Trade concerns may be deepening, but they are not clouding United’s corporate outlook

United Airlines is joining rival Delta Air Lines in offering a positive outlook for corporate bookings even as trade policies create a certain level of uncertainty.


Summary:

  • United Airlines is offering a positive outlook for corporate bookings even as trade policies create a certain level of uncertainty
  • The US has levied USD250 billion in tariffs on Chinese goods, and China has retaliated with USD110 billion in tariffs on US goods.
  • Delta Air Lines’ corporate revenues grew +12% year-on-year during 3Q2018, while  revenues at its Pacific unit increased +5% on a 11% rise in stage length.

The US has levied USD250 billion in tariffs on Chinese goods, and China has retaliated with USD110 billion in tariffs on US goods.

Despite the constant headlines of gloom and doom negative effects of the tariffs, large US airlines remain bullish on corporate demand for the foreseeable future.

Delta Air Lines’ corporate revenues grew +12% year-on-year during 3Q2018, and company executives stated the airline has not seen any meaningful impact on booking trends in Asian market due to the tariffs.

The company’s Pacific unit revenues increased 5% year-on-year in 3Q2018 on a 11% rise in stage length. The airline’s routes to Japan and Korea both produced double digit unit revenue growth, and routes to China posted a 9% rise in unit revenues on 18% capacity growth.

United also has a positive outlook for corporate demand. Its system passenger unit revenues grew 6.1% year-on-year in 3Q2018, and business travel revenues grew by double digits during that time period.

On the company’s trans-Pacific routes, passenger unit revenues increased 5.3% year-on-year, which included a 1ppt benefit from foreign exchange rates. “We continue to watch demand levels in business class for China flights and have yet to see any reduction in demand for future periods resulting from trade disruptions,” said United chief commercial officer Andrew Nocella.

But although China’s currency has rebounded nicely, the airline’s Pacific unit revenues remain down on two year comparison. “This leaves us optimism that we have further to go on improving Pacific PRASM (passenger unit revenues),” said Mr Nocella.

The Blue Swan Daily reported last week that although large US corporations are warning of higher prices of consumer goods triggered by tariffs imposed on Chinese imports, and a potential recession looms in 2020, fellow US major Delta Air Lines also sees positive corporate travel trends continuing into early 2019.

Delta’s management stated its total corporate revenues grew +12% year-on-year 3Q2018. Airline executives remarked that has recovered roughly 40% of the decline in corporate fares it has experienced since 2014, while results from Delta’s most recent survey show 90% of corporate travel managers expect to maintain or increase their spend into 2019.