United Airlines Announce Share Buyback Program

United Airlines, one of the leading airline in the US, has announced a new share repurchase program for up to $1.5 billion of outstanding shares of common stock and warrants originally issued to the U. Treasury under the CARES Act and Payroll Support Program, subject to a limit of $500 million in aggregate through year-end 2024.

This amount represents approximately 7% of the company’s market capitalisation based on the closing stock price on 14 October, United said.

This is the first share repurchase program since the suspension of the previous program in 2020 due to the COVID-19 pandemic. Unless suspended or terminated earlier by its Board of Directors, this program has no set expiration date and will therefore terminate when the company has completed all purchases authorized under the program, the airline said.

United Airlines CFO Michael Leskinen said that in the last four years, the company has invested $22 billion in its product and nearly $10 billion in its people. Those investments have enabled higher profits and are now contributing to growing free cash flow, he said.

“We are now in a position to add a share repurchase program as we continue to invest in and deleverage our business. We are simultaneously targeting net leverage2 below 2x in the next few years. We intend this buyback to be the beginning of a consistent and disciplined return of capital that is paced by our ability to generate increasing levels of free cash,” he explained.

In the third quarter of 2024, the company repurchased in the open market just over 2 million shares of UAL common stock in connection with the exercise of roughly 6.4 million warrants issued to the US Treasury under the CARES Act and Payroll Support Program.

The repurchase of these shares eliminated the dilution associated with the warrants exercised and are separate from the $1.5 billion share repurchase program above. The shares were purchased at an average price of $39.99.

United Airlines said that under the latest $1.5 billion share repurchase program, shares may be repurchased in the open market and in privately negotiated transactions, as well as accelerated repurchase agreements, depending on the capital needs of the business, the market price of UAL common stock, general market conditions, securities law limitations and other factors.

Q3-2024 Financial Results

The company said that it has produced strong financial and operational results in the third quarter of this year. As the company expected, revenue trends improved as the industry reached an inflection point in the quarter with unprofitable capacity exiting the market.

Domestic unit revenue was positive y-o-y in August and September. Demand continued to be strong for the United product and the corporate revenues were up 13% year over year in September, and in the quarter premium revenues continued to remain resilient and were up 5% y-o-y and revenue from Basic Economy was up 20% year over year.

The company also achieved diluted earnings per share of $2.90; adjusted diluted earnings per share of $3.33, ahead of the third-quarter 2024 guidance provided at the start of the quarter of $2.75 to $3.25.

United’s CEO Scott Kirby said that as predicted, unproductive capacity left the market in mid-August, and the company saw a clear inflection point in its revenue trends that propelled the airlines to exceed Q3 expectations.

“A prosperous summer 2024 is just the beginning as our improved customer experience combined with United Next positions the airline at the top of the industry for the foreseeable future,” Kirby added.