United Airlines ( UAL ) late Thursday raised its fourth-quarter unit revenue outlook and OK'd a new $3 billion share buyback program. That followed a better unit revenue forecast from Southwest Airlines ( LUV ) earlier in the day.
[ibd-display-video id=3009194 width=50 float=left autostart=true] United said it expected fourth-quarter passenger unit revenue to be flat to down 2%, compared to an earlier forecast for 1%-3% drop. Unit revenue is a key industry metric that tries to gauge an airline's operating efficiency by looking at its revenue as it relates to overall flight capacity.
For November, United said that traffic and capacity both rose 5.1%. United said that it had the fewest cancellations of any month in the company's history.
The carrier said it expected to wrap up a $2 billion buyback offering from July 2016 by the end of this month.
"We continue to invest in our employees, our customer experience and the growth of our business," CFO Andrew Levy said in a statement. "Returning cash to our shareholders reflects the strength of our balance sheet and the confidence we have in our future."
United rose nearly 2% after hours in the stock market today, aiding its recovery from a deep slide that came after the carrier in October gave a murky financial forecast for next year that flat-out terrified investors. United closed the regular session up 2.15% to 63.53.
Southwest Airlines ( LUV ) also hiked its fourth-quarter unit revenue guidance, based on solid November traffic results.
The carrier now expects a unit revenue pickup of 1%-2% in the much-watched industry metric. Thursday's forecast compares to an earlier outlook for a range of "up slightly to up 1.5 percent."
Traffic during November rose 3.4%, while capacity climbed 2.5%.
"The increase in unit revenue appears to be both demand and yield based," Cowen analyst Helane Becker said, referring to the airline's ability to get more money out of passengers when they fly. "We suspect the remainder of the industry will also raise 4Q17 unit revenue guidance, but note rising jet fuel costs might put modest pressure on the EPS accretion from the improved revenue environment."
Shares rose 3.1% to 63.02, now slightly extended from a 59.67 buy point of a cup-with-handle base.
Delta Air Lines ( DAL ), whose stock jumped on Monday after it reported November traffic figures, advanced 2.1% to 53.41. That stock is in a cup-with-handle base with a potential buy point of 54.16, one of several notable big caps nearing buy points .
American Airlines ( AAL ), which is also making its way through a cup-with-handle base with a 53.84 entry, climbed 2.6% to 50.88.
Airline stocks have been a moving target for the latter half of this year, with Wall Street punishing Spirit Airlines ( SAVE ) on fears of steeper fare discounting over the summer, then punishing United and others over concerns about their ability to control rising costs. Some analysts have indicated that Southwest might be best-positioned if Wall Street began to focus more on costs.
IBD'S TAKE: For more on what fare cuts and higher costs mean for the airline business, read this story .
Hawaiian Airlines parent Hawaiian Holdings (HA) on Tuesday also raised its fourth-quarter unit revenue outlook, which Cowen attributed to the bankruptcy filing of Island Air in October. But shares tumbled after the carrier signaled tougher competition on fare prices in the first quarter of next year.
Southwest plans to start offering service to Hawaii next year. United Airlines in June said it would expand service to Hawaii, starting this month.
Hawaiian is also considering whether to launch a no-frills basic economy fare similar to the one available on Delta, American and United, according to CNBC .
Hawaiian popped 4.55% on Thursday to 41.40.
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