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United sees bigger-than-expected first-quarter loss after 737 Max groundings. Here’s why the stock is rallying anyway.

United Airlines Holdings Inc. said it expected to lose more money than expected in the first quarter, after the government this month ordered dozens of Boeing 737 Max 9 jets grounded following a mid-air blowout on an Alaska Airlines flight.

But shares of United UAL, -0.95% rallied 6% after hours on Monday, after the air carrier forecast a full-year profit that was better than expected. That forecast followed a jump in fourth-quarter results that beat expectations, helped by both United’s premium-cabin offerings and its cheaper basic economy fares.

For the first quarter, United said it it expected to lose 35 cents to 85 cents a share on an adjusted basis. That’s worse than Wall Street’s expectations for a 23-cent per-share loss. United flies 79 Max 9 jets.

United also said the groundings would push its costs higher. In a filing, the carrier said it expected “an impact of approximately 3 percentage points of incremental [adjusted unit costs] based on the fleet being grounded January 6, 2024 through January 31, 2024.”

The Federal Aviation Administration grounded 171 Max 9 jets this month after a panel on one such jet being flown by Alaska Airlines tore away, forcing an emergency landing. No severe injuries were reported. But Boeing BA, -0.04% and air-safety regulators are likely to come under deeper scrutiny as inspections continue.

Still, United said that for the full year, it expected adjusted earnings per share of between $9 and $11. That was above FactSet expectations for $9.53.

Shares were up 5.4% after hours. United’s earnings conference call to discuss the results and forecasts takes place on Tuesday morning.

Chief Executive Scott Kirby, in a statement, said he expected the trends United saw last year to continue. But the carrier is entering a year already marked by heightened drama in the airline industry.

Some analysts have expressed worries that airlines still have too many flights and too little demand, and are still dealing with higher costs after two years of “revenge” travel. With the fate of the Max 9 still in limbo, Jefferies analysts said in a note late Monday that United’s full-year outlook was “vague.”

Elsewhere, rivals Spirit Airlines Inc. SAVE, +19.46% and JetBlue Airways Corp. JBLU, +0.20% are trying to keep their merger deal alive, after a federal judge blocked it last week. Analysts have cast doubt on Spirit’s ability to survive on its own. Meanwhile, the Federal Aviation Administration over the weekend recommended inspections on a second Boeing aircraft model, the 737-900ER.

United reported fourth-quarter net income of $600 million, or $1.81 a share, compared with $843 million, or $2.55 a share, in the same quarter in 2022. United’s adjusted earnings were $2 a share.

Revenue rose 9.9% to $13.63 billion.

Analysts polled by FactSet expected adjusted earnings per share of $1.69, on revenue of $13.55 billion.

“United’s diversified revenue strategy proved, once again, to be a critical, differentiated, competitive advantage,” the company said in a statement. “United’s premium cabin saw an increase in revenue of 16% for the quarter year over year, while its basic economy offering again saw a substantial revenue increase of 20% for the quarter year over year.”

BofA analysts this month upgraded shares of United to a buy rating. They said the company’s slightly more aggressive focus on transatlantic travel than its rivals, and said its focus on higher-end seating arrangements and other amenities had been paying off.

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