United Soars as Outlook Eases Worry Over Boeing Deliveries

The revised order book shows the dramatic steps United is taking as it grapples with challenges including the delayed arrival of a key Boeing Co. model.

(Bloomberg) — United Airlines Holdings Inc.’s shares surged the most in more than three years after the carrier forecast better-than-expected profit this quarter, tempering concerns that Boeing Co. aircraft delays and regulatory pressure will put expansion plans at risk.

Adjusted earnings will be $3.75 to $4.25 a share in the second quarter, the Chicago-based airline said late Tuesday. That topped the $3.73 average of analyst estimates compiled by Bloomberg.

The outlook shows how the airline is navigating a challenging start to the year, marked by a rash of safety incidents, the temporary grounding of some planes and the late delivery of aircraft it was counting on for expansion. A Federal Aviation Administration review has already begun to stunt near-term growth, with United recently delaying the start of two new routes.

United shares jumped as much as 13% Wednesday in New York, the biggest intraday gain since November 2020. The shares gained less than 1% this year through Tuesday’s close.

The airline now intends to take just 61 new narrowbody planes this year, down from a prior plan of 101 jets and an original expectation of as many as 183 aircraft. The change will cut United’s capital outlays by about $2.5 billion this year to $6.5 billion, the company said.

“The bigger evolving story is more balanced capital allocation, which we believe will be self-reinforcing over time,” Duane Pfenningwerth, an Evercore ISI analyst, said in a note. “This is more than short-term delivery timing challenges.”

The extra scrutiny from US authorities that led to the route delays also could limit the introduction of new planes into service, Bloomberg reported last month.

United revamped its fleet plan “to better reflect the reality of what the manufacturers are able to deliver,” Chief Executive Officer Scott Kirby said in a statement.

Kirby has been outspoken about the long-delayed regulatory certification of the 737 Max 10, Boeing’s largest single-aisle model. He recently told the manufacturer to stop producing the plane for United and pulled it from the airline’s 2024 flight plans. In March, he confirmed the carrier was in the market for rival Airbus SE’s A321neo jetliner, saying it’s “impossible to say when the Max 10 is going to get certified.”

The sharp reduction in Boeing handovers forced the carrier to ask pilots to take unpaid time off in May, after it earlier slowed hiring and suspended some training. The pilots’ union has said the leave program could be extended into summer and potentially the fall.

Airbus Leases

As part of the revamped aircraft delivery plan, United said it reached deals to lease 35 A321neo aircraft that will begin flying in 2026 and 2027. The announcement confirms earlier Bloomberg reports that the carrier was in talks to add the hot-selling Airbus narrowbody as it makes up for the delayed Max 10.

The carrier also said it will convert some Max 10 orders to the smaller Max 9 variant. United now expects to take an average of 100 narrow-body aircraft each year from 2025 through 2027, it said in the statement. It will receive five widebody planes this year.

Under its broad safety review, the FAA is stepping up its presence at United to assess the airline’s processes, manuals and facilities. United is also conducting an internal evaluation to determine if its safety training or procedures need to change. The incidents this year — including a wheel that fell from a plane after takeoff and an aircraft skidding off a runway — are unrelated, Kirby earlier told United employees.

The carrier recently postponed a May 1 investor meeting, saying it would “send the wrong message” to celebrate its performance in the wake of the safety mishaps.

United beat expectations for the first quarter with an adjusted loss of 15 cents a share, better than the 57-cent average loss estimated by analysts. Revenue of $12.5 billion also topped estimates.

The grounding of Boeing’s 737 Max 9 aircraft resulted in about $200 million in lower revenue and higher costs, United said. United is the largest operator of the plane, which was grounded by US regulators for about three weeks in January after a fuselage panel flew off an Alaska Airlines plane during flight.

The first-quarter performance was a pleasant surprise for investors after the carrier’s own guidance had it potentially losing as much as 85 cents. Absent the $200 million hit to earnings from the Max 9 groundings, United would have been profitable in the quarter, the carrier said.

The first-quarter loss “was much stronger than expectations despite delivery delays and the Max-9 grounding,” Raymond James analyst Savanthi Syth said in a report. The period’s “revenue strength appears to be driven by United’s domestic capacity adjustments and strong corporate travel recovery.”

United maintained its full-year profit outlook of $9 to $11 a share.

–With assistance from Lindsay Blakely.

(Updates share trading beginning in first paragraph)

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