Faced with uncertain economic conditions in the United States, United Airlines is preparing for various possible economic scenarios, according to an announcement made by the company on Tuesday. One scenario anticipates steady customer bookings despite a weakening economy, while another scenario projects a potential recession in the U.S. This approach could be adopted by other companies amidst market volatility.
The $22 billion airline introduced a “bimodal” set of expectations, offering guidance based on two differing macroeconomic perspectives. United Airlines communicated to its investors that there is no longer a single consensus on the economic outlook. The company outlined two potential scenarios: a stable, weaker economy or an impending recession.
In the event of a recession, United Airlines projected a five percentage point decline in total operating revenue from the second to fourth quarters. This scenario would result in adjusted diluted earnings per share (EPS) of $4.50 if fuel prices remain unchanged, leading to significantly lower full-year adjusted diluted EPS ranging from $7 to $9.
Conversely, the stable economy scenario envisions a more favorable outcome, predicting a full-year EPS between $11.50 and $13.50. As the company actively monitors booking trends, which have been stable so far, it expects to remain within its initial guidance range of $11.50 to $13.50. United Airlines CEO Scott Kirby and Chief Financial Officer Michael Leskinen are scheduled to discuss the business outlook with investors during a quarterly earnings call on Wednesday.
This strategic move was considered notable by market watchers. Economist and former Pimco CEO Mohamed El-Erian commented that United Airlines’ decision reflects the uncertainty faced by many companies. He stressed the importance for companies to consider multiple scenarios for internal planning instead of relying solely on the usual normal distribution of likely outcomes.
The market has experienced significant fluctuations since President Trump announced new import duties on Liberation Day earlier in the month. Although the announcement was anticipated, it triggered a substantial market selloff due to the unexpected scale and scope of the tariffs. In the following weeks, the market remained unpredictable with experts providing various commentary on potential developments that continue to disrupt the market.
Former Federal Reserve Chair and Secretary of the U.S. Treasury Janet Yellen noted that the U.S. “would be lucky to skirt a recession.” Meanwhile, Ray Dalio, founder of Bridgewater Associates, warned that the combination of Trump’s tariffs, rising debt, and geopolitical factors might destabilize the U.S. “monetary order.” Dalio expressed concerns about a possible situation worse than a recession if not managed properly, emphasizing the potential breakdown of the monetary order and the need for changes in monetary practices.
Despite the uncertain economic outlook, United Airlines reported a first-quarter profit and record revenues of $13.2 billion, as announced on Tuesday ahead of the scheduled investor briefing. The company reported steady travel reservations, with premium cabins witnessing a 17% increase and international flights up by 5% year-over-year.
United Airlines expressed confidence in its ability to attract and retain brand-loyal customers as a competitive advantage, providing resilience in any economic environment.
