(UPDATED July 21, 2022, 6:20 p.m. EST with comments from earnings call)
Cargo revenue growth at United Airlines decelerated in the second quarter but was barely noticed as a surge in passenger demand pushed the carrier to its first profit since the pandemic despite high fuel costs.
United (NASDAQ: UAL), which has led U.S. carriers in cargo the past couple years, generated $574 million in cago revenue for the June quarter, a drop of 5.3% from the 2021 period but still 95% above the pre-pandemic level, according to results posted after Thursday’s market close. During the first half, cargo revenue topped $1.2 billion, $98 million above last year’s total and 107% better than in 2019.
Cargo yield remained 107% above the pre-pandemic benchmark.
“As the industry pulls back up to normal passenger schedules, we expect cargo yields will decline in the future months, but remain solidly above 2019 levels. I want to also note that our cargo volumes remained strong and are only constrained by available space now being used by passenger luggage,” Chief Commercial Officer Andrew Nocella said on a call with analysts.
There is little sign of a drop in cargo volume that would signal a recession, he added.
In 2021, United Cargo received $2.4 billion in revenue. The figure could still be achieved with a strong second half, but logistics experts say demand for international freight transportation is more muted this year because of adequate retail inventories and slower consumer spending.
United’s first-quarter cargo sales were $627 million, 26% more than in 2021.
Rival Delta Air Lines’ (NYSE: DAL) cargo business saw its best second quarter in history with $272 million in revenue, a 46% jump from before the pandemic and 8.4% above 2021. For the first half, Delta Cargo pulled in $561 million in revenue.
United recorded adjusted net income of $471 million behind record second-quarter operating revenue of $12.1 billion. Adjusted operating margin was 8.2% and the company said it expects a full-year margin of 9%.
Management said the pandemic recovery in passenger travel will more than offset a slowing economy but acknowledged operational challenges, record fuel costs and a potential recession presented a risk to returns.
United in recent weeks has trimmed its schedule by 15% to prevent more flight cancellations and delays after being caught short on pilots as demand soared. Airport congestion has also slowed operations. The cutbacks impacted United’s top-line potential and increased costs.
Earnings per share of $1.43 were below analysts’ consensus of $1.88. Flight reductions contributed to higher costs – $283 million above the forecast by Cowen investment bank. United cut capacity at its Newark, N.J., hub alone by 12% because it had too many flights scheduled at an airport that is also undergoing runway resurfacing, terminal construction and air traffic control issues.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
RELATED NEWS:
United Airlines reaps cargo benefit from supply chain chaos
Return of United Airlines’ 777s provides ‘material’ upside for cargo
Freight Fraud Symposium
Double brokering. AI deepfakes. Identity theft. Freight fraud is an existential threat to the industry. Get ahead of it.
Supply Chain AI Symposium
Past the hype. Join operators, founders, and enterprise leaders figuring out how to deploy AI in supply chain.
Future of Rail Symposium
Reshoring is rewriting freight demand. Join shippers, rail executives, and government officials to shape the next decade.
Double brokering. AI deepfakes. Identity theft. Freight fraud is an existential threat to the industry. Get ahead of it.
Rock & Roll Hall of Fame • Cleveland, OH Register NowPast the hype. Join operators, founders, and enterprise leaders figuring out how to deploy AI in supply chain.
The Old Post Office • Chicago, IL Register NowReshoring is rewriting freight demand. Join shippers, rail executives, and government officials to shape the next decade.
The Signal at Chattanooga Choo Choo • Chattanooga, TN Register Now