United Airlines Anticipates Q1 Loss from Boeing 737 Max 9 Grounding

United Airlines announced on Monday that it anticipates a first-quarter financial setback, attributing it to the Federal Aviation Administration’s (FAA) grounding of Boeing 737 Max 9 planes. The move comes in the aftermath of an incident during an Alaska Airlines flight on January 5, where a part malfunction occurred on the same type of aircraft.

In a regulatory filing, United projected an adjusted loss ranging between 35 cents and 85 cents per share for the first quarter of the year. This forecast serves as the initial insight for investors into the economic ramifications resulting from the FAA’s grounding, which was implemented one day after the Alaska Airlines incident.

Ahead of Competition:

Having the largest fleet of 79 Boeing 737 Max 9 planes, United leads the pack, followed by Alaska. The airline expects the grounding to persist until January 26, although their forecast assumes no flights on these planes throughout the month.

Both United and Alaska have had to cancel numerous flights this month due to inspections while the planes remain grounded. Notably, the more widespread Boeing 737 Max 8, in operation at United, American, and Southwest, remains unaffected by the grounding order.

United stated that excluding fuel costs, unit expenses are anticipated to rise by mid-single-digit percentage points in the first quarter compared to last year, with three points attributed to the Max grounding. The airline also predicted flat unit revenues for the first three months of the year.

The first-quarter warning from United follows a relatively strong holiday period, despite challenges posed by winter storms in January. United’s shares experienced a more than 6% increase in after-hours trading.

Stats of Profits:

In the preceding quarter of 2023, United reported a net income of $600 million, down nearly 29% from the previous year, with revenue reaching $13.63 billion, a nearly 10% increase from the prior year and exceeding analysts’ estimates.

While adjusting for one-time items, United’s fourth-quarter earnings of $2 per share fell from $2.46 a year earlier. However, the airline met its full-year adjusted earnings target of $10.05 per share for 2023.

Looking ahead, United has forecasted adjusted earnings for the full year of 2024 to be between $9 and $11 per share, aligning with analysts’ estimates. United’s CEO, Scott Kirby, expressed confidence in the airline’s positioning to capitalize on strong travel demand and deliver on short- and long-term financial targets.

United executives are expected to address questions about compensation from Boeing during an earnings call on Tuesday, while Alaska and Boeing are scheduled to report their results later this month.