United Airlines Expects First-Quarter Loss Due to Boeing 737 Max Grounding
United Airlines, one of the largest carriers in the United States, has announced that it expects to incur a loss in the first quarter of this year. The loss is a direct result of the Federal Aviation Administration’s (FAA) decision to ground all Boeing 737 Max 9 planes following an incident involving an Alaska Airlines flight. United Airlines predicts an adjusted loss of between 35 cents and 85 cents per share for the first three months of the year.
The grounding of the Boeing 737 Max 9 planes has had a significant impact on United Airlines, as it currently operates 79 of these aircraft, more than any other carrier. Alaska Airlines, which operates the second-highest number of these planes, has also been affected. Both airlines have had to cancel numerous flights while the planes undergo inspection.
It is important to note that the grounding order only applies to the Boeing 737 Max 9 planes and not the more common Boeing 737 Max 8, which is used by United, American, and Southwest. This means that these airlines have not been directly affected by the grounding order.
United Airlines expects the planes to remain grounded until January 26, although their forecast assumes that they will not be able to fly the planes at all this month. The grounding of the planes has led to increased unit costs for United Airlines, excluding fuel, with a mid-single-digit percentage point increase expected in the first quarter compared to last year. Three points of this increase can be attributed to the grounding of the Boeing 737 Max 9 planes. However, United Airlines forecasts flat unit revenues for the first three months of the year.
Despite the anticipated loss in the first quarter, United Airlines had a relatively strong holiday period, with net income of $600 million for the last three months of 2023. This figure represents a decrease of nearly 29% compared to the previous year. However, revenue for the same period came in at $13.63 billion, up almost 10% from a year earlier and exceeding analysts’ estimates.
United Airlines CEO Scott Kirby expressed satisfaction with the company’s performance, stating, “Despite unpredictable headwinds, we delivered on our ambitious EPS target that few thought possible — and set new operational records for our customers.” The airline also highlighted strong travel demand in late 2023 and solid bookings for the current year.
Looking ahead, United Airlines has provided a forecast for adjusted earnings of between $9 and $11 per share for the full-year 2024, aligning with analysts’ estimates. The airline’s executives will be holding an earnings call on Tuesday, during which they are likely to face questions regarding compensation from Boeing for the grounding. Alaska Airlines will be reporting its results on Thursday, and Boeing is scheduled to release its earnings on January 31.
In conclusion, United Airlines expects to face a first-quarter loss due to the grounding of Boeing 737 Max 9 planes by the FAA. The airline has the highest number of these planes in its fleet, and the grounding has resulted in flight cancellations and increased costs. Despite this setback, United Airlines had a strong holiday period and remains optimistic about travel demand and bookings for the future. The company’s executives will address the issue of compensation from Boeing during their earnings call, and further updates will be provided by Alaska Airlines and Boeing in the coming days.
