Market News

Here are UAL’s Growth Plans amid Flight Cancellations & Delays

Story Highlights

Amid flight cancellations and delays, how will airlines satisfy the burgeoning travel demand in the summer season? Will United Airlines overcome the hurdles successfully?

One of the worst fallouts of the COVID-19 pandemic has been the shortage of labor. Coupled with supply chain crunches and slowing demand, industries are struggling to get their workshops running at full capacity with the added burden of the difficult labor market.

The airline industry, in particular, has had its worst episodes of flight delays and cancellations since December last year. Travelers witnessed another saga of the horrible state of the airline industry, as thousands of flights were either delayed or canceled over the Father’s Day weekend, causing commotion and disappointment.

Too Many Delays

As per a WSJ report, more than 6,400 flights to, from, or around the U.S. were delayed and about 860 flights were canceled on Saturday, as recorded by FlightAware.

Furthermore, the flight tracking platform reported that on Sunday, 5,854 flights within, into, or out of the U.S. were delayed, while 920 flights were canceled.

Southwest Airlines (LUV) delayed a maximum of 1,037 flights and canceled 29 flights. American Airlines (AAL) was next in line to delay 848 flights and cancel 96 flights. Meanwhile, Delta Airlines (DAL) delayed 644 flights and canceled 249 flights.

A similar fate occurred on May’s Memorial Day weekend as extreme weather and staffing shortages led to delays and cancelations.

Another major factor affecting crew shortages is the latest round of the coronavirus, which is leading to ad hoc leaves and absenteeism. Delta said in a statement on Sunday, “Canceling a flight is always our last resort, and we sincerely apologize to our customers for the inconvenience to their travel plans.”

The summer season in the U.S. (between mid-May and early September) is always associated with high flying volumes as people undertake both domestic and international leisure travel. Airlines are expecting and witnessing heavy passenger traffic as the season kicks off. However, current headwinds are taking a toll on their schedules. Several airlines have cut back on their summer travel schedules to proactively deal with the current scenario.

At a virtual meeting with airline executives on Thursday, Transportation Secretary Pete Buttigieg asked for assurances from the airlines to buckle up for the upcoming July 4 holiday and the two months of expected heavy travel demand.

Let’s look at how Chicago-based United Airlines (UAL) is handling the pressure of increased flying demand amid the ongoing challenges.

What are UAL’s Plans?

United Airlines provides both passenger and cargo carrier services worldwide through its hubs in Los Angeles, San Francisco, Denver, Chicago, and Washington. UAL shares closed 4.4% higher at $36.33 on June 18. Meanwhile, the stock has lost 20.2% so far this year.

Based on the upbeat travel demand, United has increased its Q2 FY2022 expectation of total revenue per available seat mile by 23% to 25% from the same period in 2019.

During the Father’s Day weekend, UAL delayed 400 flights and canceled 91 flights within, into, or out of the United States on Sunday.

The carrier is undertaking several initiatives to make its flights more appealing and draw a higher number of fliers to its airline. Amid the growing demand for plant-based meat products, UAL is adding more vegan and vegetarian options to its culinary lineup.

To deal with the current crew crunch, UAL is expanding its Flight Training Center in Denver’s Central Park neighborhood, which is already the largest training center in the world. The airline is committed to adding 10,000 pilots by 2030, and to achieve this, UAL will build a new four-story building that will house 12 additional advanced flight simulators, training classrooms, conference rooms, and offices at the Denver site.

Moreover, as a step forward to reaching United’s 100% green net zero commitment by 2050 without the use of traditional carbon offsets, UAL has partnered with Dimensional Energy to produce sustainable aviation fuel (SAF). This is achieved by converting carbon dioxide and water into usable ingredients by combining revolutionary carbon utilization technology with a century-old process.

Furthermore, UAL is also the first airline to add a new transpacific destination to its global network since the start of the pandemic. The carrier will have year-round, non-stop service between San Francisco and Brisbane starting in October.

UAL Price Target

Amid the current airline industry chaos, analysts on the Street are cautiously optimistic about the UAL stock, with a Moderate Buy consensus rating based on ten Buys, six Holds, and one Sell. The average United Airlines price target of $61.22 implies 68.5% upside potential to current levels.

Diverse Investor Confidence

Remarkably, TipRanks’ Stock Investors tool shows that investor sentiment is currently Negative on United Airlines, with 0.9% of portfolios tracked by TipRanks reducing their exposure to UAL stock over the past 30 days.

Meanwhile, TipRanks’ Hedge Fund Trading Activity tool shows that confidence in United Airlines is currently Very Positive, as seven hedge funds increased their cumulative holdings of UAL stock by 1.9 million shares in the last quarter.

Concluding Thoughts

United Airlines boasts of one of the largest global networks in the world and flies a more widebody aircraft than any other North American carrier. However, the current airline headwinds and the inflationary pressures are acting as a spoiler. To add to that, the mixed view on UAL stock from both analysts and investors suggests that it is best to remain cautious.   


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