United Airlines bonds trend upward on mixed 3Q21 numbers as international travel returns, fuel prices spike – Market React

United Airlines’ debt and equity shared a mostly muted reaction to yesterday’s 3Q21 results driven by investor hesitation on when the airline sector will see a full return to business and international travel, as well as the impact of increasing fuel cost, said a buysider and a sellsider. 

The company raked in USD 7.8bn of revenue for the quarter ended 30 September, compared to expectations of USD 7.64bn, citing a rebound in leisure and business travel. The results, while better than originally projected and a drastic 213% improvement from 3Q20, were still down 32% compared to 3Q19. 

The recently removed restrictions for vaccinated travelers from abroad are expected to go into effect on 8 November, and should further help United with its return to international travel, the sources noted. Deutsche Bank added in its positive forecast for the company that the airline is heavily exposed to the international markets and the increased travel will benefit United, along with its goal to raise international capacity by 10% in 2022 compared to 2019. 

However, United guided 4Q21 revenue will drop 25% to 30% compared to 2019, compared to prior expectations of a 24% decline. 

During the quarter, capacity was down 28% compared to 3Q19, a number that United expects to only mildly improve to a 23% decline next quarter. Revenue passenger miles dropped by a steeper 37% since before COVID-19. 

Peer Delta Air Lines reported promising numbers last week but warned of rising fuel costs. Delta expects to pay between USD 2.25 and USD 2.40 per gallon during the fourth quarter. In comparison, United said it expects to pay roughly USD 2.39 per gallon in 4Q21. 

American Airlines and Southwest Airlines are also set to report 3Q21 numbers tomorrow to provide investors with an overall outlook for the airline industry.

United’s USD 2bn 4.375% senior secured notes due 2026 traded today at 103.375 to yield 3.46%, compared to trades at 103 to yield 3.56% yesterday (19 October), according to MarketAxess. 

Its USD 5bn Libor+ 375bps due 2028 is quoted 100.75/101.25 today, noted a trader. By comparison, the loan was last quoted 101.1/101.475 on Markit.

Equity trading has ranged between USD 45.58 and USD 46.90 with around a USD 14.9bn market cap today, after closing at USD 46.22 yesterday.

2021 Debtwire

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