Insights

Why United Airlines Dipped While the Market Climbed Today

What happened

United Airlines Holdings (NASDAQ: UAL) announced Thursday it is cutting flights from an important hub airport, and investors were none too pleased with the news. This, combined with a target-price cut from an analyst tracking the carrier’s stock, drove United’s share price down by 2.5% on a generally up day for the wider market.

So what

That morning, United said it will provisionally remove around 50 daily domestic departures from New Jersey’s Newark Liberty, one of the largest and most important airports in the New York metropolitan area. That tally comprises around 12% of the company’s total Newark departures.

United stressed that these cuts are only temporary. According to the company, they are due to construction at the airport and issues with air traffic control (ATC) staffing.

In an article on the matter, Reuters cited a company letter to employees in which management wrote that the move should help United ease extreme delays and get its planes to their destinations on time more frequently. United added that neither company workforce or hardware issues were at play as it possesses “the planes, pilots, crews and supporting staffing necessary to fly our current Newark schedule.”

Although the move has been described as temporary, it is unknown when United might resume some or all of the affected departures.

United was also dinged Thursday by that price-target cut. Raymond James‘ Savanthi Syth now feels the stock is worth only $48 per share. That’s well down from her previous $62 level, although she’s maintaining her outperform (i.e., buy) recommendation on the shares. The reasons behind this change were not immediately apparent.

Now what

Pent-up demand for air travel has put a strain on many airlines, United included. And despite what the carrier says about the sufficiency of its staff, all airlines have struggled with maintaining and rebuilding workforces which many employees left during the travel-industry lull in the thick of the coronavirus pandemic.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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