Shares of United Airlines rose nearly 10% after hours yesterday following earnings but ultimately gave it all back, in part because of a bearish shift in the broader market.
One of the things that weighed was commentary from the company that tilted bearish and highlighted real weakness from consumers, particularly in the middle class.
Some highlights from the conference call:
Scott Kirby, CEO
- “The first quarter of 2025 was sure eventful. It’s clear the softer macroeconomic environment is driving both volatility in the market and softer demand for travel.
Andrew Nocella, Chief Commercial Officer
- Demand trends did turn down as we exited January resulting in lower revenue production than we had originally forecasted for Q1. Domestic main cabin RASMs were down 5% year-over-year and represent the bulk of the gap between our Q1 revenue expectations and actual results.”
- “So far, we’ve seen no deterioration in high-end consumers’ willingness to purchase a premium experience. We attribute this to the fact that the economic uncertainty has a larger impact on more budget-minded discretionary travelers than those seeking a premium experience.”
- “I do think there are different types of consumers and each of those consumer types feels a different level of pressure in the situation that the country faces right now. And clearly, the discretionary consumer faces more pressure. And that customer was probably less likely to take that vacation to Rome or Tokyo to begin with.”
The airline said it’s preparing for the possibility that “bookings could weaken from here” and took the rare step of issuing two sets of guidance, with one for a recession. Those numbers highlighted the extreme operating leverage in the commercial aviation industry with a dozen empty seats being the difference between a cash-gushing machine and a financial disaster.
This article was written by Adam Button at www.forexlive.com.