United Airlines made headlines on Tuesday with the announcement of its first share buyback program since the onset of the COVID-19 pandemic. The airline has initiated a $1.5 billion share repurchase plan alongside the disclosure of third-quarter earnings, which significantly surpassed analyst expectations.
The Chicago-based airline reported net income of $965 million for the third quarter, marking a decline of over 15 percent compared to the same period the previous year. Despite this dip, the adjusted diluted earnings per share stood at $3.33, comfortably exceeding the analysts' forecast of $3.17, according to reports from CNBC and Yahoo Finance.
United Airlines' revenue for the third quarter reached approximately $14.8 billion—a 2.5 percent increase—thanks to rising passenger and cargo revenue. Notably, CEO Scott Kirby praised the company's team for their dedication during the busy summer travel season, stating, "I appreciate the entire United team coming together to take care of our customers by operating a safe and on-time airline this summer." Kirby highlighted improvements made after airlines trimmed excess capacity from the market, which had previously contributed to a decline in fares.
Specifically, United's operational revenues benefited from enhanced demand across both corporate and premium sectors. Corporate revenue surged by 13 percent, and premium revenue—which includes tickets for business class—rose 5 percent. The lucrative basic economy ticket sales also saw growth, increasing by 20 percent over the same period last year. This upswing came amid strategic moves by the airline to restore its market position following pandemic-induced challenges.
According to Randy altucher, the company’s Chief Financial Officer, this buyback plan exemplifies United’s confidence in its financial recovery and growth prospects. The share repurchase program, amounting to about seven percent of United's total market capitalization as of the close of the market on Monday, indicates a solid commitment to returning value to shareholders.
This strategic initiative mirrors actions taken by other U.S. airlines, such as Southwest Airlines, which announced its $2.5 billion share repurchase program last month. The industry as a whole received substantial government assistance during the travel slump caused by the pandemic, totaling more than $50 billion, which restricted companies from executing share buybacks or paying dividends.
Looking forward, United Airlines has forecast fourth-quarter earnings adjusted to range between $2.50 to $3.00 per share. This estimate reflects growth compared to last year's adjusted earnings of $2.00 per share and exceeds Wall Street expectations of $2.68 as compiled by LSEG. Following the earnings call, analysts are anticipated to probe more deeply about end-of-year demand and the airline's plans for 2025.
Despite the positive outlook and impressive third-quarter performance, not everyone seems to be on board with the share buyback decision. The Association of Flight Attendants-CWA, which advocates for United's flight attendants, expressed criticism over the decision to prioritize shareholder returns at this time. Sara Nelson, the president of the union, stated, "That money United just promised Wall Street belongs to Flight Attendants who worked throughout the pandemic and during this taxing recovery for all of us on the frontlines."
This sentiment emphasizes the broader debate surrounding corporate buybacks and how companies choose to allocate resources, particularly following the hardships faced during the pandemic.
United Airlines is eyeing steady recovery and has initiated various measures, including the addition of new routes targeting international travel demand for the coming year. Recent announcements about flights stretching to Mongolia, Senegal, Spain, and Greenland showcase the airline's ambition to capture growing market opportunities.
Overall, United Airlines appears to be on the rebound, and with looming expansion plans and the substantial share buyback program, the company seems set on regaining its footing and embarking on a course toward substantial growth. The airline industry as a whole continues to navigate the aftershocks of the pandemic, with United Airlines now demonstrating confidence through strategic financial maneuvers and operational improvements. The coming months will certainly be pivotal as analysts and investors keep their eyes on the airline sector.
