By Shivansh Tiwary (Reuters) -United Airlines said on Wednesday it expects its financial performance to remain resilient despite economic uncertainty stemming from new tariffs, citing demand for high-margin premium offerings and international travel. Shares of the carrier rose as much as 5% in morning trade before shedding those gains to a broader market fall. They […]
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United Airlines banks on premium, international travel to ease trade war gloom
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By Shivansh Tiwary
(Reuters) -United Airlines said on Wednesday it expects its financial performance to remain resilient despite economic uncertainty stemming from new tariffs, citing demand for high-margin premium offerings and international travel.
Shares of the carrier rose as much as 5% in morning trade before shedding those gains to a broader market fall. They were marginally down in afternoon trade.
“Regardless of the economic path ahead, we expect our financial results to be resilient,” CFO Michael Leskinen said on Wednesday.
Trump’s trade policies and sweeping tariffs have sparked a global trade war and increased the possibility of a global recession, making customers hesitant to spend on travel.
Expectations of a gloomy demand environment have prompted airlines to take a prudent approach with capacity and cost controls. Several U.S. airlines are cutting flights to avoid lowering fares and to protect margins.
The economic downturn is creating headwinds for major U.S. airlines, which, just two months ago, were benefiting from strong travel demand and solid pricing across their networks.
However, airlines with an extensive premium presence have limited some of the impact.
United on Tuesday reported better-than-expected first-quarter earnings and said forward bookings for high-margin premium cabins rose 17% over the past two weeks, with international reservations up 5% during that period.
“So far we’ve seen no deterioration in high-end consumers’ willingness to purchase a premium experience,” Chief Commercial Officer Andrew Nocella said on the company’s earnings call.
United said it expects to hit its full-year adjusted profit forecast of $11.50 to $13.50 per share if demand remains stable and fuel prices stay around the current levels.
“This was a well-executed quarter, and we expect UAL to outperform given its premium revenue base, strong loyalty program, and solid balance sheet,” BofA said in a note, while maintaining its “buy” rating on the stock.
But United also warned the forecast was dependent on the macro environment, which it added was “impossible to predict this year with any degree of confidence.”
If a recession occurs, it would lead to a 5-percentage-point drop in its revenue and translate into a full-year adjusted profit of $7 to $9 a share.
This stands in contrast to rival Delta Air Lines, which withdrew its full-year outlook last week, citing “stalled” demand growth.
(Reporting by Shivansh Tiwary and Rajesh Kumar Singh; Editing by Shinjini Ganguli and Alan Barona)