United Airlines is set to release its second quarter earnings on July 16, 2025. Bloomberg analysts widely estimate the company's adjusted earnings per share (EPS) to be $3.84, representing a year-on-year decline of over 7%; operating revenue is projected to reach $15.335 billion, up 2.3% from the previous year.

I. Review of Last Quarter’s Performance: Foundation Set by Unexpected Growth

In Q1 2025, United Airlines (UAL) delivered an impressive performance with revenue of $13.213 billion (an increase of 5.38% year-on-year), a net profit of $387 million (returning to profitability year-on-year), and adjusted EPS of $1.16, significantly exceeding market expectations of $0.73. This robust performance was driven by two core factors:

• International route boom: unit revenue growth exceeded 5%, driven by strong demand for premium cabin travel which pushed ticket prices higher;

• Cost meticulous management: improvements in fuel efficiency and rationalized manpower allocation offset some of the domestic route weaknesses (with unit revenue down 3.9%).

This performance validated the management's "premium + international" strategy, providing cash flow and capacity allocation space for Q2 peak season operations.

II. Q2 Key Highlights: Switching Growth Engines amidst Demand Divergence

1. Dynamic Capacity Adjustments and Revenue Structure Optimization

• Continued emphasis on international routes: European summer bookings are up 5% year-on-year, with strong demand in destinations like Italy, Greece, and Spain driving ticket prices higher. The company plans to increase daily international flights to 800, compared to just 700 in 2024.

• Strategic reduction of domestic routes: 4% capacity cut starting Q3, focusing on high-yield hubs, addressing weak economic cabin demand.

• High-end service incremental contribution: premium cabin bookings are up 17% year-on-year, with high-margin ancillary revenues such as mileage redemption and upgrade services increasing in share.

2. Cost-End Dual Defensive System

• Flexible fuel hedging: Current Brent crude oil prices have fallen 17.5% from last year's highs, but Trump's tariffs policy increases volatility risk. The company uses a combination of hedging strategies to lock in some costs.

• Non-fuel cost containment: After Q3, CASM (Cost per Available Seat Mile) is expected to decline, with digitalization of maintenance and flexible manpower models reducing fixed costs.

III. Profit Elasticity and Potential Risk Matrix

IV. Diverging Analyst Views: Optimism vs. Cautious Reality Check

• Bullish perspective: TD Cowen sees a stock price target of $142 (10.4x 2025 P/E), believing pricing power and international route combinations will drive margin expansion by 200 basis points. Seaport Global estimates that achieving a 12% pretax margin could add another $17.5 per share in valuation.

• Risk warnings: UBS, while maintaining a "buy" rating, has lowered its target price to $107, noting that weakness in domestic leisure travel may drag down RASM (Revenue per Available Seat Mile) by 2-3 percentage points.

Key validation point: Whether Q2 can achieve the higher EPS range of $3.25-$4.25 (market expectations at $3.84) will determine the direction of the full-year forecast revision.

V. Strategic Window Period: Digitalization and Ecological Synergy to Secure Long-Term Success

• Realization phase of technology investment: AI systems for fleet maintenance reduce downtime, while customer experience platforms boost NPS (Net Promoter Score) by 5 percentage points, directly translating into premium capability.

• Deepening cross-border alliances: Joint marketing with hotels and OTA platforms, integrating frequent flyer programs (last quarter's revenue +11%), creating a travel service ecosystem loop.

• ESG premium acquisition: Increased share of new-generation fuel-efficient models meets corporate client carbon-neutral procurement requirements.

Market signal verification: On July 8, airline stocks broadly increased (UAL +2%), reflecting market optimism about the Q2 earnings season.

Conclusion: A Critical Quarter for Demand Resilience Validation and Profitability Model Upgrade

United Airlines' core task for Q2 is to offset domestic pressures through the monetization capability of international routes and to deliver margin expansion via digitalized cost reduction. Achieving an EPS of nearly $4 on a revenue base of $15.3 billion will strongly support the strategic target of "double-digit pretax margin by 2026." Short-term focus on three major signals in the earnings report on July 16:

1. Whether international route unit revenue (RASM) sustains over 5% growth;

2. Confirmation of fuel hedging coverage and Q3 cost inflection point;

3. Whether the frequent flyer program’s contribution to gross profit margin surpasses 25%.

(Data status as of July 10, 2025, upon release of the earnings report, a directional choice window will be ushered in.)

This document is generated based on Tiger AI and Bloomberg data, for reference only.