Business travel barely received a mention by United Airlines executives during a Wednesday earnings call. CEO Scott Kirby noted it was "nice to see recent momentum in the segment, but also increasingly the leisure customers as well," and added more about the carrier's swing to leisure.
"We've gotten a lot more agile at pivoting capacity in the leisure markets, and not surprisingly have found that our core customers can now fly us in both business and leisure markets as we add seats to leisure destinations," Kirby said. "Our ability to move domestic capacity in the leisure markets when they're strong is a consequential driver of our strong relative revenue performance."
United's third-quarter operating revenue was up 12.5 percent year over year to $14.5 billion, the "highest third quarter in our history," Kirby said. Passenger revenue was up 14.6 percent to more than $13.3 billion.
Kirby also noted the carrier's improvement in its service-class segmentation efforts, which allows it to "compete more profitably on price" on the low end with Basic Economy class up to Polaris premium class on long-haul international flights.
Premium Plus class "has been a huge success," United chief commercial officer Andrew Nocella said. Premium Plus' third-quarter 2023 capacity is five times that of the same period in 2019, with revenue up seven times from 2019, and "is now our most profitable cabin." In addition, United plans to increase first-class seats on those domestic flights that offer the service to 16 by 2027 from 9 in 2019.
But Nocella also noted United's growth in Basic Economy, which many business travel programs do not include. About 12 percent of United's domestic passengers now comprise that segment, he said, and its revenue in the third quarter was up 50 percent from a year prior.
"Basic has made United more competitive versus ultra-low-cost competitors and [gives] our customers more choices," Nocella said. "We expect to be even more competitive in this segment of the market in the future with the arrival of our large narrowbody jets in 2024 and 2025."
As for domestic versus international, "we fly as much capacity in global markets as we do domestically," Nocella said. The carrier focused a majority of its third-quarter growth on international service, with that capacity increasing 22 percent year over year, and international margins remain "well ahead" of domestic. Still, "domestic margins remain solidly profitable" and were the second-highest all-time for the quarter. Profits were at record highs in both the Atlantic and Pacific regions, according to United.
United Q3 Metrics
Third-quarter 2023 capacity was up 15.7 percent year over year. Net income was more than $1.1 billion, up 20.7 percent from a year prior. The carrier also set a company record for the highest daily average of revenue passengers ever carried in a quarter at more than 482,000.
Domestic passenger revenue was up 8.7 percent year over year to nearly $7.7 billion. International was up 23.6 percent to nearly $5.7 billion. Average third-quarter fuel price was $2.95 per gallon. Fuel guidance for the fourth quarter was $3.28 per gallon.
United projects fourth-quarter revenue to be up about 10.5 percent on approximately 15.5 percent more capacity year over year. The guide assumes the carrier begins limited service to Tel Aviv again in November. Service currently is suspended through October. The destination accounts for about 2 percent of United's consolidated capacity, Nocella said. If flights were to be suspended through the fourth quarter, it would reduce capacity by approximately an additional 1.5 points, he added.
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