United Airlines (UAL) 3Q 2024 earnings

United Airlines said Tuesday that it is starting a $1.5 billion share buyback as the carrier reported higher-than-expected earnings for the busy summer travel season and forecast higher airfares into 2025.

United Airlines shares rose nearly 13% Wednesday, leading the S&P 500 higher and closing at $72.02, the highest since February 2020, before Covid-19 was declared a pandemic. Other airline shares also rose sharply, outpacing the broader market.

United said domestic unit revenue turned higher in August and September compared to last year as airlines trimmed a glut of flights that were pushing down fares.

“We believe Q1 yield strength will be possible due to the significant schedule changes and business model changes that will continue to be implemented by low-margin airlines,” United’s Chief Commercial Officer Andrew Nocella said on Wednesday’s earnings call.

United expects to earn an adjusted $2.50 to $3.00 a share in the fourth quarter, compared to $2.00 a share a year earlier and the $2.68 analysts polled by LSEG estimated.

United expanded capacity by 4.1% in the third quarter. The carrier said corporate revenue rose 13% in the quarter; premium revenue, including business class tickets, rose 5%; and sales from its no-frills basic economy tickets were up 20%. United posted revenue of $14.84 billion, up 2.5% from a year earlier and above analysts’ estimates. It reported net income of $965 million, down 15% from a year ago.

Adjusting for one-time items, United reported earnings per share of $3.33, topping Wall Street forecasts and United’s estimate in July of $2.75 to $3.25 a share.

Here is what United reported for the third quarter compared with what Wall Street expected, based on average estimates compiled by LSEG:

• Earnings per share: $3.33 adjusted vs. $3.17 expected
• Revenue: $14.84 billion vs. $14.78 billion expected

The share buyback would be United’s first since before the Covid-19 pandemic. U.S. airlines received more than $50 billion in government aid during the pandemic travel slump that prohibited share repurchases and dividends, though airlines were still fighting for financial stability.

Southwest Airlines announced a $2.5 billion share repurchase program last month.

“Like other leading airlines and companies, we are initiating a measured, strategic share repurchase program,” United CEO Scott Kirby said in a note to staff on Tuesday. “Importantly, my commitment to you is that investing in our people and our business will always be my top priority even while we institute this share repurchase program.”

United’s flight attendants’ union, which hasn’t yet reached a new labor agreement with the company slammed the airline’s decision to resume buybacks.

In a statement, Sara Nelson, president of the Association of Flight Attendants-CWA, which represents crews at United, Spirit, Alaska and other carriers, said: “That money United just promised Wall Street belongs to Flight Attendants who worked throughout the pandemic and during this taxing recovery for all of us on the frontlines.”