United Scales Back Plans to Add Flights -- WSJ
July 17 2019 - 03:02AM
Dow Jones News
By Doug Cameron
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 17, 2019).
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 profit
to climb.
Chicago-based United on Tuesday reported forecast-beating
quarterly profit, reflecting strong domestic demand. But it expects
to only boost flying capacity by as much as 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 after 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 an additional 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 less costly, 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., which report earnings next week. "We
believe the timing of U.S. airlines catching up to original MAX
delivery schedule will likely take 15-18 months," analysts at
Raymond James 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 were up less than 1%
in after-hours trading after gaining 2.9% during the 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-time charges, earnings
increased 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
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 17, 2019 02:47 ET (06:47 GMT)
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