BA - United Airlines' Growth To Be Throttled Back (Rating Downgrade)

2024-03-11 08:52:42 ET

Summary

• United Airlines has faced multiple operational incidents and accidents, raising concerns about its safety and maintenance practices.
• The airline's aggressive growth plan, including a massive aircraft buying program, may be impacted by delivery delays and reduced capacity growth.
• United's financial commitments for fleet acquisition and airport terminal expansion are significantly larger than competitors and will put strain on its balance sheet.

United Airlines ( UAL ) received plenty of attention in the news during the past week, largely because of multiple operational incidents and accidents, the most recent in a turbulent year for the Chicago-based airline. Since the beginning of the year, United faced a grounding of its MAX 9 fleet as a result of the in-flight failure of an Alaska Airlines ( ALK ) Boeing ( BA ) 737-MAX 9 door plug. The resulting investigation and ongoing investigation by the NTSB resulted in the FAA telling Boeing that it will not be allowed to increase production of the MAX until the government is satisfied that Boeing has addressed the MAX safety concerns. I previously reviewed United Airlines and suggested a buy for the company. Since that time, UAL stock has appreciated 5%, the lowest for the big 4 airlines -also including American, Delta, and Southwest ( LUV ) - and farthest below LUV's 18.6%. U.S. airline industry stocks fell sharply in the summer of 2023, driven primarily by macroeconomic fears and industry oversupply fears. As investors process all of this information, it is necessary to study what has taken place at United as well as consider potential changes to United Airlines' strategies.

Operational Concerns or a Confluence of Coincidences?

United kicked off March with a rough week of operations

March 8, 2024 – a 22-year-old United A320 operating from San Francisco to Mexico City diverted to Los Angeles after a reported hydraulic failure....

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