On Tuesday, United Airlines Holdings (NASDAQ: UAL) released its third-quarter report, beating Wall Street estimates. United also announced its first buyback since suspending the program during the Covid-19 pandemic, citing an improving industry outlook. Shares rose 13.2% after the release, fueled by optimism that airline profits will improve. Shares of its peers Delta Air Lines Inc. (NYSE: DAL), Southwest Airlines Co. (NYSE: LUV) and American Airlines Group Inc. (NASDAQ: AAL) also rose. Delta Air Lines alone saw a 5.4% increase during the morning session.

Third quarter highlights

For the quarter ended September, United Airlines reported that revenue rose 2.5% year-over-year to $14.84 billion, topping the LSEG consensus estimate of $14.78 billion. Company revenue rose 13%, business class tickets rose 5%, while sales of basic, no-frills economy tickets rose 20%.

Net income fell 15% year-over-year to $965 million, with adjusted earnings per share coming in at $3.33, down 8.8% year-over-year but still above LSEG's consensus estimate of 3.17 US dollars.

United said it plans to repurchase $1.5 billion in shares, similar to its airline rival Southwest Airlines, which announced a $2.5 billion stock repurchase program last month.

An improved outlook

After cutting excess flights over the summer that hurt profits, United Airlines improved its outlook. United forecast fourth-quarter adjusted earnings in a range of $2.50 to $3 per share.

Fares are expected to rise by 2025. The indicator of pricing power, domestic unit sales, turned positive in August and September compared to the previous year. Last week, rival airline Delta Air Lines also reported that unit sales improved in the third quarter. Delta also assumes that this trend will continue.

While revenue growth was moderate and profits even fell, United's third-quarter results were better than analysts expected. In the quarter under review, unprofitable capacity exited the market in mid-August, with revenue trends improving as the industry reached an inflection point and when capacity is rationalized in an established fixed cost business, everyone becomes more profitable. Along with the strategic initiation of the first share repurchase program, it is official that United and other airlines have moved on from COVID-19. However, the flight attendants union criticized the airline's decision to resume buybacks. The union believes flight attendants who have worked on the front lines during both the Covid-19 crisis and the fiscal recovery deserve the money United promised Wall Street. What may make the situation even more difficult for United Airlines is the fact that the union has not yet reached a new collective agreement with the company.

The story continues

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