United’s cargo revenue falls 31% in 2023

United Airlines reported $53.7 billion in operating revenue for 2023, an increase of 19.5% year over year, but saw cargo revenue fall 31.1% YoY to $1.5 billion. [caption id="attachment_93518" align="alignright" width="300"] (Courtesy/United Airlines)[/caption] THE BIG PICTURE: Decreased demand and increased capacity continued to constrain United’s earnings for full-year 2023 and the fourth quarter, as passenger travel recovered from the pandemic. The carrier’s earnings were in line with the earnings Delta Air Lines reported last week. Despite depressed cargo figures throughout 2023, many analysts are cautiously optimistic that cargo operations and revenue will begin to recover in 2024. BY THE NUMBERS: United reported $13.6 billion in operating revenue for Q4, up 9.9% YoY, in today’s earnings call. Additionally in Q4: Cargo revenue was $402 million, down 14.8% YoY; United flew 894 cargo revenue ton miles, up 16.9% YoY; The carrier saw pre-tax income of $800 million, with a pre-tax margin of 5.7%; and Diluted earnings per share were $1.81. In the full year of 2023: United flew 3,159 cargo revenue ton miles, up 3.9% YoY; United flew nearly 141,974 tonnes of cargo, including about 4,354 tonnes of medical shipments and about 120 tonnes of military shipments; The carrier saw a pre-tax income of $3.4 billion, with a pre-tax margin of 6.3%; Diluted earnings per share were $7.89; and The carrier saw total debt and finance lease obligations of $29.3 billion at yearend. STATE OF PLAY: The United Next plan, released in April 2022, calls for fleet growth and newer technologies, among other goals. “Despite the numerous geopolitical and other headwinds around the globe, 2023 really was the year that our plan for United Next came together,” United Chief Executive Scott Kirby said in today’s earnings call. United Next could face delays due to recent issues with Boeing. United grounded 79 Boeing 737 Max 9 jets after a door partially blew off of an Alaska Airlines B737 Max 9 shortly after it had taken off from Portland International Airport (PDX) on Jan. 5. In response, the FAA suspended B737 Max 9 flights in the United States as well as those flying into U.S. territories. The grounded planes will not take to the skies again until they are deemed safe after inspection. “I’m proud of our tech ops team, who’s taken the lead and has been working 18-hour days nonstop since Jan. 6 to ensure that the Max 9 is 100% safe before we return it to service,” Kirby said. The Max 9 issues will not only affect current flight schedules but are expected to affect United Next’s fleet growth agenda. “In the fourth quarter, we took delivery of 20 Boeing Max and four Airbus A321 aircraft,” Executive Vice President and Chief Financial Officer Mike Leskinen said in the call. “Looking ahead to 2024, we have a total of 107 aircraft scheduled to deliver, 31 of those being Max 9. It is unrealistic at this time to believe all of those aircraft will deliver as currently planned.” United also has 277 Max 10 aircraft on order through 2030 and 200 auctions for Max 10s, Leskinen said. “The reality is that with the Max grounding, this is the kind of straw that broke the camel’s back with believing that the Max 10 will deliver on the schedule we had hoped for,” he said. “Though the United Next plan is firmly on track, it will take a little longer to get there.” Regarding the Max 10, Leskinen said: “It’s a great aircraft, but we can’t count on it and so we’re working on alternate plans.” Kirby clarified that United is not canceling its Max 10 order with Boeing but is “taking it out of our internal plans.” “We’ll be working on what that means exactly with Boeing, but Boeing is not going to be able to meet their contractual deliveries on at least many of those airplanes,” he said. NOTEWORTHY: United, along with many other carriers, is still not flying to Ben Gurion International Airport (TLV) in Tel Aviv as a safety precaution due to the ongoing Israel-Hamas war . “Service to Tel Aviv will resume as soon as it’s safe for our customers and crew but no sooner than Feb. 15,” Executive Vice President and Chief Commercial Officer Andrew Nocella said in the call. FUTURE LOOK: United expects a loss per share between $0.35 and $0.85, Leskinen said. He attributed these predictions to the Max 9 aircraft grounding and the impact of new labor agreements, among other things. “We’re confident that the pace of inflation in our costs will continue to be favorable vs. our historically lower-cost competitors,” Leskinen said. “Building off of our 2023 momentum, we expect full-year 2024 earnings per share to be between $9 to $11.” THE BOTTOM LINE: “United’s financial performance was impressive, especially if you consider where the analysts were tracking at this time a year ago,” Kirby said. MARKET REACTION: Shares of United Airlines (NASDAQ: UAL) rose 5.31% from market open to $40.49 as of market close today. United has a market capitalization of $13.28 billion.

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