United Airlines (NASDAQ:UAL) is one of America’s “Big Three” airlines and has been a barometer for both the aviation industry and the broader economy. This company recently reported its strongest first-quarter result in five years, with $13.2 billion in revenue and $0.91 in adjusted EPS, both beating Wall Street expectations. However, there is something important you may have missed.
United presented investors with dueling 2025 forecasts on April 15. This is very unusual as it included a baseline projection of $11.50-$13.50 adjusted EPS assuming economic stability and a recessionary scenario, slashing expectations to $7-$9.
This “bimodal” guidance is due to management admitting that it is impossible to predict this year with any degree of confidence. There has been solid international demand, with premium cabin bookings up 17% year-over-year and $3.7 billion in Q1 operating cash flow. Even then, management went ahead and presented a scenario where EPS could be as low as $7 due to U.S.-specific risks.
Q1 unit revenue for U.S. routes fell 3.9% year-over-year, and United will retire 21 older aircraft early and reduce off-peak flights to save $100 million annually. The company plans to cut 4% of domestic capacity starting July. Industry-wide domestic fares already fell 5.3% in March, and this is the steepest drop since 2021.
I believe you should pay attention to United Airlines’ concerns about where the U.S. economy could go this year. Delta (NYSE:DAL) and Frontier (NASDAQ:ULCC) recently withdrew annual guidance citing "stalled" demand growth, while Southwest (NYSE:LUV) and American Airlines (NASDAQ:AAL) reported softening government travel spending. The International Air Transport Association warns that airline profits could halve if GDP growth dips below 2%.
I see the dual forecasts as a Rorschach test for economic outlooks. The airline’s fate hinges less on jet fuel prices and more on consumer wallets and business travel budgets in the coming quarters. For now, I’d keep out of airline stocks.
