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United Airlines Q1 FY2022 Earnings Report Preview: What to Look For

Focus on UAL load factor

Key Takeaways

  • Analysts estimate adjusted EPS of -$4.18 vs. -$7.50 in Q1 FY 2021.
  • Load factor is expected to rise YOY.
  • Revenue is expected to rise as travel demand slowly stages a rebound from the pandemic shock.

United Airlines Holdings Inc. (UAL) is seeing a rapid recovery in revenue after the shock to travel demand triggered by the onset of the COVID-19 pandemic in early 2020. But the recovery has been bumpy. United Airlines is reporting continuing net losses as new variants, such as Delta and Omicron, have slowed the travel rebound and weighed on the carrier's performance in recent quarters. In addition, United is facing higher fuel costs, most of which the carrier is trying to pass on to customers.

Investors will be watching to see when United Airlines can return to profitability, and how quickly, when it reports earnings after market close on April 20, 2022 for Q1 FY 2022. As is customary for the company, it will then hold a conference call the next day to discuss its results on the morning of April 21, 2022. Analysts are not optimistic. They expect the company to report a much wider adjusted loss per share than in recent quarters. It would be the company's ninth straight quarter of adjusted losses. Revenue is expected to expand for the fourth consecutive quarter, but at a slower pace.

Investors will also be watching United Airlines' load factor, a key metric used by air carriers to gauge what percentage of paid-passenger seating capacity is being filled. Analysts expect the company's load factor to rise compared to the year-ago quarter but to be basically flat compared to the previous quarter.

United Airlines' shares have underperformed the broader market over the past year. The stock very briefly outperformed the market from late May 2021 to early June 2021, but it has underperformed ever since. The stock's performance gap has also widened throughout the year. Shares of United Airlines have provided a total return of -20.7% over the past year, well below the S&P 500's total return of 6.5%.

One Year Total Return for S&P 500 and United Airlines
Source: TradingView.

United Airlines Earnings History

United Airlines reported Q4 FY 2021 earnings that beat analysts' expectations. The airline reported its eighth consecutive adjusted loss per share. Revenue, however, rose 140.1% year over year (YOY), marking the third straight quarter of growth after five consecutive quarters of declines. The company said that the Omicron variant of the coronavirus was impacting demand in the near term, but that it remains optimistic about the spring and summer seasons of 2022 and beyond.

In Q3 FY 2021, United Airlines' earnings and revenue beat consensus estimates. The carrier reported its seventh straight quarterly adjusted loss per share. However, it was the smallest such loss out of the seven. Revenue expanded 211.4% YOY, rising for the second straight quarter but at a decelerating pace compared to the previous quarter. The company said that the spread of the Delta variant stalled the recovery in travel demand, but that it remained confident about achieving its 2022 financial targets.

Analysts expect more of the same from United Airlines in Q1 FY 2022. The airline is expected to report its ninth straight adjusted loss per share. Revenue is expected to grow at a rapid pace of 138.7% YOY. It would mark the fourth consecutive quarter of growth but the pace continues to slow. For full-year FY 2022, analysts expect United Airlines to report its third straight year of adjusted losses per share, though the losses are expected to narrow dramatically compared to FY 2020 and FY 2021. Annual revenue is expected to grow 66.7%, its fastest pace in at least five years.

United Airlines Key Stats
  Estimate for Q1 FY 2022 Q1 FY 2021 Q1 FY 2020
Adjusted Earnings Per Share ($) -4.18 -7.50 -2.57
Revenue ($B) 7.7 3.2 8.0
Load Factor (%) 77.0 56.8 70.9

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be focused on United Airlines' load factor, a key metric indicating the percentage of a carrier's available seats that are filled with paying passengers. A high load factor, as opposed to a low load factor, indicates that a high percentage of seats are occupied by passengers. Because the costs of sending an aircraft into flight are relatively the same whether there are 50 people aboard or 100, airlines have a strong incentive to fill as many seats as possible by selling more tickets. Higher load factors mean an airline's fixed costs are spread across a greater number of passengers, making the airline more profitable. The pandemic led to a reduction in air travel, leaving airlines with high fixed costs amid falling load factors and revenues, the combination of which has caused steep losses. Continuing to boost its load factor will help United Airlines to return to profitability.

United Airlines maintained an annual load factor of nearly 84% in the two years prior to the start of the pandemic. But in FY 2020, its annual load factor sank to 60.2% amid cratering travel demand triggered by the pandemic. Its load factor fell to as low as 33.1% in the second quarter of FY 2020 before rising to 47.8% in the third quarter and then to 55.6% in the fourth. It continued to increase throughout FY 2021, reaching 77.0% in the final quarter of FY 2021. Analysts expect United Airlines' load factor in Q1 FY 2022 to be 77.0%, which is stable on a sequential basis but up considerably from the year-ago quarter. For full-year FY 2022, analysts expect an annual load factor of 81.2%. That would be the highest level since the start of the pandemic, but still slightly below pre-pandemic levels.

Article Sources

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  1. The Wall Street Journal. "United Airlines’ Profit Dented by Delta Variant."

  2. The Wall Street Journal. "United Airlines Says Omicron Variant to Slow Travel Rebound."

  3. Reuters. "U.S. airline demand, costs soaring as earnings kick off."

  4. United Airlines Holdings Inc. "United to Hold Webcast of First-Quarter 2022 Financial Results."

  5. Visible Alpha. "Financial Data."

  6. United Airlines Holdings Inc. "United Airlines Achieves Fourth Quarter Financial Targets and Reiterates Long-Term Commitments -- Despite Headwinds from Omicron Variant."

  7. United Airlines Holdings Inc. "United Airlines Third-Quarter Results; Remains on Track to Meet 2022 Targets; Poised to Capitalize on International Reopening."

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