United’s Earnings Win Hides Serious Turbulence Beneath the Surface
United’s Earnings Win Hides Serious Turbulence Beneath the Surface
CHICAGO — United Airlines delivered what looked like a victory lap in its third-quarter earnings report on Wednesday. The company beat Wall Street’s expectations, sounded upbeat about the holiday season and highlighted record passenger numbers. At a glance, it all looked smooth and steady. But once you dig into the financials, the shine fades fast. Margins are shrinking, revenue per seat is falling hard and some clever accounting helped prop up the results.
United now finds itself in a strange situation. Planes are fuller than ever, yet those passengers aren’t translating into stronger profits. The airline shifted some expenses into the future to boost this quarter’s margins, which raises an uncomfortable question: Is United building real momentum or just dressing up the numbers to look good in the short term?
The broader market is watching closely. United’s results often serve as a bellwether for the post-pandemic travel boom. Demand surged the past few years, but now travelers appear more price-sensitive. If United has to cut fares just to keep planes full, the industry could be entering a new era where growth comes at the expense of profits.
The Shine of a Strong Quarter
At first glance, United gave investors everything they wanted. Adjusted earnings per share hit $2.78, beating its own guidance. It flew a record 48 million passengers and hit its best third-quarter on-time performance ever. Management bragged about premium cabin growth of 6 percent and loyalty program growth of 9 percent, signaling that supposedly high-value travelers continue to choose United.
Looking ahead, the airline projected fourth-quarter EPS of $3.00 to $3.50, showing confidence in a busy holiday season. It also paid off a $1.5 billion debt facility, which cleaned up its balance sheet and reduced interest costs.
On the surface, everything pointed toward a well-run airline firing on all cylinders. United positioned its strategy—invest heavily in new planes, premium lounges and technology like Starlink Wi-Fi—as proof that it can command top-tier customers and outperform competitors even in choppy economic waters.
The Revenue Problem No One Can Ignore
The real story isn’t the earnings beat. It’s the collapse in unit revenue, the lifeblood of any airline. Total Revenue per Available Seat Mile fell 4.3 percent year over year. Passenger Revenue per Available Seat Mile fell an even steeper 5.0 percent.
Put simply, United earned far less per seat than it did last year.
This drop showed up everywhere. Domestic PRASM slid 3.3 percent. The profitable Atlantic routes fell 6.2 percent. Latin America, a market United views as strategic, plunged a shocking 13.5 percent.
Why? Because United made a massive bet on growth. It increased capacity—measured in Available Seat Miles—by 7.2 percent. But passenger revenue rose only 1.9 percent. That means United added flights and seats but likely had to slash prices to fill them. That directly contradicts the storyline that its brand has strong pricing power.
Earnings Boosted by Accounting Tricks
Given the revenue slump, the earnings beat looks far less impressive. Take a closer look at the financial statements and two choices stand out.
First, United admitted it moved about 1 percentage point of expenses from the third quarter to the fourth quarter. Delaying maintenance and labor costs boosted this quarter’s margins, but those expenses are still coming. They’ll squeeze fourth-quarter results—the same quarter United is confidently hyping.
Second, United reported a $73 million “special credit” under GAAP net income. That money didn’t come from flying passengers. It came from selling its own aircraft and leasing them back. While common in the industry, booking this as income makes the profit line look healthier than the core business actually is.
A Subtle Warning From the Top
The most revealing sign of caution came from the cash flow statement. Despite the third quarter being peak travel season, United reported negative free cash flow of $153 million. That alone should make investors stop and think. Profitable airlines don’t usually burn cash during their busiest months.
Management’s actions echoed that concern. United bought back $612 million of its stock earlier this year. In the third quarter, it repurchased only $19 million. That’s not a slowdown—it’s practically a stop. When leaders praise their stock publicly but stop buying it privately, it sends a loud message: preserving cash matters more than projecting confidence.
Investors Look Ahead: Can United Handle the Pressure?
United now faces a classic “show-me” set-up. Its bold guidance for the fourth quarter assumes revenue per seat will suddenly improve, even as the airline absorbs the very costs it delayed to make Q3 look better. Holiday travel demand could help, but execution must be flawless.
Analysts believe the market initially reacted to the headline earnings. However, the deeper risks—weak pricing and rising costs—may not be fully reflected in the stock price. United is spending heavily on long-term bets like supersonic jets from Astro Mechanica and high-speed Wi-Fi. Those may differentiate the brand eventually, but they’re expensive today and don’t fix the immediate revenue problem.
Trading the Gap Between Hype and Reality
Because of the uneven results, some investors are considering relative trades. One strategy gaining attention: short United and go long Delta . Both airlines face the same economic backdrop, but Delta appears to be executing better, especially in premium demand. It also hasn’t shown the same collapse in unit revenue, giving it a cleaner story.
Over the next few months, several metrics will determine United’s fate. TRASM in Q4 must at least stabilize. If it drops again, pricing pressure is deepening. Costs per seat mile will finally reflect the deferred expenses, so the real cost structure will be exposed. And most importantly, free cash flow must turn meaningfully positive. Without that, investors will question management’s discipline.
United delivered a masterclass in hitting short-term targets. The real question is whether the long-term bill will be far more expensive than investors expect. Right now, the turbulence isn’t in the air—it’s in the numbers.
Disclaimer: This article provides information, not financial advice. Market conditions and data can change rapidly. Readers should consult a qualified financial advisor before making investment decisions. Past performance does not guarantee future results.