Key Takeaways

  • Analysts estimate adjusted EPS of -$4.12 vs. -$9.31 in Q2 FY 2020.
  • Load factor is forecast to rise YOY, but is still expected to be below pre-pandemic levels.
  • Revenue is expected to rise amid economic reopening and pickup in travel demand.

United Airlines Holdings Inc. (UAL), like many air carriers, is still feeling the effects of the COVID-19 pandemic that brought air travel to a near standstill last year. The outlook, however, is brightening due to vaccine rollouts, easing travel restrictions, and ten of billions of dollars in federal rescue money that has financially bolstered the industry. United Airlines, one of the big four U.S. carriers, also will have to navigate its recovery amid new scrutiny by the Biden administration. The president's July 9 executive order contained directives to improve competition, including regulating fees charged by air carriers.

Investors will look for a clearer picture of United Airlines' financial performance, and its outlook, when it reports earnings on July 21, 2021 for Q2 FY 2021. Analysts expect the airline's adjusted loss per share to narrow considerably as revenue surges from last year's pandemic-depressed low.

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 carrier's load factor to be more than double its level in the second quarter of FY 2020, when it reached a low during the pandemic. However, the company's load factor is still expected to be below the norm before the height of the pandemic. COVID-19 still remains a threat to the economy and the industry. The fast-spreading Delta variant, the most contagious version of the virus, could dampen some consumers' enthusiasm for air travel.

United Airlines' shares have performed on par with the broader market over the past year. The stock began to outperform in November 2020 following the U.S. presidential election and positive results regarding the efficacy of COVID-19 vaccines. But its performance has been extremely volatile ever since. After reaching a recent peak in early June, the stock has shed gains made since the second half of February 2021. Shares of United Airlines have provided a total return of 33.4% over the past year, slightly below the S&P 500's total return of 34.6%.

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

United Airlines Earnings History

The stock sank after United Airlines reported Q1 FY 2021 earnings and revenue that missed expectations. The company reported an adjusted loss per share for the fifth quarter in a row. Revenue was down 59.6% from the year-ago quarter, marking the fifth consecutive quarter of declining revenue. Despite the weak performance, the company said it was optimistic about the recovery in travel demand.

In Q4 FY 2020, United Airlines reported a fourth straight quarterly adjusted loss per share and year-over-year (YOY) decline in revenue. Revenue fell 68.7% compared to the year-ago quarter. The weak performance was caused by what the airline carrier called the "most disruptive crisis in aviation history."

Analysts expect significant improvement in United Airlines' financial performance in Q2 FY 2021, but results are still estimated to be below pre-pandemic levels. The carrier is expected to report an adjusted loss per share that's less than half the size of the loss posted in the year-ago quarter. Revenue is expected to rise 271.5%, breaking the streak of revenue declines. But quarterly revenue will still be well below the level the airline was generating before the pandemic. For full-year FY 2021, analysts forecast that the company's adjusted loss per share will narrow sharply as revenue rebounds 55.2% after falling 64.5% in FY 2020.

United Airlines Key Stats
  Estimate for Q2 2021 (FY) Q2 2020 (FY) Q2 2019 (FY)
Adjusted Earnings Per Share ($) -4.12  -9.31 4.21
Revenue ($B) 5.5  1.5 11.4
Load Factor (%) 70.4 33.1 86.0

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 has led to a reduction in air travel, leaving airlines with high fixed costs amid falling load factors and revenues, the combination of which is causing steep losses.

United Airlines maintained an annual load factor in a tight range between 82-84% from FY 2017 to FY 2019. But in FY 2020, its load factor sank to 60.2% amid cratering travel demand triggered by the pandemic. Its load factor fell as low as 33.1% in Q2 FY 2020 before rising to 47.8% in Q3 and then to 55.6% in Q4. After rising slightly to 56.8% on a sequential basis in Q1 FY 2021, analysts expect United Airlines' load factor in Q2 FY 2021 to rise to 70.4%, more than double the level of the year-ago quarter. However, that would still be more than ten percentage points below pre-pandemic levels. For full-year FY 2021, analysts are forecasting that the air carrier's load factor will be 71.8%. That level would be a little more than ten percentage points above FY 2020, but more than ten percentage points less than pre-pandemic levels.