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United Airlines among many set for a good year

Jason Robinson on June 26, 2023

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United Airlines: Since many prominent companies are experiencing the effects of inflation, profit is difficult to estimate.

Due to the growing need for travel, United Airlines has a great prospect, while other firms are still considering their outlook for 2023.

The news

First-half and fourth-quarter forecasts for the major airline both exceeded Wall Street projections.

The positive news might be attributed to increased prices and surging demand for travel.

Airlines are again profitable due to customer demand for air travel and readiness to pay more.

The cost of building out networks, including personnel, fuel, and other fees, has dramatically decreased due to the increased demand for air travel.

The rise of airlines has also been limited by aircraft backlogs and delays, which has raised ticket costs.

Revenue

United Airlines earned $843 million on $12.4 billion in revenue in the last quarter of 2022, a 31% rise over the same period in the previous three months.

9% fewer flights were taken, but there were around 14% greater revenues than at the same time in 2019.

Even though unit costs increased by 21% from 2020, the revenue helped the airline make a profit.

Only 2% of United Airlines’ stock price rose during Tuesday’s extended session.

The quarterly update is another optimistic sign that airlines will end the year well, despite the winter storms and delays during the critical holiday travel season.

Other airlines

United, one of many major airlines, is bound for a prosperous year.

Last week, Delta Air Lines’ revenue and earnings exceeded Wall Street’s projections.

Its predicted first-quarter profitability, however, is outweighed by a more considerable expenditure brought on by an unforeseen pilot labor agreement.

American Airlines boosted both its profit and sales forecasts for the fourth quarter.

There will be a report made public on January 26.

Fourth quarter

Refinitiv combined consensus expectations with seeing how United Airlines performed in the fourth quarter.

Adjusted earnings per share: $2.46
Total revenue: $12.4 billion

These projections come from Wall Street.

Adjusted earnings per share: $2.10
Total revenue $12.2 billion

2023 expectations

United Airlines predicts that its revenue from January through March 2023 will increase by 50% compared to the same period last year.

Additionally, the airline projects between 50 cents and $1 in earnings per share for the first quarter.

According to Refinitiv, it exceeds the 25-cent analyst estimate.

Compared to the same period last year, United Airlines anticipates a 20% rise in flight traffic in the first quarter.

The airlines predict a capacity increase in the high teens for the whole year compared to 2022.

As a result of the same unit revenues (revenue per available seat mile) as in 2022, the analysis assumes that the steep price increase may continue to level out when airlines add more flights.

In a presentation to investors, United said that a shortage of pilots, outdated technology, and labor issues would constrain the industry’s capacity.

Staff plans

Even though the aviation industry continues to have a labor shortage brought on by Covid, several airlines have plans to boost the number of pilots and crew members they hire this fiscal year.

United Airlines revealed on Tuesday that the Calibrate apprenticeship program and the United Aviate Academy started in November and early 2022, respectively.

A greatly updated and expanded flight attendant training facility has opened in Houston, according to the airline.

A new labor deal between United and its pilots has not yet been reached.

A proposed salary increase agreement between Delta and the pilots has not been ratified by their union.

United pilot union

United Airlines’ pilots union is preparing to elect a new head after the former one resigned.

CEO Scott Kirby predicts that the election will be concluded this month.

Kirby anticipates that when the new head is selected, negotiations will commence again around February 7.

He insisted that an agreement for a pilot contract ought to be finished right away.

To maintain non-fuel cost above the prior year, United noted in its investor presentation that it anticipated new agreements with pilots, flight attendants, technicians, and airport workers.

According to Scott Kirby, the most recent system breakdown at the Federal Aviation Administration is a case study showing how the industry’s supply constraints are a symptom of a bigger infrastructural problem.

He said that the FAA’s use of space and drones was taxing the resources typically utilized to maintain aviation infrastructure.

“They’ve had to rob Peter to pay Paul,” said Kirby. “They just don’t have enough resources.”

Kirby added that he travels to Washington, DC, twice a month to advocate for increased funding.

Reference:

United results top estimates a demand remains resilient despite high fares

Walmart will trust automation to improve profits

Jason Robinson on April 12, 2023

Walmart — Increased prices and rising interest rates have altered the economic landscape, causing firms to reevaluate their strategies.

To boost profitability, Walmart, an international retailer, has extended the use of automation throughout its supply chain.

The future of Walmart

Walmart detailed its automation goals during its investor presentation last week.

Automation would allow the organization to better manage inventory, replace shelves, and respond to online inquiries.

The company’s 1.4 million-square-foot factory in Brooksville, Florida, was exhibited to investors.

This is the first automated distribution facility for packaged foods and other shelf-ready household items in the world.

In addition, Walmart plans to deploy the same Symbotic automation in all 42 regional distribution centers.

Walmart will purchase a majority stake in Symbotic, a warehouse technology firm, in 2022.

According to the corporation, by the end of January, more than a third of its facilities will have automated delivery.

A broader plan

Walmart’s automation is part of a bigger plan to increase profits.

According to CEO Doug McMillon, revenue will grow at a 4% annual rate in the next years.

Nonetheless, the proportion is lower than the 8% reported in the three years preceding the pandemic.

It is, however, faster than the 3.1% and 3.6% growth rates observed in the three years preceding the global pandemic.

McMillon also forecasted that over the next five years, profitability will climb faster than sales as Walmart focuses on automation while expanding higher-margin categories such as:

Advertising
Last-mile delivery
Fulfillment services

New ways to shop

According to Doug McMillon, Walmart has given customers more options for online transactions and speedier delivery of items.

The firm now has a bigger product offering, including distinctive brands in a number of industries.

Furthermore, more suppliers are utilizing the company’s third-party marketplace.

“We’re now in a phase that is less about scaling store pickup and delivery, e-commerce assortment, and e-commerce FC [fulfillment center] square footage and more about execution and operating margin improvement,” said McMillion.

Within three years, Walmart plans to automate more than two-thirds of its shops.

Automated facilities will handle more than 55% of fulfillment center tasks, and unit prices may decline by 20%.

A shift in workforce

Walmart is widely regarded as one of the largest employers in the United States, and the company’s 1.6 million employees may be laid off as a result of the automation effort.

Only a few individuals were present on the distribution center floor during the Brooksville facility tour.

The total number of staff, however, has remained unchanged.

According to David Guggina, executive vice president of Walmart’s US supply chain operations, automation is about increasing capacity rather than eliminating jobs.

Guggina claims that because the work is less physically demanding, retention has improved.

While he was unable to provide specific turnover data, he did state that no employees left the factory in the year after its automation.

Meanwhile, Doug McMillon is certain that the retailer’s employees will be retained.

However, he did hint that the structure will be changed.

Walmart, for example, may require fewer employees to transport pallets in warehouses but more employees to complete online purchases.

Layoffs and automation spending

Hundreds of thousands of Walmart employees have been laid off around the country.

According to McMillon, the layoffs were prompted by a rise in internet sales during the early years of the pandemic, with the company seeking to determine their sales pattern outside of the holidays.

Walmart has not disclosed the amount of money it intends to invest in automation initiatives.

According to Chief Financial Officer John David Rainey, the company forecasts capital expenditures to be somewhat higher than in 2022, ranging between 2.5% and 3% of revenues.

Rainey also claimed that 90% of the company’s capital expenditures will go toward high-return industries including e-commerce, retail enhancements, and supply chain.

Changed routines

Some employees’ behaviors have already changed as a result of Walmart’s extended rollout.

Beginning in 1995 at the Brooksville distribution facility, James Molina documented his narrative.

He added that he had previously managed inventory for years but had become tired of carrying massive boxes with a pallet jack or forklift.

Molina, on the other hand, may witness the robots unloading the container and intervene if something goes wrong.

He wouldn’t need a pen and paper because scanners catch everything.

Molina is also able to leave work without feeling tired, allowing him to teach high school soccer.

“I even kick the ball sometimes,” said Molina.

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