Airlines to report earnings as Boeing 737 Max troubles set to linger for months more

U.S. airlines will detail for investors this month how the worldwide grounding of the Boeing 737 Max — now about to enter its fifth month — is impacting their financial results during the busiest time of the year for the industry.

Airlines are enjoying searing air travel demand. Fares are on the rise, according to some analyst estimates. Fuel prices are down compared with last year. All of that is good news for carriers and their shareholders, but investors will also want to know how they’re meeting that demand during the busiest travel season of the year with dozens of planes out of service due to safety concerns.

The Federal Aviation Administration and regulators around the world grounded the popular Boeing 737 Max jets in mid-March following two fatal crashes — one in Indonesia in October and another in Ethiopia in March — which claimed a total of 346 lives. Boeing has developed a software fix for an anti-stall system on the planes that investigators implicated in both crashes, but regulators haven’t signed off on the changes, forcing carriers to cancel thousands of flights during the busiest travel period of the year.

Still, the planes, which entered into service in May 2017, are still a small part of U.S. airlines’ fleets, so the immediate impact may be minor. But regulators have not indicated when they would allow the 737 Max jets to fly again.

Here are some things to watch as U.S. airlines report earnings, starting with Delta on Thursday:

• Delta‘s shares are up nearly 19% so far this year, more than any other large U.S. airline. The airline doesn’t have any 737 Max jets in its fleet and “has benefited from customer spillover from competitors and partners being impacted by the grounding of the aircraft,” notes Cowen & Co. Last week, the airline forecast that revenue per available seat mile, a key industry metric of how much a carrier makes for each seat it flies, would be at the upper end of its previous range, up around 3.5% in the three months ended June 30, from a year earlier. Analysts polled by Refinitiv expect per-share second-quarter earnings of $2.24, an increase of nearly 27% from a year ago, on revenue of about $12.5 billion.

• United has 14 Boeing 737 Max 9 jets in its fleet and last month said it was removing the plane from its schedule through Labor Day, a month longer than previously expected. The impact is smaller compared with some of its other legacy airline competitors who have more of the grounded planes, but investors will be looking for updates on its contingency plans. CEO Oscar Munoz has said some travelers may not want to fly the Max even after regulators approve a fix for the planes. Analysts estimate per share earnings of $4.04, which would be a 25% jump the second-quarter of 2018, and revenue of $11.3 billion. The Chicago-based airline was a favorite among investors last year as an aggressive expansion plan, at which shareholders originally scoffed, helped deliver higher profits. Shares of United are up about 8% so far this year. The carrier reports earnings after the bell on July 16, and holds an investor call the next morning.

• Southwest has 34 Boeing 737 Max jets in its fleet of some 750 jets, more than any other U.S. airline. The low-cost airline has cut the planes from its schedules through Oct. 1, but CEO Gary Kelly told employees earlier this month that the impact could last longer than that. Executives will likely detail which frequencies or routes they are cutting due to the planes’ grounding and how much that will impact results in the third quarter, which encompasses the height of the summer travel season. Analysts expect the Dallas-based airline to post second-quarter profit of $1.34 per share, an increase of 6% from a year ago, and revenue of more than $5.9 billion. It’s scheduled to report earnings at 6:30 a.m. ET on July 25.

• American Airlines shares continue to lag its closest peers and investors will be looking for details on an ongoing dispute with the two unions representing its mechanics, which American has alleged in a lawsuit in May is disrupting its operations. That dispute comes as the carrier’s 24 Boeing 737 Max planes remain grounded and prompted the carrier to extend cancellations through Labor Day. Executives will also likely provide more information about the airline’s plan to buy the new Airbus 321XLR, the European manufacturer’s longest-range single-aisle plane it’s developing. The decision, announced at last month’s Paris Air Show, was a loss for Boeing, as American seeks to replace its aging Boeing 757 planes with those made by its main competitor. Analysts expect American to post per-share earnings of $1.69, up close to 4% from a year ago, and revenue of nearly $12 billion. It hasn’t said exactly when it will release its earnings results, but analysts expect it to report around July 25.