Why United Airlines thinks it’ll be able to deliver big profits even in a recession

On the conference call with analysts following its earnings report, United Airlines CFO Michael Leskinen unpacked how the carrier expects to still turn a solid profit even if the US economy enters a recession, in stark contrast to prior downturns:

“While we’ve seen stability in demand for the past six weeks, we also recognize that there’s a real risk of the US economy going into a recession. If we enter a recession, we are modeling an additional five-point reduction in total revenue for the remainder of the year on average per quarter.

In that scenario, we would make an additional downward adjustment to capacity. And we have not assumed any further relief in fuel price, even though that might happen. Even in that world, we expect our full-year earnings per share to be between $7 and $9. While that is not what our expectations were at the start of the year, that scenario would be the first time United would have remained solidly profitable through a recession.

While that is not what our expectations were at the start of the year, that scenario would be the first time United would have remained solidly profitable through a recession. We believe it would justify significant multiple expansion, as we will have proven our financial resiliency, our greatly improved competitive position, and the durability of a de-commoditized business powered by brand-loyal customers.”

United has already trimmed some capacity on flights that were marginally profitable and look to be less so in a lower-demand environment. As for the recessionary revenue forecast, here’s what has happened to United’s sales during recent downturns.