Recently, United Airlines (NASDAQ:UAL) announced that it will be dramatically increasing its capacity of Transatlantic flights. This comes ahead of the summer flying season, as United seeks to capitalize on a swift recovery in passenger traffic levels. Already, domestic U.S. travel has enjoyed a solid rebound, and United’s management team is now placing a significant bet on a similar upswing overseas. Here’s what it means for UAL stock.
United already had significantly more international flights than either Delta (NYSE:DAL) or American Airlines (NASDAQ:AAL) as per data from research firm Cirium. Now, with this added capacity, United will be far and away the largest U.S.-based international carrier. The company plans to take its capacity to fully 25% above its pre-pandemic levels. That’s a huge increase given the remaining amount of uncertainty in the global travel market. United will move to having 22 daily flights between the U.S. and London, and is adding flights to new destinations such as the Canary Islands of Spain and Portugal’s Azores Islands among others.
International flying is generally attractive for airlines. That’s not only for the higher ticket yields, but also the broader possibilities. A bigger international network improves the value of code-sharing and alliance programs with international carriers. Loyalty programs are a big piece of the pie for airlines, so United is making a power play to bolster its standing on that front.
For another, with business travel being slower to recover, premium international destinations could become the major new growth driver for airlines as they seek to adapt to changing conditions. Tourism-centered routes such as to the Canaries could represent an interesting strategic shift for United over the longer-term.
A big part of this strategy swings on higher fuel costs. Given the far longer routes we’re talking about here, it will be important to maintain high load factors on these flights. Flying a half-empty jet over the Atlantic comes at a higher cost than doing so between New York and Boston. So United will need to get the math right in terms of which routes it adds and at what capacity. But it’s nice to see them being willing to take a big swing like this. United’s move represents an airline that is lifting off out of crisis mode and is operating from a position of strength. That could well reflect itself in the value of UAL stock going forward, as well.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.