United Airlines Q2 2022 Earnings Preview: Revenue Hits $12.2B, Return to Profitability Expected

Focus on United Airlines' Load Factor and Profitability

Key Highlights to Watch

• Analysts project adjusted EPS of $1.93 for Q2 2022, a sharp turnaround from a loss of $3.91 in Q2 2021.
• Load factor is anticipated to climb year-over-year, returning to pre-pandemic standards.
• Revenue is expected to soar over 120% year-over-year, driven by rising travel demand.

United Airlines Holdings Inc. (UAL) is experiencing a robust revenue recovery as air travel rebounds following pandemic restrictions. However, industry-wide staffing shortages have caused delays and cancellations, including at United. The airline is actively recruiting thousands of pilots lost during the pandemic slowdown, while negotiating a pilot union contract amid some disagreements. Additionally, soaring aviation fuel prices are pushing ticket costs higher, posing challenges to the airline’s recovery trajectory.

Investors eagerly await United’s Q2 2022 earnings report, due after market close on July 20, with a follow-up earnings call scheduled for July 21. Expectations are high for United to return to profitability for the first time since Q4 2019, bolstered by more than doubling revenue compared to last year.

A critical focus will be United's load factor, measuring the percentage of filled seats on flights. Analysts predict a significant increase, with the airline expected to reach an 84.5% load factor in Q2 2022, matching pre-pandemic levels.

Over the past year, United’s stock has shown volatility, outperforming the market during earnings releases but also facing sharp pullbacks. As of mid-July 2022, the stock’s 1-year return trails the S&P 500, reflecting ongoing market uncertainties.

United Airlines Earnings and Revenue Recovery

The pandemic severely impacted United, resulting in nine consecutive quarters of adjusted losses starting Q1 2020. However, losses have narrowed steadily, with analysts forecasting a return to profitability with $1.93 adjusted EPS in Q2 2022—a pivotal step toward full recovery despite still trailing the $4.21 EPS seen in Q2 2019.

Revenue took a massive hit, plunging from $11.4 billion in Q2 2019 to $1.5 billion in Q2 2020. Since then, revenue has steadily climbed, reaching $7.6 billion in Q1 2022. The anticipated $12.2 billion revenue for Q2 2022 marks a 122.1% year-over-year increase and surpasses any quarter in 2019, signaling strong demand resurgence.

Source: Visible Alpha

The Importance of Load Factor

Load factor is a vital metric indicating the percentage of available seats filled with paying passengers. Airlines strive for high load factors to maximize profitability since the fixed costs of flights remain constant regardless of passenger count. The pandemic caused load factors to plummet, leading to heavy losses. United’s ability to boost its load factor is crucial for sustaining its return to profitability.

Before the pandemic, United’s load factor hovered around 84% in 2018 and 2019. This dropped dramatically to 60.2% in 2020, with a pandemic low of 33.1% in Q2 2020. Recovery began in late 2020 and continued through 2021, reaching 77% by year-end. Although the airline has not surpassed 80% since the pandemic started, Q2 2022 is expected to break this barrier with an estimated 84.5% load factor, signaling a near-complete recovery with an anticipated 81.5% annual load factor for 2022.

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