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United Airlines (UAL) earnings Q4 2022

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United Airlines‘ fourth-quarter profit and outlook for early 2023 topped Wall Street estimates because of strong travel demand and high fares.

Consumers’ appetite for air travel and willingness to pay higher fares has helped airlines return to profitability despite higher costs for fuel, labor and other expenses tied to ramping their networks back up. Meanwhile, aircraft delivery delays and training backlogs have constrained airlines’ growth, keeping fares high.

United reported an $843 million profit for the last three months of 2022, a 31% increase compared with three years earlier, on revenue of $12.4 billion. That revenue was almost 14% higher than the identical period in 2019, before the pandemic, despite flying 9% less, helping it post a profit despite a 21% increase in unit costs from three years earlier.

United shares gained about 2% in prolonged trading Tuesday.

The quarterly update is one other sign of a robust year-end for airlines, despite severe winter storms and disruptions through the popular holiday travel period.

A grounds crew member directs an United Airlines airplane to a gate at Terminal A at Newark Liberty International Airport (EWR) in Newark, Recent Jersey, US, on Thursday, Jan. 12, 2023.

Aristide Economopoulos | Bloomberg | Getty Images

Last week, Delta Air Lines‘ profit and revenue surpassed Wall Street’s expectations though higher costs, partly because of an expected pilot labor deal, weighed on its first-quarter profit forecast. Also last week, American Airlines, which reports on Jan. 26, hiked its profit and sales forecast for the fourth quarter.

Here’s how United performed within the fourth quarter compared with what Wall Street expected, based on average estimates compiled by Refinitiv:

  • Adjusted earnings per share: $2.46 versus an expected $2.10
  • Total revenue: $12.4 billion versus expected $12.2 billion

For the primary three months of 2023, United expects to generate revenue 50% higher than the identical period of 2022. It expects first-quarter earnings per share to be between 50 cents and $1, above analyst consensus of 25 cents, in accordance with Refinitiv.

United expects to expand flying 20% in the primary quarter from a 12 months ago, it said in a filing.

It forecast capability growth within the high teens for the total 12 months over 2022. It forecast unit revenues, or revenue per available seat mile, for the total 12 months to are available flat compared with 2022, an indication that air fares’ sharp rise this 12 months could proceed to abate as airlines add back more flights.

United also said in an investor presentation that staffing issues, plane shortages and outdated tech would restrict industry capability this 12 months.

Because the airline industry confronts a Covid-induced labor shortage, United and others are hoping to spice up pilot and crew counts into the subsequent fiscal 12 months. The corporate on Tuesday noted the debut of its Calibrate apprenticeship program, which it launched in November, and the United Aviate Academy which began in early 2022. The airline also on Tuesday said it opened a renovated and expanded flight attendant training facility in Houston.

United hasn’t yet reached a latest labor agreement with its pilots. Delta and its pilots’ union have reached a preliminary agreement for large raises, but pilots have not yet voted on it.

CEO Scott Kirby told CNBC’s “Fast Money” that the airline’s pilots union is working on electing a latest leader after its last head resigned, which must be finalized later this month. Once the brand new leader has been chosen, Kirby expects negotiations to resume, which he estimated to be by Feb. 7.

He said an agreement on a pilot contract “should be done pretty quickly once we get back to the table.”

United said in its investor presentation that it expects latest contracts with pilots, flight attendants, technicians and airport employees to maintain its non-fuel costs regular over 2022.

Kirby also said the industry’s supply constraints reflect a broader infrastructural problem, displayed within the recent Federal Aviation Administration system outage. He said that the FAA’s expansion into space and drones has strained the resources it could typically use to support flight infrastructure.

“They’ve needed to rob Peter to pay Paul,” Kirby said. “They simply do not have enough resources.”

Kirby said he’s in Washington, D.C., twice a month, lobbying for more resources.

United executives will hold a call with analysts and media at 10:30 a.m. ET Wednesday.

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