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Airlines earnings: United, American forecast profitability amid strong demand

Yahoo Finance Live’s Julie Hyman and Brian Sozzi discuss quarterly earnings for United Airlines and American Airlines.

Video Transcript

JULIE HYMAN: Thing number three this morning is a big sector that is reporting a lot of numbers. I'm talking about the airline group. And we have been seeing them move sharply higher in pre-market trading, the trio of companies that reported. Let's start with United Airlines. It forecast a profit for this year and said second quarter operating margin is going to be about 10%. It has had nine consecutive quarterly losses.

But what we're hearing, to sort of zoom out for a minute, Sozz, what we're hearing from all the airlines is that there is just unprecedented demand. The CEO of United said this in a statement-- the demand environment is the strongest it's been in my 30 years in the industry. I thought it was also interesting American Airlines made similar comments. Said the demand environment is very strong and, also, by the way, said its second quarter revenue will rise 6% to 8% from 2019. Not from 2021, not from 2020, but from 2019.

So we are talking about just an incredibly strong environment at the same time that these companies are keeping capacity low. That seems to be the other theme. Demand is strong. They are trying to keep some capacity discipline here, which helps with their pricing. The demand that we're seeing doesn't hurt the pricing.

And then theme number three that we're hearing-- demand, capacity, discipline, and fuel costs, right? So for example, United talking about its second quarter fuel costs is going to be $3.43 a gallon. That compares with $2.88 in the first quarter. So we're really seeing big increases on that front for these airlines.

BRIAN SOZZI: Yeah, I'll just add here, Julie, United Airlines looking for second quarter profits. Market loves to hear that. That is peak season here. American Airlines also echoing that as well, I believe, also looking for second quarter profits, to your point, on lower capacity and higher energy or higher jet fuel costs. So again, that is very interesting to see and very telling to see.

And I would argue, some of these reports, Julie, from the airlines have been telegraphed or were telegraphed by the move in Marriott shares. We noted yesterday Marriott shares are trading at close to a record high here, really under the assumption that the summer travel season for many companies, lodging companies, travel companies, whatever, is going to be pretty good.

JULIE HYMAN: Yeah, so that's being seen, really, across the board. I believe we're going to be talking to the Booking Holdings CEO tomorrow?


JULIE HYMAN: This week?

BRIAN SOZZI: That's on the docket.

JULIE HYMAN: I guess tomorrow.


JULIE HYMAN: So, good. We'll get another insight into what's going on in this industry.