United Airlines Makes More Cargo Revenue With Less Cargo

Carrier narrows overall loss to $300 million but cautions on softer Q4 passenger demand.

Editor’s Note: This article originally appeared on FreightWaves.com.

Cargo and domestic leisure travel were United Airlines’ strong suit in the third quarter as the carrier just missed returning to profitability despite better-than-expected results.

Cargo revenue soared 84 percent to $519 million compared to 2019, setting a record for the three-month period. For the first nine months of the year, cargo revenue is up 88 percent to $1.6 billion.

Those gains, however, don’t represent more cargo volume. Cargo revenue ton miles, an industry metric that measures the revenue earned by weight and distance carried, actually decreased 5.7 percent to 758 million and year-to-date through September were down 1 percent to 2.4 billion versus 2019.

United actually moved less freight but made more money because air cargo rates and yields are extremely high due to an ongoing shortfall in capacity.

What May Lie Ahead

United last month resumed cargo-only flights after international passenger traffic failed to materialize to the expected degree because of the rise in infections from the delta variant. It put five Boeing 777s back to work making dedicated cargo runs and officials say more could be used during the heavy peak shipping season currently underway.

Chief commercial officer Andrew Nocella said Wednesday that officials expect cargo demand to remain at elevated rates through next year given the massive supply chain disruptions in ocean transportation that have seen upward of 70 container vessels stranded outside the ports of Los Angeles and Long Beach waiting for berths.

The auxiliary freighter operations are likely to end again at the end of the year or early 2022, he added.

United operates the second-largest widebody fleet in the world, which gives it a lot of capacity to carry cargo in the lower deck of passenger flights. Exposure to international travel has held back United’s financial recovery compared to some competitors but could turn in its favor once that segment picks up again.

It’s Not All Good News

Overall, United’s revenues were down 32 percent to $7.75 billion and passenger traffic remained 36.5 percent below 2019 levels. The lower revenues, combined with rising fuel costs, contributed to a $300 million adjusted net loss, not including more than $1 billion in federal payroll protection because of the COVID-19 crisis.

United officials said they expect strong holiday demand but that the rest of the fourth quarter would be muted with businesses slow to reopen offices. The Chicago-based carrier forecast capacity will be 23 percent lower than two years ago.

Delta Air Lines gave a similar outlook last week after achieving its first profit since the pandemic, saying it expects to lose money again in the fourth quarter as a result of the bumpy recovery and higher fuel prices. Delta also had a strong third quarter for cargo, plus 39 percent over 2019 to $262 million, but United outperformed it by a wide margin.

United said it planned to increase international capacity by 10 percent in 2022 while keeping the number of domestic seats flat in anticipation of higher demand because of premium leisure taking the slack for business travel, the reopening of European borders next month and early indications of looser travel restrictions in key Asian markets.

The international flights will be enabled by the expected return of United’s Boeing 777-200s, powered by Pratt & Whitney PW4000-112 engines, that were grounded early this year to investigate potential problems after an uncontained engine failure.

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