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United Airlines' (UAL) Removal of 777 Jets Raises Cargo Concerns

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Per a FreightWaves report, United Airlines Holdings Inc (UAL - Free Report) gave a heads up that the temporary removal of its 24 Boeing 777 jets from service might reduce cargo capacity for business customers next month.

The Chicago, IL-based carrier pulled-out the jets after a Honolulu-bound flight, operating on the same Boeing aircraft variant, suffered an engine failure, forcing the plane to make an emergency landing at the Denver International Airport. This particular type of aircraft, which caused the mid-air scare, was powered by a Pratt & Whitney PW4000 engine. Following this incident, the Federal Aviation Administration said that it required increased inspections of the Boeing 777 jets with Pratt & Whitney 4000-series engines.

To replace the suspended 777 jets, some large aircraft, which was being utilized to support dedicated cargo operations, will be put back to passenger service. Cargo schedules will be accordingly adjusted next month.

“As we review options for swapping aircraft in for scheduled passenger flights, we will be readying planes that have been parked in storage, reconfiguring some cargo-only flights to return to the passenger schedule, and modifying the March cargo flight schedule,” FreightWaves quoted United Cargo.

United Cargo further added, “We expect limited impact on cargo shipments through the end of this week. We do, however, expect there to be adjustments to our March cargo flight schedule. Once we have determined the scope of these changes, we will communicate the
updated schedule and reach out to customers who have shipments that have been impacted.”

With travel demand at an unprecedented low level, thanks to coronavirus keeping people away from air travel, United Airlines’ cargo-only flights were partly offsetting the revenue declines. Notably, cargo revenues surged 77.2% year over year in the December quarter and 39.8% in 2020. The potential disruptions in cargo operations as a result of the groundings will likely lead to further revenue losses.

Zacks Rank & Key Picks

United Airlines carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader Transportation sector are ArcBest Corp. (ARCB - Free Report) , Saia, Inc. (SAIA - Free Report) and Herc Holdings Inc. (HRI - Free Report) . While Herc Holdings sports a Zacks Rank #1 (Strong Buy), ArcBest and Saia carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of ArcBest, Saia and Herc Holdings have rallied more than 69%, 53% and 100% in the past six months, respectively.

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