United Airlines Finds Growth in Premium, International Offerings
United on Tuesday reported stronger-than-expected results for the first quarter, powered by demand for international flights and premium seats.
Premium cabin revenue rose 9.2% year-over-year and international passenger revenue per available seat mile (PRASM) was up 5.2%.
Demand for domestic flights fell, however, and the carrier will be cutting capacity.Demand for international flights and premium seats is powering growth for United Airlines (UAL).
In its first-quarter report released Tuesday, the Chicago-based carrier swung to an adjusted profit of 91 cents per share on revenue that grew more than 5% year-over-year to record $13.21 billion.
The stronger-than-expected results were led by growth at the front of the plane and on long-haul flights. Premium cabin revenue rose 9.2% year-over-year, United reported, and international passenger revenue per available seat mile (PRASM) was up 5.2%, including an 8.5% increase in the Pacific.
"The market is down in recent months, but the high-end consumer, the more wealthy consumer, the one that takes the global vacations, the one that wants to sit in a premium seat seems to be less impacted so far," Chief Commercial Officer Andrew Nocella said during Wednesday's earnings call, according to a transcript from AlphaSense. "And I think that's really good for our business, and it's consistent with our brand and winning these customers to begin with."
CFO Mike Leskinen added, "I think probably at the industry level with a real mix shift in our premium cabins, we have less corporate and we have more premium leisure. And I believe that piece of our business is showing some great resilience as well. So, a lot of secular trends are accruing to our benefit."
United shares surged close to 6% in early trading Wednesday, before paring back gains later in the session amid a broader market decline. (Read Investopedia's live coverage of today's markets here.)
The gains on international flights are helping make up for declines in the U.S. United reported domestic PRASM fell 3.9% from a year ago amid an "uncertain macroeconomic environment."
In response, the carrier said it was "removing 4 points of scheduled domestic capacity starting in the third quarter," and issued "bimodal" guidance.
"The bulk of issue we're seeing today is demand for domestic flights, particularly in the main cabin," Nocella said. "And that's where the challenge will be in Q2 as it was in Q1, and it's going to be clearly a negative RASM environment for domestic in Q2 based on everything we see right now."
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