United Raises Profit Outlook Even as Fuel Costs Erase Earnings
United Airlines Holdings posted a 17.3% drop in second-quarter net income to $805 million as fuel expense jumped 84.1% to $5.11 billion, yet the carrier raised its full-year profit guidance.
United Airlines Holdings (UAL), the Chicago-based carrier, reported second-quarter revenue growth that accelerated even as a spike in fuel costs pushed net income and earnings per share down from a year earlier. Total operating revenue rose 16.0% year over year, up from 10.6% growth in the first quarter and a marked reversal from the softer 2.6% and 4.8% gains posted in the third and fourth quarters of 2024, respectively.
The reacceleration in revenue was driven by pricing rather than volume. Yield climbed 12.1% in the quarter, a sharp turn from 4.2% growth in the first quarter and from negative yield in the prior two quarters, while total revenue per available seat mile rose 12.1%, up from 6.9% in the first quarter and reversing declines of 1.6% and 4.3% in the fourth and third quarters of 2024. Capacity growth, meanwhile, held at 3.5%, roughly half the 6.5% to 7.2% pace United posted in the back half of 2024, consistent with a five-point capacity reduction plan the company outlined earlier in the year.
That pricing strength was not enough to offset fuel. Fuel expense surged 84.1% to $5.11 billion from $3.04 billion a year earlier, as the average price per gallon jumped to $4.19 from $2.78 in the first quarter and $2.34 in the second quarter of 2024. Headline unit costs followed: cost per available seat mile rose 15.2% to 18.99 cents, a steep acceleration from 4.4% growth in the first quarter, even as the ex-fuel measure of unit costs rose a comparatively steady 6.1%, little changed from 5.9% in the prior quarter. The divergence between the two measures shows the cost pressure was concentrated almost entirely in fuel rather than in labor, maintenance or other operating expenses.
With operating expense growing 19.2%, faster than the 16.0% rise in revenue, operating income fell 17.3% to $1,096 million from $1,325 million, reversing a first quarter in which operating income had risen 64.2%. Net income declined 17.3% to $805 million and diluted earnings per share fell 17.2% to $2.46, a reversal from the first quarter's 85% year-over-year EPS gain to $2.14 and the fourth quarter's 8.1% gain to $3.19. Adjusted diluted earnings of $1.99 a share beat the company's guidance despite the fuel headwind.
Domestic passenger revenue rose 20.3%, outpacing international growth of 11.2%, a reversal from the first quarter when the two grew at roughly matched paces of 10.2% and 12.2%. Premium revenue rose 16%, roughly flat against the first quarter's pace but sharply faster than the 9% and 6% growth rates posted in the fourth and third quarters of 2024, while cargo revenue growth accelerated to 23% from 3% in the third quarter of last year.
United recovered only about half of the fuel cost increase through pricing in the second quarter, but expects to recover 80% to 90% of the increase in the third quarter and the full amount by the fourth — a forward margin-recovery timeline the company had not previously disclosed. Management raised full-year adjusted diluted earnings guidance to a range of $9.00 to $11.00 a share even after flagging an increase of nearly $6 billion in expected full-year fuel costs compared with its start-of-year outlook.
United also raised $3.7 billion in new private-bank liquidity during the quarter, intended to insure against oil-price spikes and geopolitical risk, following a first quarter in which the company issued $2 billion in unsecured bonds — its first unsecured market return since 2019 — and paid down $3.1 billion of debt. Net leverage ticked up to 2.2 times trailing earnings from 2.0 times in the first quarter, moving back toward the 2.2 times level reported at the end of 2024, while free cash flow fell to $322 million from $2.9 billion in the prior quarter.
Special items swung to a $145 million credit in the quarter, against a $447 million charge a year earlier, bringing the six-month tally to a $534 million credit versus a $340 million charge over the same period last year. The anchor release did not disclose a share-repurchase figure, after United had reported $27 million bought back in the first quarter, $29 million in the fourth quarter of 2024 and $19 million, or $612 million year-to-date, in the third quarter of 2024.