Airlines stocks up in morning trading on Wednesday; United Airlines rose 9.3%; Delta Air Lines rose 4.5%; Spirit Airlines, American Airlines rose 3%; Southwest Airlines rose 2%.
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.
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 (.XAL), is up 28% since early August, outpacing a 12% jump in the broader S&P 500.
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