United Remains Cautious On Capacity, Sees Signs Of Recovery
United Airlines this week lowered its planned first-quarter capacity from down 17% versus 2019 to down 19% versus 2019, but the carrier reports improving trends in leisure and business travel demand.
“First, there is very strong leisure demand,” United executive VP and chief commercial officer Andrew Nocella said while speaking this week at a JP Morgan investor conference. “People want to get back out, they want to connect, they want to see their friends and family and, in fact, they actually want to start traveling for business.”
Regarding business traffic, “we've made so much more progress than we thought earlier in Q1,” Nocella said. “Business demand is about 70% [of 2019 levels] … We expect business traffic will continue to grow closer and closer to 2019 levels, with another step up occurring in the fall when the kids go back to school.”
United is forecasting its full-year 2022 capacity to be “down high single digits” versus 2019. At the start of 2022, the Chicago O’Hare (ORD)-based airline anticipated operating 5% more capacity in 2022 versus 2019.
Nocella said the airline has not finalized 2023 capacity levels yet. “We continue to assess exactly how many ASMs will apply in 2023,” he explained. “It’s likely that some of our new aircraft deliveries will be late, given the track record from Boeing recently. We are a bit frustrated by that.”
The rest of 2022 will be challenging because of high fuel prices and uncertainty surrounding the future of the COVID-19 pandemic, Nocella conceded.
“United's full recovery is delayed a bit due to these issues, but 2022 was always going to be a year of transition and we now expect that it will probably be until Q4 before we transition to a more stable environment where our aircraft and asset utilization is starting to approach  levels,” he said. “Each wave of the pandemic has had a smaller and smaller impact on the business. We don't know if there'll be another variant or how severe it will be, but when you look at this trend, it's clearly showing that each variant is having a smaller and smaller impact on the business.”
Nocella said United will not become overly enamored by positive trends given the current global environment. “We have adjusted capacity for the remainder of the year to make sure we can recapture 100% of the price of oil,” he explained. “We continue to remain cautious on capacity. We are following geopolitical events very, very carefully, and we'll make the right decisions for our network and our business.”
Nocella said the return of business travel is important for United. “We believe very strongly that business traffic is a laggard that hurts United more than the average airline,” he commented. “It’s coming back and you will see us accelerate.”