United Airlines is grappling with significant financial challenges in the first quarter of the year, largely attributed to the grounding of the Boeing 737 Max 9. The recent filing by the airline sheds light on the broader financial implications that may arise for carriers dealing with issues surrounding this specific aircraft model.
The projected adjusted loss for United Airlines during the first quarter ranges from 35 to 85 cents per share, directly linked to the grounding of the Boeing 737 Max 9 since January 5. Notably, Alaska Airlines is the only other U.S. carrier affected by these groundings. United, possessing the most extensive Max 9 fleet with 79 aircraft, is facing substantial fallout, while Alaska Airlines, with a smaller fleet, is yet to disclose the financial impact, awaiting its fourth-quarter earnings announcement on January 25.
The grounding of the Boeing 737 Max 9 resulted from a mid-air incident involving an Alaska Airlines jet, where a door plug detached. This has forced United to cancel hundreds of flights daily. Although initially, the carrier projected 737-9 cancellations until January 26, the recent filing extends this expectation through the end of January. The operational disruptions from these cancellations have added to United’s challenges, with the carrier anticipating a three-percentage-point increase in unit costs (excluding fuel) in the first three months of 2024. Additionally, revenue is expected to remain flat during the first quarter.
United CEO Scott Kirby reportedly expressed frustration with Boeing’s ongoing quality issues. Despite these challenges, the airline remains cautiously optimistic about its future financial performance, anticipating an adjusted profit of $9 to $11 per share in 2024. This projection surpasses the $9.58 per share expected by Wall Street analysts, as reported by Reuters.
In the fourth quarter, United reported a net income of $600 million, reflecting a 29% decrease from the previous year. However, the overall revenue for 2023 demonstrated a noteworthy 10% increase from 2022, reaching $2.6 billion.
Acknowledging the resilience of its team, CEO Scott Kirby expressed gratitude, stating, “Our plans really came together in 2023, and I want to thank the United team for all of the hard work it took to get us there.” United highlighted strong travel demand throughout 2023 and reported revenue growth in both premium and basic economy cabins.
Despite the near-term challenges posed by the Boeing 737 Max 9 groundings, United Airlines appears poised to navigate through the headwinds and remains committed to its long-term strategic goals. The airline is scheduled to hold an earnings call at 10:30 a.m. ET on Tuesday, providing an opportunity for further insights into its financial position and strategies for overcoming the challenges at hand.