What drove UAL's operating profit growth in Q2 2023?

United Airlines' (UAL) operating profit growth in Q2 2023 was primarily driven by a significant increase in operating revenue, which surpassed expectations, and effective cost management despite higher fuel and labor costs due to inflation.

1. Revenue Growth: United Airlines recorded a substantial 51.1% year-over-year increase in total operating revenue for Q1 2023, reaching $13.36 billion. This impressive growth was fueled by a 61.8% rise in passenger revenues, driven by international revenues more than doubling on a 36% higher capacity, and a 43.8% increase in domestic revenues on 15.8% higher capacity. The company's passenger revenue per available seat mile (PRASM) guidance for a 22 to 23 percent expansion, coupled with a 23.4% capacity increase, indicates effective revenue management strategies and improved pricing power.
2. Cost Management: Despite the challenges posed by increased fuel and labor costs, United Airlines managed to maintain profitability. The company's largest competitor, Delta Air Lines, reported a net loss that was partially attributed to a four-year pilot contract with an initial 18% pay increase, highlighting the impact of labor costs on airline profitability. In response, United Airlines focused on cost control, particularly in areas such as fuel efficiency and operational optimization, which helped to mitigate the effects of inflation on its bottom line.
3. Operational Efficiency: United Airlines' efforts to streamline its operations and improve efficiency were evident in its ability to maintain the lowest mainline flight and seat cancellation rates among U.S. airlines, despite being the most flights impacted by weather. This indicates strong operational performance and customer satisfaction, which are critical factors in revenue growth and profitability.

In conclusion, United Airlines' operating profit growth in Q2 2023 was driven by robust revenue growth, effective cost management, and operational efficiency. These factors combined to enable the company to overcome the challenges posed by higher fuel and labor costs and deliver strong financial performance.