United Airlines (NASDAQ:UAL) shares gained 5% in pre-open trading Tuesday after providing a better-than-expected guidance update to investors after the close.
The Chicago-based airline said it now sees total revenue per available seat mile up 23%-25% from 2019, versus its prior forecast of up 17% as customers return to flying.
United Airlines' capacity is still sharply below 2019 levels. The company said capacity is estimated to be down 14% from 2019, versus its prior guidance of -13%.
While travel demand is robust, the company faces headwinds from higher fuel costs. United now estimates the average aircraft fuel price per gallon of $4.02, up 17% from its prior guidance of $3.43 per gallon.
Despite the higher fuel costs, the company maintained its guidance of an Adjusted Operating Margin of 10%, suggesting it has no problem passing the higher costs on to travelers.
Analysts were bullish on the update from the company. "Management's new estimates reflect demand that continues to improve, which is in line with our forecast," Cowen analyst Helane Becker commented. She reiterated an Outperform rating on the stock and thinks these shares can sell at $86.50, or ~8.0x the firm's 2023 EPS forecast.
The news also put a bid in United Airlines' rivals, which are likely to see similar demand strength. Shares of American Airlines (NASDAQ:AAL) and Delta Air Lines (NYSE:DAL) each rose 3% in pre-open trading, while Southwest Airlines (NYSE:LUV) rose 2%.