United Out-Sold Delta by Revenue and Still Lost the Profit Race

United Airlines reported third-quarter revenue of about $17.88 billion, up 17.4 percent from $15.23 billion a year earlier, narrowly beating Delta’s $17.59 billion. Yet Delta kept far more of its money. Delta’s adjusted pretax profit of $1.497 billion was about 35 percent above United’s $1.109 billion, and its adjusted pretax margin of 8.5 percent compares with United’s 6.2 percent.

Fuel explains much of the squeeze. United’s fuel expense rose about $1.846 billion, or 62 percent, and other adjusted operating costs climbed roughly $895 million. Non-fuel unit costs rose 7.8 percent, and adjusted operating profit fell about $91 million. Adjusted earnings per share came in at $2.54 versus a $2.57 analyst consensus. Free cash flow was negative $1.843 billion, compared with negative $153 million a year earlier.

The outlook is the harder part. United guided fourth-quarter adjusted earnings of $0.50 to $1.50 per share, well below the roughly $1.76 analysts expected, even while projecting revenue growth above 20 percent. Delta, for its part, trimmed full-year guidance earlier this month to $5.10 to $5.60 per share, though it still earned $1.5 billion before tax in the quarter.

For travelers, the pattern matters because fuel-driven costs tend to reach fares and fees. American Airlines said its fourth-quarter fuel was running about a dollar per gallon above its July assumption and that it could trim capacity if prices stay high. Expect airlines to defend margins with schedule cuts and tighter discounting through the winter, so booking early for holiday travel may help.

Sources: Aviation A2Z, Live and Let’s Fly