United Airlines leapfrogs Boeing impact

By Shivansh Tiwari

(Reuters) – Shares of United Airlines rose 10% in morning trade on Wednesday, driven by an upbeat profit forecast for the second quarter and strong first-quarter results despite a $200 million win over planemaker Boeing's safety crisis.

The carrier's forecast indicated strength in travel demand as corporate spending improved, lifting shares of rival Delta Air Lines and American Airlines by about 3% and 4%, respectively.

“United delivered Q1 results that dramatically beat expectations after the Boeing 737 MAX-9 grounding in January,” Third Bridge analyst Peter McNally said in a note.

Boeing's main customer, United, cut its annual delivery estimate for new planes by 25%.

A shortage of aircraft is limiting capacity for major airlines, hampering their efforts to cash in on growing demand.

United CEO Scott Kirby said during an interview with CNBC on Wednesday that he is “confident that the 787 Dreamliner is a safe aircraft,” as the company dismissed safety and quality concerns over claims by a Boeing whistleblower in an investigation by the U.S. aviation regulator. Production of its 787 and 777 jets.

The plane maker's manufacturing practices will come under scrutiny Wednesday in two Senate hearings, one of which is expected to feature testimony and documents from a whistleblower.

For the current quarter, United expects adjusted earnings of $3.75 to $4.25 per share, compared with analysts' average expectations of $3.76, according to LSEG data.

“Overall, these results and guidance may provide at least some relief to what we would characterize as an oversold situation in United shares,” Citi analyst Stephen Trent said in a note, while reiterating a “buy” rating on the company's stock.

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United shares trade at 4.2 times forward earnings estimates, compared to an industry average of 7.4.

“Had it not been for MAX 9s' bottom line, United would have been profitable in the March quarter,” Deutsche Bank analysts said.

(Reporting by Shivansh Tiwari in Bengaluru; Editing by Devika Siamnath)

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