Airline stocks are having a strange time of it these days. It wasn’t so long ago that the big problem for airlines was being terminally under-staffed. Now, the problem seems to be over-staffing, at least in the short term. That’s the case for United (NASDAQ:UAL), who recently took an unusual step forward in dealing with its pilots. That move was actually a draw for investors, however, who sent shares upward fractionally in Monday afternoon’s trading.
United made an unusual offer to its pilots, starting in May, and potentially going throughout the summer: take some time off, but don’t expect us to pay you for it. The unpaid furloughs are being offered in response to the string of troubles seen at Boeing (NYSE:BA), as more and more planes run afoul of mechanical difficulties and the company itself is under increasing government scrutiny. Boeing’s increasing delivery troubles prompted United to reduce its block hour forecast for 2024, and that in turn means a need for fewer pilots in the air.
United was originally set to receive 43 Boeing 737 Max 8 and 34 Max 9 planes, but that fell to 37 and 19 after the latest reports. Any hope of the Max 10, meanwhile, has largely gone up in smoke.
So Much for Summer Travel Season
The news comes at the worst possible time, too, at least for summer travelers. United wasn’t the only airline to announce troubles with getting enough jets on hand. Southwest (NYSE:LUV) and Ryanair (NASDAQ:RYAAY) both saw their delivery numbers from Boeing decline as Boeing attempts to get its collective act together. Thus, carriers are already reducing available flights and looking for any kind of alternative to the 737 that has already been ordered. Meanwhile, Boeing can’t begin to guess when the regulatory horde will decamp and go home.
Is United Airlines a Buy or Sell Stock?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on UAL stock based on 10 Buys and five Holds assigned in the past three months, as indicated by the graphic below. After a 10.87% rally in its share price over the past year, the average UAL price target of 58.27 per share implies 21.5% upside potential.
