United Airlines (UAL) Q2 2023 earnings

United Airlines on Wednesday posted record quarterly earnings and forecast a strong third quarter due to an unrelenting travel boom, led by a return of international travel.

The airline lost some of its capacity during the second quarter because of flight disruptions at its Newark, New Jersey, hub, which shaved 1 percentage point off of its profit margin. United is now trimming its August schedule at the airport to help avoid further flight cancellations and delays when obstacles like bad weather arise.

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But United’s quarterly results and forecast still surpassed analysts’ estimates due to strong demand.

Shares rose more than 3% to $56.57 on Thursday, while rivals posted modest gains or ended lower.

United is the second U.S. carrier to report results for the recent quarter, echoing Delta Air Lines‘ upbeat travel demand outlook. American Airlines reported earnings before the market opened Thursday, and its shares dropped 6% after forecasting third-quarter earnings in line with estimates.

United and other carriers have been expanding their international service to capitalize on strong bookings after a years-long pandemic slump. The airline’s revenue for international flights made up about 40% of its total sales but is growing faster than domestic sales.

Here’s what United reported for the second quarter compared with what Wall Street expected, based on average estimates compiled by Refinitiv:

• Adjusted earnings per share: $5.03 vs. an expected $4.03
• Total revenue: $14.18 billion vs. an expected $13.91 billion

United reported net income of $1.08 billion or $3.24 per share, compared with $329 million, or $1 per share, during the same period last year. Adjusting for items, including a pilot bonus as part of a new preliminary labor deal, the company earned $1.67 billion, or $5.03 per share.

A 26% lower fuel bill helped boost United’s bottom line.

Meanwhile, revenue per available seat mile dropped 0.4% from a year earlier. Total revenue of $14.18 billion marked a 17% increase year over year.

Capacity was up 17.5% from the second quarter of 2022, a percentage point below what United planned to fly, before the Newark disruptions.

United’s CEO Scott Kirby earlier this month said the company will have to reduce flights at Newark Liberty International Airport. A series of early-summer thunderstorms derailed United’s operation at the airport, disrupting thousands of flights and displacing passengers and crews.

Kirby earlier this month said the airline would have to cut flying there. He had said the problems were a result of near-constant bad weather, airspace constraints and scheduling issues, as well as a shortage of air traffic controllers.

United scheduled about 410 flights a day for the summer but the airline’s chief commercial officer, Andrew Nocella said the airline will operate about 390 flights a day there next month. It usually operates about 435 daily flights there, he said.

“So hopefully, we will return to that bigger schedule in the future,” he said on a quarterly call on Thursday. “But for next summer, I do think that we will have a smaller schedule, and we will operate a reliable schedule.”

He said the airline is working with federal and state transportation officials to make sure schedules are reliable.

Still, United expects to grow capacity in the three months ending Sept. 30 about 16% over last year and with estimated revenue growth of as much as 13% during the same period in 2022. United expects to post adjusted earnings per share of between $3.85 and $4.35 for the third quarter, far above analysts’ estimates of $3.70 a share, according to Refinitiv.

Separately over the weekend, United and its pilots’ union said they reached a preliminary labor deal that would give pilots raises of as much as 40% over four years, a deal that comes after years of talks.

The union estimates the deal is worth $10 billion. It still needs to be ratified by United’s 16,000 pilots but could end years of negotiations as United seeks to increase its pilot ranks amid a shortage of aviators.