United Airlines Earnings: Even With a Potential Recession, Firm Should Be Okay

Morningstar’s Metrics for United Airlines Holdings

• Fair Value Estimate: $42.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of United Airlines Holdings’ Earnings

United Airlines Holdings UAL reported a robust first quarter, delivering a $607 million operating profit on $13.2 billion in revenue during airlines’ toughest quarter to make money. Management offered parallel forecasts for 2025 performance, one with and one without a potential recession, and both are reasonably profitable.

Why it matters: We have not modeled an explicit consumer recession into our forecast for United, though we project more moderate growth and less pricing power in the near and medium term than the airline industry has experienced since the pandemic.

• While constraints on the supply of jets may persist for more than the coming year, aided by airlines remaining disciplined so far in their prudent management of incremental capacity, we do maintain the view that slacking demand will deflate industry profits.
• Based on their ability to offer highly segmented travel offerings, United and its premium peer Delta DAL may be able to weather a mild recession and remain profitable over a fiscal year, even while other operators are likely to lose money.

The bottom line: We raised our fair value estimate for the no-moat airline’s stock to $42 per share from $39, primarily as a result of slightly lower long-term capital expenditures and a slightly higher long-term leverage ratio.