United Airlines Plans $1.5 Billion Share Buyback Amid Profit Surges

United Airlines declared on Tuesday that it will begin a $1.5 billion share buyback. This decision follows higher-than-expected earnings during the busy summer travel season. The airline also forecasts solid financial results for the last quarter of the year.

United expects to earn between $2.50 and $3.00 per share in the fourth quarter, a notable increase from the $2.00 per share reported last year. Analysts surveyed by LSEG estimated earnings of $2.68 per share for the upcoming quarter.

For the third quarter, United reported adjusted earnings of $3.33 per share, surpassing expectations of $3.17. The airline's revenue reached $14.84 billion, slightly above the anticipated $14.78 billion. This marks United's first share buyback since the onset of the Covid-19 pandemic. U.S. airlines received over $50 billion in government aid during the pandemic, restricting share repurchases and dividends as airlines struggled financially.

In a note to staff, United CEO Scott Kirby explained the reasoning behind the buyback. "Like other leading airlines and companies, we are initiating a measured, strategic share repurchase program," he said. He also told employees, "My commitment to you is that investing in our people and business will always be my top priority."

United's revenue increased by 2.5% in the third quarter compared to the previous year. However, net income fell by 15% to $965 million. The airline noted positive domestic unit revenue in August and September due to reduced flight capacity, which had been lowering fares. United expanded its capacity by 4.1% in the third quarter. Corporate revenue climbed by 13%, while premium revenue, which includes business class tickets, rose by 5%. Sales from basic economy tickets grew by 20%.

Last week, United unveiled ambitious plans for next year, introducing new flights to destinations like Mongolia, Senegal, Spain, and Greenland. These routes aim to capture the demand for international travel.

Adjusting for one-time items, United's earnings per share of $3.33 exceeded Wall Street's forecasts and the airline's earlier estimates of $2.75 to $3.25. Airline executives will conduct a call with analysts at 10:30 a.m. ET on Wednesday to discuss demand for the end of the year and into 2025.

Meanwhile, United's flight attendants' union criticized the buyback decision. The president of the Association of Flight Attendants, Sara Nelson, stated, "That money United just promised Wall Street belongs to Flight Attendants who worked throughout the pandemic."

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