BA Boeing Co

By Doug Cameron 

United Airlines Holdings Inc. said it is trimming extra flying this year because of the grounding of Boeing Co.'s 737 MAX, though the nation's second-largest carrier by traffic still expects profits to climb.

Chicago-based United on Tuesday reported forecast-beating quarterly profit, reflecting strong domestic demand. But it now expects to only boost flying capacity by up to 4% this year as it rejiggers schedules to cover the grounding of the MAX.

The MAX grounding has removed dozens of jets from the U.S. airline fleet as regulators continue their appraisal of proposed software fixes in the wake of two fatal crashes that government and industry officials have said could keep the plane out of service until next year.

United didn't detail the cost of the MAX grounding. The airline has received 14 of the jets, with another 16 due to arrive by the end of the year and 28 more in 2020.

The airline said it has agreed to buy 19 used Boeing 737-700 jets that are due to arrive in December, continuing its recent addition of cheaper, older planes to give it more flexibility to add flights. The jets are smaller than the 737 MAX 9 model it is currently unable to use and not intended as substitutes.

Late MAX deliveries are piling up at Boeing facilities for carriers including United, American Airlines Group Inc. and Southwest Airlines Co. "We believe the timing of U.S. airlines catching up to original MAX delivery schedule will likely take 15-18 months," Raymond James analysts wrote in a client note.

Despite the MAX scheduling challenge, United reported stronger-than-expected earnings for the sixth quarter in a row and raised its full-year guidance. United's shares rose in after-hours trading after gaining nearly 3% during Tuesday's regular session.

Strong domestic demand for flights and fuel prices that are 5% lower than a year ago are driving industry profits. Delta Air Lines Inc., which doesn't operate the MAX, last week raised its full-year profit outlook, helped also by the diminished capacity of competitors stemming from grounded MAX jets and additional flying on behalf of alliance partners such as Canada's WestJet.

United reported net profit for the second quarter rose to $1.05 billion from $683 million a year earlier. Earnings per share climbed to $4.02 from $2.48. Excluding one-off charges, earnings climbed to $4.21, ahead of the $4.11 consensus among analysts polled by FactSet. The airline raised the low end of its full-year per-share profit guidance by 50 cents to $10.50 and maintained the top end of its range at $12, though costs excluding fuel are now expected to rise by 0.5% to 1% from a year earlier versus its April guidance for expenses to remain flat.

Capacity is expected to grow by 3% to 4% this year, down a percentage point from United's guidance in April, when it cut planned flying this year by the same amount.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

July 16, 2019 18:50 ET (22:50 GMT)

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