Airfare is climbing and United Airlines stock is surging but investors want to know whether the third-largest U.S. carrier is prepared for leaner times.
Investors have asked executives at the third-largest U.S. airline how it would react to slower Travel demand due to the trade war or if the economy falls into a recession, Scott Kirby, United’s president, told analysts on an earnings call Wednesday morning.
Earlier this month, Deutsche Bank lowered its rating on American, Delta and United to hold, saying geopolitical risks like rising trade tensions between the U.S. and other nations could crimp demand for corporate travel.
Fewer than 10 percent of air travelers fly in premium-class cabins, but those passengers account for about a quarter of revenue, according to the International Air Transport Association, a trade group that represents most of the world’s airlines.
Kirby said if demand fell the airline could reduce its fleet by up to double-digit percentages each year, retiring aircraft or return leased jets early.
The airline offers more service to China than its competitors and said bookings were strong in Pacific region, including in premium cabins. But China and the U.S. are feuding over U.S. airlines’ recognition of Taiwan, which Beijing says is Chinese and has demanded foreign companies, including airlines, refer to it as part of China.
Munoz said he was hopeful the U.S. and Chinese governments would resolve the issue before a July 25 deadline. The White House in May called Beijing’s demand “Orwellian nonsense.”
United’s CEO Oscar Munoz declined to comment on the potential impacts of the dispute and said he supports a resolution forged by both countries.
In afternoon trading Wednesday, United shares were up more than 8 percent. Earlier, it hit a 52-week high of $79.49.
Source : CNBC