(UPDATED July 21, 2022, 6:20 p.m. EST with comments from earnings call)
Cargo revenue growth at United Airlines decelerated in the second quarter but was barely noticed as a surge in passenger demand pushed the carrier to its first profit since the pandemic despite high fuel costs.
United (NASDAQ: UAL), which has led U.S. carriers in cargo the past couple years, generated $574 million in cago revenue for the June quarter, a drop of 5.3% from the 2021 period but still 95% above the pre-pandemic level, according to results posted after Thursday’s market close. During the first half, cargo revenue topped $1.2 billion, $98 million above last year’s total and 107% better than in 2019.
Cargo yield remained 107% above the pre-pandemic benchmark.
“As the industry pulls back up to normal passenger schedules, we expect cargo yields will decline in the future months, but remain solidly above 2019 levels. I want to also note that our cargo volumes remained strong and are only constrained by available space now being used by passenger luggage,” Chief Commercial Officer Andrew Nocella said on a call with analysts.
There is little sign of a drop in cargo volume that would signal a recession, he added.
In 2021, United Cargo received $2.4 billion in revenue. The figure could still be achieved with a strong second half, but logistics experts say demand for international freight transportation is more muted this year because of adequate retail inventories and slower consumer spending.
United’s first-quarter cargo sales were $627 million, 26% more than in 2021.
Rival Delta Air Lines’ (NYSE: DAL) cargo business saw its best second quarter in history with $272 million in revenue, a 46% jump from before the pandemic and 8.4% above 2021. For the first half, Delta Cargo pulled in $561 million in revenue.
United recorded adjusted net income of $471 million behind record second-quarter operating revenue of $12.1 billion. Adjusted operating margin was 8.2% and the company said it expects a full-year margin of 9%.
Management said the pandemic recovery in passenger travel will more than offset a slowing economy but acknowledged operational challenges, record fuel costs and a potential recession presented a risk to returns.
United in recent weeks has trimmed its schedule by 15% to prevent more flight cancellations and delays after being caught short on pilots as demand soared. Airport congestion has also slowed operations. The cutbacks impacted United’s top-line potential and increased costs.
Earnings per share of $1.43 were below analysts’ consensus of $1.88. Flight reductions contributed to higher costs – $283 million above the forecast by Cowen investment bank. United cut capacity at its Newark, N.J., hub alone by 12% because it had too many flights scheduled at an airport that is also undergoing runway resurfacing, terminal construction and air traffic control issues.
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