United Airlines (NASDAQ: UAL) impressed a year ago when cargo sales jumped 36% during the early stages of the COVID pandemic. That was merely a warmup for the 2021 second quarter when the passenger carrier more than doubled cargo revenue to $606 million from the 2019 benchmark period.
For the first half of 2021, United Cargo pulled in $1.1 billion, an 89% increase from two years ago, according to financial results released after the market closed on Tuesday.
The 105% cargo growth helped assuage some investors slightly disappointed in passenger revenues and load factors. The company’s stock was down a point to $45.89 in after-hours trading.
United was one of the most aggressive carriers in substituting cargo shippers for passengers as the primary customer on many aircraft when COVID outbreaks depressed travel volumes last year. It has flown more than 13,400 cargo-only flights in the past 15 months, while continuing to carry belly freight where passenger service was still available.
A 77% increase in cargo revenue in the fourth quarter of last year seemed like a possible peak for United Cargo with questions early in the year about whether consumer buying behavior would slow down, but the North American air cargo market has remained red hot and United continues to benefit from extremely high yields and service that meets freight forwarders’ needs.
United transported nearly 298 million pounds of freight, including 48 million pounds of critical supplies such as medical kits, personal protective equipment and pharmaceuticals, as well as more than 765,000 pounds of military mail and packages, the second-quarter earnings report said. COVID-19 vaccine shipments ticked up during the quarter to 225,000 pounds, United said.
Industry experts say COVID vaccine shipments by air are increasing industrywide as the U.S. and Europe turn from caring for their own populations to helping vaccinate the world.
On Tuesday, American Airlines (NASDAQ: AAL) said it delivered 3 million doses of COVID vaccine from Chicago O’Hare International Airport to Guatemala City. The climate-controlled shipment follows 1.5 million COVID-19 vaccine doses that American transported to Guatemala earlier this month, part of a White House initiative to share 80 million doses globally this summer. American donated the Boeing 777-300 cargo-only flight for Tuesday’s mission.
United’s results were more than twice the $251 million in cargo revenue posted last quarter by Delta Air Lines (NYSE: DAL).
The cargo division’s performance was part of Chicago-based United’s overall comeback story in which earnings and revenue beat analysts’, and even its own, expectations. The company generated revenue of $5.47 billion and posted an adjusted net loss of $1.3 billion. The revenue figure was 52% below 2019 levels, but United said faster-than-expected recovery in passenger demand enabled it to narrow losses, with officials now projecting a pretax profit in the third and fourth quarters as critical international long-haul and business travel accelerate.
Excluding a large federal relief payment for covering employee wages, and other special charges, United’s net loss was actually $434 million. Although it substantially narrowed losses, Delta last week reported an adjusted profit last week and Southwest Airlines did so in April – albeit with the help of aid from the Payroll Support Program.
Company officials said they expect a full recovery in travel demand in 2023.
United projected passenger seat capacity would improve to 26% below 2019 levels this quarter, from down 41% in the second quarter.
Rosy scenarios for the second half of the year are being tempered by a dose of COVID reality, with large parts of the world completely unvaccinated, the Delta variant spreading at alarming rates in many regions and infections rising. Even as Canada said it plans to reopen its borders with the U.S. next month and the United Kingdom removes restrictions on economic activity, the U.S. government on Monday warned citizens not to travel to the U.K.
Cargo as a share of total revenue dropped in the second quarter to 11% compared to 16.5% at the end of 2020 and 27.3% a year ago, but that is only because of the recovery in passenger revenues from historic lows.
As the passenger business picks up, United is returning some of the temporary freighters to full passenger service. But widebody planes on long-haul routes will still provide a large amount of space for freight, and shippers welcome more passenger service because that means more frequencies and more total capacity in the air.
Last month, United signaled its optimism about the recovery by ordering 270 narrowbody aircraft from Boeing and Airbus.