The shares of United Airlines (NASDAQ: UAL) have trended downward due to fears of low air travel demand in the fourth quarter. While the ongoing surge in coronavirus cases due to the delta variant is likely to cause near-term uncertainty, long-term trends look favorable for the stock. As highlighted in our earlier article , United Airlines' 270 plane order is likely to assist in revenue and margin expansion. Interestingly, the third round of payroll support will support employee salaries through September 30, and passenger numbers at TSA checkpoints have not observed a sharp decline. Also, air travel demand surged during the second quarter as restriction measures were eased – pinning hopes for a similar trajectory after the current surge. Trefis highlights the key factors driving United Airlines' Valuation including revenues, margins, valuation multiple, and competitive comparison with peers in an interactive dashboard analysis.
[Updated 07/13/2021] – United Airlines' Aircraft Order To Assist Long-Term Revenue Growth
In a recent move, United Airlines (NASDAQ: UAL) announced a 270-plane order of Boeing 737 Max and Airbus A320s to replace its older regional and mainline aircraft. The new fleet will be 11% more energy efficient and lower carbon emission per seat by 15-20%. Along with better customer experience and a spacious cabin, the company is adding newer destinations and more aircraft options between various U.S. cities. Per Boeing's commercial market outlook, the passenger air travel market is expected to grow at a single-digit rate in the next twenty years with new orders mainly driven by aircraft replacements. Apart from the earlier provided guidance of complete revenue and EBITDA recovery by 2023, United Airlines' revenues are likely to observe strong growth post-2023 as new planes are added to the fleet. We highlight the key divisions of United Airlines' revenues in an interactive dashboard analysis.
Aircraft replacement necessary for margin expansion
Per annual filings, United Airlines' fleet comprises 812 mainline and 475 regional aircraft. The mainline primarily consists of 136 737-900ER and 141 737-800 aircraft types. The regional fleet is made up of 190 Embraer and 133 CRJ 200. The recently released aircraft retiral program mostly includes smaller mainline jets and 200 regional jets to be replaced over the next couple of years. With 500 new airplanes in the order book, 40% of United's fleet will be comprised of newer aircraft – leading to substantial fuel savings and margin expansion.
Travel demand and new retirement plan to push top line higher
United Airlines' revenues increased by 14% from $38 billion in 2017 to $43 billion in 2019, driven by rising capacity and ticket prices. Revenues are likely to continue the growth trajectory in the post-pandemic period as occupancy rates improve. Notably, passenger numbers at TSA checkpoints have reached almost 20% below 2019 figures assisted by recovering travel and the tourism sector. Also, the third round of payroll support requires airlines to suspend dividends and share repurchases until September 2022 – highlighting the requirement of strong cash generation to reinstate shareholder returns.
Invest with Trefis Market Beating Portfolios
- Solskjaer admits Man United looking to buy in January
- European stock markets dip as tensions flare between US, Iran
- Buy right stocks on dips is our market strategy now: Siddharth Sedani, Anand Rathi
- Oil Prices Surge, Stocks Slip After Death of Iranian General
- Stock pick of the week: Why stock market analysts are bullish on United Breweries
- Motilal Oswal maintains 'BUY' on 4 auto stocks
- Best Buy Outlet clearance sale: Save up to 40% on AirPods, iPads, and PS4 Pro
- Stocks slump after Soleimani assassination
- Stocks in the news: YES Bank, IndiGo, DHFL, Vodafone Idea & United Spirits
- Auto stocks in focus this week; Bajaj Auto, Maruti & Motherson Sumi preferred buys
- 'Godfrey Phillips is a buy-on-dips stock despite 40% up move in 2019'
- US STOCKS-S&P 500 inches lower as year-end record rally cools off
- Technical Check: 10 breakout stocks that could give double-digit returns in 2020
- Non-banking PSU stocks, private banks, metals likely to hog limelight in 2020
- Stocks in the news: Sun Pharma, YES Bank, RCom, Tata Motors and SAIL
- Hot stocks | Three stocks that can give up to 12% return in 3-4 weeks
- Alex Ferguson retires as manager of Manchester United – as it happened
- 12 stock recommendations for traders to kick off the New Year
- Breakout buys: SBI, Hindalco among 10 stocks to consider for January series
- Stocks were on a runaway train. Then Iran happened
United Airlines Stock: Should You Buy The Dip? have 705 words, post on www.forbes.com at September 15, 2021. This is cached page on Game Breaking News. If you want remove this page, please contact us.