Q3 result: United records $1.3B pre-tax earnings, announces $1.5B share repurchase prog.

• Year-to-date generated $7.2 billion of operating cash flow, $3.4 billion free cash flow

United Airlines (UAL) on Wednesday reported third-quarter 2024 financial results. The company had pre-tax earnings of $1.3 billion, with a pre-tax margin of 8.7%; adjusted pre-tax earnings¹ of $1.4 billion, with an adjusted pre-tax margin¹ of 9.7%.

The company also achieved diluted earnings per share of $2.90; and adjusted diluted earnings per share¹ of $3.33, ahead of the third-quarter 2024 guidance provided at the start of the quarter of $2.75 to $3.25.

To show its strength in the global airline industry, the company produced strong financial and operational results in the quarter.

As the company expected, revenue trends improved as the industry reached an inflexion point in the quarter with unprofitable capacity exiting the market.

Domestic unit revenue was positive year-over-year in August and September. Demand continues to be strong for the United product: Corporate revenues were up 13% year over year in September, and in the quarter premium revenues continued to remain resilient and were up 5% year over year and revenue from Basic Economy was up 20% year over year.

United Airlines CEO, Scott Kirby said, “I appreciate the entire United team coming together to take care of our customers by operating a safe and on-time airline this summer.”

“As predicted, unproductive capacity left the market in mid-August, and we saw a clear inflexion point in our revenue trends that propelled United to exceed Q3 expectations. A prosperous summer 2024 is just the beginning as our improved customer experience combined with United Next positions the airline at the top of the industry for the foreseeable future.”

The company’s Board of Directors authorized a new share repurchase programme for up to $1.5 billion of outstanding shares of common stock and warrants originally issued to the U.S. Treasury under the CARES Act and Payroll Support Program, subject to a limit of $500 million in aggregate through year-end 2024.

This amount represents approximately 7% per cent of the company’s market capitalization based on the closing stock price on Oct 14, 2024.

This is the first share repurchase program since the suspension of the previous program in 2020 due to the COVID-19 pandemic. Unless suspended or terminated earlier by our Board of Directors, this program has no set expiration date and will therefore terminate when the company has completed all purchases authorized under the program.

“In the last four years, we’ve invested $22 billion in our product and nearly $10 billion in our people. Those investments have enabled higher profits and are now contributing to growing free cash flow,” said United Airlines CFO Michael Leskinen.

“We’re now in a position to add a share repurchase program as we continue to invest in and deleverage our business. We are simultaneously targeting net leverage below 2x in the next few years. We intend this buyback to be the beginning of a consistent and disciplined return of capital that is paced by our ability to generate increasing levels of free cash.”

In the quarter, the company repurchased in the open market just over 2 million shares of UAL common stock in connection with the exercise of roughly 6.4 million warrants issued to the U.S. Treasury under the CARES Act and Payroll Support Program.

The repurchase of these shares eliminated the dilution associated with the warrants exercised and is separate from the $1.5 billion share repurchase program above. The shares were purchased at an average price of $39.99.

Under today’s $1.5 billion share repurchase program shares may be repurchased in the open market and in privately negotiated transactions, as well as accelerated repurchase agreements, depending on the capital needs of the business, the market price of UAL common stock, general market conditions, securities law limitations and other factors.

Customer Experience 

• Saw a 5.8% increase in customer check-in satisfaction, a 6.5% increase in customer checking in digitally and 9% increase in customers bypassing the lobby for the third quarter year over year thanks to check-in process improvements like introducing Spanish translations within features of the United app, enhancing digital check-in options for basic economy and expanding curbside bag drop-off outside airports.
• Opened the newly updated South Terminal lobby at Miami International Airport, featuring 10 new ticket counters, additional self-serve kiosks and other time-saving app features like bag drop shortcut and updated signage.
• Nearly half (49%) of passengers whose trips were cancelled were rebooked through United’s automated service or self-service in the third quarter, an increase in five points year over year.
• Enhanced customers’ culinary experience with the introduction of the airline’s new domestic economy cabin wine list, which includes canned wine from two women-owned companies and expanded choice for customers with new rose and brut options.
• With Live Activities on Apple Watch, customers can now access important flight information right from their wrist without opening the United app.
• Unveiled improvements to United’s digital offerings by introducing digital food menus for all flights and cabins within the United app and transitioning Hemispheres® magazine to an all-access digital experience on United.com.
• Opened the Reset Suite by Therabody at Chicago O’Hare, a luxury wellness lounge for customers to relax before their flight.

Operations 

• Operated the busiest third quarter as measured by revenue passenger volumes in company history, setting the record for the most ever passengers carried for the July 4 and Labor Day holidays and for the highest number of customers carried in a day at 552,000 in July.
• Set the company record for the highest daily customer average in September with 474,000 carried.
• United finished the quarter with the best on-time departure amongst major U.S. airlines in six of seven of United’s U.S. hub locations, making it the 30th quarter in a row leading on-time departure at United’s Chicago O’Hare hub and 10th in a row leading United’s Denver hub.
• In September, the airline achieved its highest completion rate year to date.

Employees and Communities 

• In partnership with United’s Eco-Skies Alliance, United partnered with the San Francisco 49ers to become the first NFL team to purchase sustainable aviation fuel.
• In the third quarter, United saw a nearly 50% growth in employee volunteerism year to date, with nearly 4,000 United employees volunteering more than 16,000 hours, 11,000 hours of which were logged in United’s annual month-long volunteer campaign September of Service to honour those affected by 9/11.
• Announced a new sponsorship with the Washington Capitals, Mystics and Wizards as the three teams’ official airline and a founding partner of the Monumental Sports & Entertainment’s Capitol One Arena transformation, giving MileagePlus customers access to exclusive experiences.
• For the second year in a row, United donated $1.25 million through the education nonprofit DonorsChoose to support aviation and STEM classroom projects in historically underfunded schools across United’s domestic hub communities.
• United and Airlink mobilized 335 responders for 14 emergencies, humanitarian crises and recovery and preparedness initiatives globally, and United shipped 17 million tons of aid cargo to support relief efforts.
• Members of United’s Black Business Resource Group Beacon participated in Chicago’s Bud Billiken Parade, with United awarding a $2,500 scholarship to Emory University.
• United hosted more than 850 girls at 35 different airports across their system to celebrate the 10th anniversary of Girls in Aviation Day, recognizing the achievements of women in aviation and inspiring the next generation of aviators.

Wole Shadare