United Airlines sees stronger profit, unveils $1.5 billion share buyback program

United Airlines forecast a stronger-than-expected profit in the current quarter on Tuesday, after third-quarter earnings topped Wall Street expectations on improved pricing power.

In a sign of growing confidence in its business, the Chicago-based airline also announced a $1.5 billion share buyback program - its first since the COVID-19 pandemic.

United said it expects an adjusted profit of $2.50 to $3 per share in the quarter through December. Analysts expect the company to report a quarterly profit of $2.68 a share, according to LSEG data.

United reported adjusted third-quarter earnings of $3.33 a share, compared with analysts' expectations of $3.17.

Its shares were down about 0.2% in after-hours trading.

The airline said its domestic unit revenue, a proxy for pricing power, turned positive in August and September from a year ago.

An excess supply of airline seats in the domestic market during the summer travel season had forced carriers to discount fares, hurting their earnings.

U.S. airlines have moderated capacity since then. Annual domestic seat growth has slowed to 1.5% in October and November from 5.5% in July, according to analysts at BofA.

"As predicted, unproductive capacity left the market in mid-August, and we saw a clear inflection point in our revenue trends that propelled United to exceed Q3 expectations," United CEO Scott Kirby said in a statement.

Last week, rival Delta Air Lines also reported an improvement in its unit revenue in the third quarter and said the trend was expected to continue through year end.

Capacity adjustments as well as a more than 20% year-on-year decline in jet fuel prices in North America have bolstered the industry's earnings outlook, driving up airline shares.

The NYSE Arca Airline index is up 28% since early August, outpacing a 12% jump in the broader S&P 500. United's shares have also gained about 69% in that time.

United said its investments in the past four years are now generating higher profits and free cash flow, enabling the company to resume share buybacks. It called the $1.5 billion share repurchase program "the beginning of a consistent and disciplined return of capital."

"Like other leading airlines and companies, we are initiating a measured, strategic share repurchase program," Kirby told staff in a note on Tuesday.

He added, however, that investments in the company's business and repaying debt would take precedence over shareholder returns.

United will discuss its financial results on a call with analysts and investors on Wednesday morning.