to $7-9B annually those years (from previous plans) while still enabling growth and fleet renewal.
Overall Sentiment: The tone of the call was quite optimistic. Management expressed strong confidence in United’s strategic positioning, demand backdrop, and ability to deliver on its financial targets despite supply chain challenges. They believe United’s network strengths, product segmentation, and operational initiatives have created sustainable competitive advantages. The moderated aircraft delivery schedule is seen as a near-term challenge but one United is managing well by reducing costs and capex.