U.S. markets closed
  • S&P 500

    4,594.62
    -106.84 (-2.27%)
     
  • Dow 30

    34,899.34
    -905.04 (-2.53%)
     
  • Nasdaq

    15,491.66
    -353.57 (-2.23%)
     
  • Russell 2000

    2,245.94
    -85.52 (-3.67%)
     
  • Crude Oil

    68.15
    -10.24 (-13.06%)
     
  • Gold

    1,785.50
    +1.20 (+0.07%)
     
  • Silver

    23.11
    -0.39 (-1.66%)
     
  • EUR/USD

    1.1320
    +0.0108 (+0.96%)
     
  • 10-Yr Bond

    1.4820
    -0.1630 (-9.91%)
     
  • GBP/USD

    1.3338
    +0.0018 (+0.14%)
     
  • USD/JPY

    113.3300
    -2.0090 (-1.74%)
     
  • BTC-USD

    54,890.88
    -16.84 (-0.03%)
     
  • CMC Crypto 200

    1,365.60
    -89.82 (-6.17%)
     
  • FTSE 100

    7,044.03
    -266.34 (-3.64%)
     
  • Nikkei 225

    28,751.62
    -747.66 (-2.53%)
     
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

United posts smaller loss than anticipated as travel demand picks up

In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Yahoo Finance’s Julie Hyman, Brian Sozzi, and Brian Cheung break down United Airline’s Q3 earnings, and outlook for the airline industry.

Video Transcript

- And let's move on to another earnings report that we are watching. That is from United Airlines. Although, in this case, of course, it is a loss report.

The company saying it had $1 to loss. That was on an adjusted pre-tax basis by the way. It is a smaller loss than analysts had.

Anticipated and revenue is a little bit higher than anticipated. And it's been very interesting to follow the airlines and the sort of wave that we have seen both in COVID and its effect on the airlines, and then their commentary around their profitability, and the return to it. There have been a lot of fits and starts here from the company.

But now, it is saying in the fourth quarter United says it plans to fly 77% of the capacity that it flew in 2019. At the same time, revenue is going to decline as much as 30% compared to it was in 2019. And yet, the stock guys is hired this morning Brian Sozzi.

- Yeah, no, I'm actually reading right now a good nugget of information from Michael Lindbergh over at Deutsche Bank, which really sums up I think the thesis on United airline. And to a lesser extent, the whole airline sector he says, quote, with the US reopening to nonessential vaccinated foreign travelers next month. And the continued recovery in corporate bookings.

United is most leveraged in our view to those lucrative segments. And that's a trade right now. If you are out there trading these airlines, you are hoping for a strong recovery in demand in the fourth quarter. The crucial fourth quarter with all the holiday travel, whether it's for business to a lesser extent or holiday.

Household traveling to go see your family members. You're hoping that bounces back in a big way as those travel restrictions lift. And United Airlines. Deutsche Bank is correct is most leveraged to the return of business travel.

- Well, that's certainly the case with business travel. But I do want to point out that when you're talking about the pricing power that the airlines have, not just United, the whole airline industry has. It's really in a rut again. When you consider that obviously the reopening of the economy, particularly in those summer months saw a massive spike in airline prices. And not to bring everything back to the Bureau of Labor statistics like you guys know I love to do.

But when you take a look at things like the consumer price index, for example, you're seeing 24%, 25% month over month on a yearly basis changes in ticket prices as people were trying to fly from, you know, either cross country or, in some cases, to other countries that allowed those in the United States who are vaccinated to travel there.

But what you're seeing now is that actually when you measure the difference between September and August, I believe ticket prices only increased by 0.8%. So that's a much lower number than we've seen.

Obviously, this is also anecdotally true flights aren't as booked. Obviously, a lot of them are still booked to the brim. But some flights are not as booked as they were in the summer.

And it's unclear what the holiday volume is going to be. So whether or not that presents a headwind or tailwind for these airlines remains an open question.

- Hey, Brian. Since you open the door here, how will Fed tapering impact airline sector profits go?

- Well, here's the thing, right? I mean, the Fed taper is going to have an impact on obviously the ability of companies to access markets. It's not that liquidity is immediately going to dry up. But I think for the airlines, that's an irrelevant question.

They didn't turn to the Federal Reserve to get liquidity during the depths of 2020. They relied on a handout from the CARES Act, right? They were reliant on the federal government to help them out in that time. So I don't think the Federal Reserve is a big factor there. Although I appreciate your enthusiasm in trying to bring this full circle, Brian.

But listen, as Delta-- as Delta told us what was it last week, the thing-- the thing that is really going to be important for these guys in the fourth quarter is going to be jet fuel prices, right? Yes, these guys-- yes, most of the airlines hedge et cetera, et cetera. But nonetheless, it's something that they're going to be pinched by or at least Delta told us it's going to be pinched by.