Why United Airlines Is Likely To See Very Little Revenue Growth In 2020?

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United Airlines Holdings

United Airlines (NASDAQ: UAL) is one of the largest passenger airlines in the world and operates an extensive domestic and international network which spans across the Americas, Europe, Asia-Pacific, Africa, the Middle East, the Caribbean, and Australia. Trefis highlights trends in United Airlines’ Revenues over recent years along with our forecast for full-year 2019 and 2020 in an interactive dashboard. We expect the company to generate $44.4 billion in total revenues for 2020 – representing a growth of just 2% over the figure for 2019 due to weak passenger as well as cargo demand.

A Quick Look at United Airlines’ Revenues

United Airlines’ reported $42 billion in Total Operating Revenues for full-year 2018. This includes three revenue streams:

  • Passenger Revenue: $38 billion in FY2018 (91% of Total Operating Revenue). It represents income from the sale of air tickets and other ancillary offerings for the company’s mainline and affiliate carriers. If a ticket is sold and travel is yet to happen, the company recognizes income from such tickets as air traffic liability. Due to the complex structure of ticket pricing, cancellation and rescheduling, a certain portion of the liability is recognized as passenger revenues based on recognized historical patterns.
  • Cargo: $1.3 billion in FY2018 (3% of Total Operating Revenue). It represents income freight and mail services.
  • Other Revenue: $2.4 billion in FY2018 (6% of Total Operating Revenue). It comprises of the sale of loyalty points to credit card companies.
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United Airlines’ Total Revenues have grown at a CAGR of 6.3% from $36 billion in 2016 to $41 billion in 2018, and is expected to grow at a slower pace in the next 2 years

  • Air ticket sales are the major contributor to United Airlines’ revenues, which is driven by available seat miles, the passenger yield, and occupancy levels.
  • Passenger division is expected to remain the sole driver of United Airlines’ revenues for the next two years and is expected to add $2.8 billion to our total revenue forecast for 2020.
  • Revenue increases would primarily be driven by growing passenger yield, which represents the average amount a person pays to fly one mile.
  • Cargo revenues have observed declines in 2019, primarily due to weaker transportation demand. The ongoing trade war between the U.S. and China has also weighed on the company’s freight business. As the developments around the trade deal unfold, we expect the company’s cargo division to continue to face headwinds in 2020.
  • United Airlines’ Other Revenues, which primarily comprises of the sale of loyalty points to credit card companies, should grow at a similar rate as the passenger division.

Notably, we expect United Airlines’ top line to grow at a notably slower rate compared to peers Delta Airlines and Southwest Airlines. Additional details about our forecast for Delta Airlines’ and Southwest Airlines’ Revenues for 2019 and 2020 are available in our interactive dashboard.

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