United Airlines delivers solid 3QFY22 results; management remains upbeat on earnings prospects
- 3QFY22 adjusted EPS of US$2.81 per share is 25% higher than consensus
- Earnings beat primarily driven by strong increase in passenger volumes and lower unit costs
- Management guided for adjusted operating margin to be above pre-COVID levels in 4Q22; reiterated confidence in FY23 pre-tax margin target of 9%
3Q22 was handily above expectations. Outperformance during the period comes on the back of stronger than expect passenger traffic (91.4% of 2019’s level in 3Q22 vs 86.2% in 2Q22) and a sequential reduction in ex-fuel unit costs (-3.4% q-o-q). Meanwhile, passenger yields remained elevated (+21.6% above 2019 in 3Q22 vs +19.8% in 2Q22) on the back of robust demand and gradual capacity restoration in North America. The group also made good progress on its customer transformation journey, achieving close to a 5-point improvement in its Net Promoter Score and made commendable strides in its on-time performance as well.
Management continues to be optimistic on UAL’s medium-term outlook despite macroeconomic uncertainty. The management highlighted multiple positive trends, including the rise of bleisure (business + leisure) and hybrid work arrangements, and sluggish capacity growth (which will support passenger yields). Additionally, the management also expressed their confidence in achieving a solid set of results in 4Q22 despite global recessionary fears, guiding for a marginal uptick in capacity and passenger yields to remain resilient at current levels, underpinning above pre-pandemic operating margin and EPS of US$2.0-2.25 per share (around 15% lower than 4Q19).