United Airlines shares slide after Omicron impacts demand, American Airlines jumps on Q4 beat

Yahoo Finance's Adam Shapiro joins the Live show to discuss fourth quarter earnings for United Airlines, American Airlines, and Union Pacific.

Video transcript

- Well, airlines are sort of pushing off their expectations for a full recovery here. That was one of the messages and takeaways from earnings reports from United and American. Our Adam Shapiro covers these companies. He's here now.

So United, in particular, Adam, sort of saying, not so fast here. It sounds like Omicron is really giving them a step back.

ADAM SHAPIRO: Yeah, and we're going to hear from Scott Kirby and the team at United at 10:30 Eastern. But let me give you the quote that Kirby put out in the statement when they released earnings after the bell yesterday. Quote, "Omicron is impacting near-term demand. We remain optimistic about the spring and excited about the summer and beyond."

But, for instance, when you compare United to what we heard from Delta last week, Delta said, look, January and February, we will not be profitable. We will be profitable in March. United not quite making that kind of promise. What they're telling us about the quarter is that revenue came in at $8.19 billion. That beat what everyone expected, but Omicron and the delays and cancellations in December from the booking public impacted the airline. Also, they're anticipating that their costs in the first quarter of this year will be up 15%. And that's excluding fuel.

So United is facing some headwinds, the biggest of which, when you think about this, Julie, is that 50% of United's revenue before 2019 was tied to international travel, a lot of that Asia. And this Omicron wave and the slow recovery of the globe from the pandemic is impacting-- impacting United.

Then take a look at American Airlines. I want to tell you what Doug Parker is saying about American. Quote, "over the past year, we have experienced periods of high travel demand countered by periods of decreased demand due to new COVID-19 variants." This is the key-- "the volatility has created the most challenging planning environment in the history of commercial aviation."

Now, you should know, for American, which of the big three-- Delta, United, American-- a lot of analysts will tell you American has the biggest debt problem. So take a look at what happened for them. They had the highest amount of revenue that they have had since the beginning of the pandemic. It was down compared, obviously, to 2019-- $9.43 billion. In 2019, it was $11.3 billion. But they also have, at this point-- they ended the fourth quarter with $15.8 billion of total available liquidity. That's the highest year-end liquidity balance in the company's history. So that's a message to those who are worried about their debt.

And the other situation that Doug Parker is pointing to at American is that they completed-- they hired 16,000 people in 2021. They intend to hire 18,000 this year. Remember, the airlines did not lay people off, but thousands upon thousands of airline employees took early retirement and buyout packages. And that left the airline short-staffed for the recovery, which the leisure travel recovery is here.

When you speak to Savi Syth over at Raymond James or Helane Becker over at Cowen, and they tell you, look Americans, despite the pandemic, that kind of travel, visiting friends and relatives is back and better than it was in 2019. This slow recovery is really one, international and business travel. Back to you.

- Adam, we have you on the industrial beat today. I know you're also covering earnings out of railroad United-- Union Pacific, not United. Union Pacific.

ADAM SHAPIRO: Yeah, Union Pacific is going to be pretty interesting. They had-- I'm looking for the specific quote here. "The Union Pacific team concluded its most profitable year ever in 2021. We produced double-digit fourth quarter revenue growth by leveraging our great rail franchise to generate positive business mix and core pricing gains." Look, Lance Fritz is going to be on with us in the 11:00 AM hour. A couple of things, though, that we're going to talk to him about, because they are such a bellwether for the US economy.

In the quarter, the volume-- total revenue for carloads, business volumes, was down 4%. Also, the velocity of the trains was down 12%. These are issues that impact Union Pacific's ability to deliver. On the other hand, the average maximum length of their trains was up 2%. So we're going to ask him to put it in perspective for us and where we are headed. They also have a big deal that they closed that they're talking about with Schneider on intermodal transportation.

And then, of course, there was Dani's article yesterday, Dani Romero here at Yahoo Finance, about, you know, there are people who are breaking into trains-- this is hitting all of the freight train companies-- stealing stuff. So we're going to talk to Lance Fritz about everything, not only for the-- for the railroad, but the steps they're taking to protect the cargoes that they're shipping.

- Yeah. That-- those pictures of goods strewn around the tracks are getting a lot of attention.