United Airlines Earnings: What Should You Look For?

Key learning points

  • Analysts estimate adjusted EPS of -$4.12 versus -$9.31 in Q2 FY 2020.
  • The load factor is expected to increase JOY, but is still expected to be below pre-pandemic levels.
  • Sales are expected to increase as the economy reopens and demand for travel picks up.

United Airlines Holdings Inc. (UAL), like many airlines, is still feeling the effects of the COVID-19 pandemic that nearly brought air traffic to a standstill last year. However, the outlook is brighter thanks to vaccine rollouts, the easing of travel restrictions and ten billion dollars in federal bailout money that has financially supported the industry. United Airlines, one of the four major US airlines, will also have to navigate its recovery amid new investigations by the Biden administration. The president’s July 9 executive order contained guidelines to improve competition, including regulating fees charged by airlines.

Investors will be looking for a clearer picture of United Airlines’ financial performance and outlook when it reports earnings for the second quarter of 2021 on July 21, 2021. Analysts expect the airline’s adjusted loss per share to decline significantly as revenues rise from last year’s pandemic-depressed low.

Investors will also look at United Airlines’ occupancy rate, a key metric used by airlines to gauge what percentage of paid passenger seats are filled. Analysts expect the carrier’s load factor to be more than double its levels in the second quarter of FY 2020, when it bottomed out during the pandemic. However, the company’s occupancy rate is still expected to be below the norm before the peak of the pandemic. COVID-19 still remains a threat to the economy and industry. The rapidly spreading Delta variant, the most contagious version of the virus, could dampen some consumers’ enthusiasm for air travel.

United Airlines shares have performed on par with the broader market over the past year. The stock started to outperform in November 2020 after the US presidential election and positive results regarding the efficacy of COVID-19 vaccines. But performance has been extremely volatile ever since. After hitting a recent peak in early June, the stock has lost gains since the second half of February 2021. Shares of United Airlines have delivered a total return of 33.4% in the past year, slightly less than the total return of 34.6% of the S&P 500.

Source: TradingView.

United Airlines Earnings History

The stock slumped after United Airlines reported Q1 FY 2021 earnings and earnings that exceeded expectations. The company reported adjusted loss per share for the fifth straight quarter. Sales were down 59.6% from the same quarter a year ago, marking the fifth consecutive quarter of declining sales. Despite the weak performance, the company was optimistic about the recovery in travel demand.

In the fourth quarter of FY 2020, United Airlines reported a fourth consecutive quarterly adjusted loss per share and year-over-year revenue decline (YOY). Sales decreased by 68.7% compared to the same quarter a year ago. The weak performance was caused by what the airline called the “most disruptive crisis in aviation history.”

Analysts expect a significant improvement in United Airlines’ financial performance in the second quarter of 2021, but results are still estimated to be below pre-pandemic levels. The airline is expected to report an adjusted loss per share that is less than half the loss recorded in the same quarter a year ago. Sales are expected to increase by 271.5%, breaking the chain of sales declines. But quarterly sales will still be well below the levels the airline generated before the pandemic. For the full year of FY 2021, analysts predict that the company’s adjusted loss per share will decline sharply as revenue returns 55.2% from a 64.5% decline in FY 2020.

United Airlines Key Statistics
Estimate for Q2 2021 (FY) 2nd quarter 2020 (FY) Q2 2019 (FY)
Adjusted Earnings Per Share ($) -4.12 -9.31 4.21
Yield ($B) 5.5 1.5 11.4
Load factor (%) 70.4 33.1 86.0

Source: Visible alpha

The most important statistic

As mentioned above, investors will also focus on United Airlines’ occupancy rate, an important metric that indicates the percentage of an airline’s available seats that are filled with paying passengers. A high occupancy rate, as opposed to a low occupancy rate, indicates that a high percentage of seats are occupied by passengers. Because the cost of flying an aircraft is relatively the same whether there are 50 or 100 people on board, airlines have a strong incentive to fill as many seats as possible by selling more tickets. Higher load factors mean that an airline’s fixed costs are spread over a larger number of passengers, making the airline more profitable. The pandemic has led to a reduction in air traffic, leaving airlines with high fixed costs amid declining load factors and revenues, which together lead to significant losses.

United Airlines maintained an annual load factor within a narrow range of 82-84% from FY 2017 to FY 2019. But in FY 2020, load factor dropped to 60.2% amid increasing demand for travel due to the pandemic. The occupancy rate fell to 33.1% in the second quarter of 2020, before rising to 47.8% in the third quarter and then to 55.6% in the fourth quarter. After rising slightly to 56.8% on a sequential basis in Q1 FY 2021, analysts expect United Airlines’ load factor to rise to 70.4% in Q2 FY 2021, more than double the level of the same quarter a year ago . However, that would still be more than ten percentage points below pre-pandemic levels. For the full year 2021, analysts predict that the airline’s load factor will be 71.8%. That level would be just over ten percentage points above FY 2020, but more than ten percentage points below the pre-pandemic level.