United Airlines Has Analyst Concerned With Increased CAPEX, Large Airplane Orders — And What About That Balance Sheet?

BofA Securities released its first take on the United Airlines Holdings Inc UAL Investor Day presentation on Tuesday, maintaining a bearish sentiment on the Chicago-based airline company.

The United Airlines Analyst: BofA Securities analyst Andrew G. Didora maintained an Underperform rating on shares of United Airlines, increasing the price target from $39 to $43.

The United Airlines Takeaways: The United Airlines investors day presentation went as expected, with the company ordering 270 narrow-body planes from Boeing Co. BA and Airbus SE EADSY to replace older regional jets, Didora said.

The analyst noted that this fleet modernization is primarily aimed at driving down costs associated with older, less efficient planes, such as fuel costs and marginal seat costs.
Despite United’s robust plans for increasing profitability, Didora is concerned about the airline company’s ability to deliver. As of December 2020, United’s net debt to equity stood at 360.4%, according to the research report.

Didora said that with the recently announced airline order, United’s debt will grow to $25 billion by 2023 — up from $24 billion now and $18 billion in 2019 — then add in $8 billion in CAPEX in 2024, which means 2025 is the first possible year United can be expected to remedy its balance sheet.

UAL Price Action: Shares of United Airlines were up 1.18% Wednesday to $52.77.