United Airlines Holdings Inc. (NASDAQ:UAL)

The financial performance, as measured by economic profit, exhibits significant fluctuations over the observed period. Initially, the company experienced substantial economic losses, followed by a period of improvement and subsequent decline. Net operating profit after taxes (NOPAT) demonstrates a strong recovery and growth trend, while the cost of capital increased consistently. Invested capital shows volatility, impacting the overall economic profit calculation.

NOPAT Trend

Net operating profit after taxes transitioned from a loss of US$797 million in 2021 to a profit of US$2,682 million in 2022. This positive trend continued with further increases to US$4,823 million in 2023 and US$5,148 million in 2024. Growth moderated slightly in 2025, reaching US$5,340 million. This indicates improving operational profitability over the period.

Cost of Capital Trend

The cost of capital increased steadily throughout the period, rising from 8.77% in 2021 to 9.86% in 2022, 9.75% in 2023, 12.26% in 2024, and reaching 13.31% in 2025. This suggests increasing financing costs, potentially due to rising interest rates or perceived risk.

Invested Capital Trend

Invested capital decreased from US$52,534 million in 2021 to US$41,357 million in 2022, before recovering to US$45,532 million in 2023 and further increasing to US$49,435 million in 2024. It continued to rise modestly to US$50,212 million in 2025. This fluctuation may reflect changes in capital expenditure, asset sales, or debt levels.

Economic Profit Analysis

Economic profit began at a loss of US$5,407 million in 2021, reflecting the negative NOPAT and the cost of capital applied to the invested capital. The loss narrowed to US$1,395 million in 2022, coinciding with the improvement in NOPAT. A positive economic profit of US$385 million was achieved in 2023. However, economic profit turned negative again in 2024, reaching a loss of US$912 million, and further declined to a loss of US$1,346 million in 2025. This reversal is attributable to the increasing cost of capital outpacing the growth in NOPAT, despite the increase in invested capital.

In summary, while the company demonstrated significant improvement in operational profitability as indicated by NOPAT, the increasing cost of capital and fluctuations in invested capital ultimately resulted in a decline in economic profit towards the end of the observed period. The positive economic profit achieved in 2023 was not sustained.

Net operating profit after taxes (NOPAT) demonstrates a significant improvement over the observed period. Beginning with a negative value in 2021, NOPAT exhibits consistent growth through 2025. This positive trajectory contrasts with the initial net income performance, indicating a strengthening of core operational profitability relative to tax obligations.

NOPAT Trend

In 2021, NOPAT registered at -797 US$ millions, representing a loss. A substantial increase is then observed in 2022, with NOPAT reaching 2,682 US$ millions. This positive trend continues into 2023, where NOPAT further increases to 4,823 US$ millions. The growth rate moderates slightly in 2024, with NOPAT reaching 5,148 US$ millions, and continues at a similar pace in 2025, reaching 5,340 US$ millions.

The magnitude of the increase in NOPAT from 2021 to 2022 is particularly noteworthy. While net income also improved during this period, the NOPAT increase suggests improvements in operational efficiency and profitability beyond simply accounting for tax effects. The consistent positive NOPAT values from 2022 onwards indicate a sustained ability to generate profit from core operations after accounting for taxes.

Relationship to Net Income

While both net income and NOPAT show improvement over the period, NOPAT consistently exceeds net income in 2022, 2023, 2024, and 2025. This difference suggests the presence of significant non-operating items or accounting adjustments impacting net income. The divergence between the two metrics warrants further investigation to understand the underlying drivers of these differences.

The sustained growth in NOPAT from 2022 to 2025 suggests effective management of operational costs and revenue generation. The incremental increases in NOPAT in the later years, while positive, indicate a potential slowing of growth momentum, which may require further analysis to determine its sustainability.

The relationship between income tax expense and cash operating taxes demonstrates notable fluctuations over the five-year period. Income tax expense exhibits a significant swing from a benefit in 2021 to positive expenses in subsequent years, while cash operating taxes show a more moderate, generally decreasing trend.

Income Tax Expense

Income tax expense initially registered as a benefit of US$593 million in 2021. This shifted dramatically to an expense of US$253 million in 2022, followed by increases to US$769 million in 2023 and US$1,019 million in 2024. A slight decrease is observed in 2025, with income tax expense reported at US$953 million. This pattern suggests a changing profitability profile and/or tax rate environment.

Cash Operating Taxes

Cash operating taxes began at US$374 million in 2021, decreasing to US$352 million in 2022. A more pronounced decline occurred in 2023, falling to US$274 million, before a modest increase to US$288 million in 2024. The trend continues downward in 2025, with cash operating taxes reported at US$221 million. This indicates a reduction in actual cash outflows related to operations-based taxes.

The divergence between income tax expense and cash operating taxes is substantial. While income tax expense increased significantly from 2021 to 2024, cash operating taxes generally decreased. This discrepancy could be attributed to several factors, including deferred tax assets/liabilities, changes in tax credits utilized, or differences between accounting and tax depreciation methods. The reduction in cash operating taxes, despite rising income tax expense, may positively impact free cash flow.

Relationship between Metrics

In 2021, the income tax benefit significantly exceeded cash operating taxes. As income tax expense became positive, the difference between the two metrics narrowed. By 2025, income tax expense remained considerably higher than cash operating taxes, suggesting a growing reliance on non-cash tax benefits or timing differences in tax payments.

Further investigation into the components of income tax expense and the nature of the differences between income tax expense and cash operating taxes is recommended to fully understand the underlying drivers of these trends.

The composition of invested capital at the company exhibits notable fluctuations over the five-year period. Total reported debt & leases generally decreased, while stockholders’ equity consistently increased. These movements have a combined effect on the overall invested capital, which initially decreased before showing signs of stabilization and modest growth.

Total Reported Debt & Leases

A consistent downward trend is observed in total reported debt & leases, decreasing from US$41,063 million in 2021 to US$31,036 million in 2025. The most significant reduction occurred between 2021 and 2022, with a decrease of US$3,763 million. Subsequent annual decreases were more moderate, suggesting a slowing rate of debt reduction.

Stockholders’ Equity

Stockholders’ equity demonstrates a clear upward trajectory throughout the period. Beginning at US$5,029 million in 2021, it increased to US$15,282 million by 2025. The rate of growth accelerated over time, with the largest annual increase occurring between 2023 and 2024 (US$3,351 million). This indicates increasing retained earnings and/or capital contributions.

Invested Capital

Invested capital initially decreased from US$52,534 million in 2021 to US$41,357 million in 2022, primarily driven by the substantial reduction in debt. It then experienced a moderate increase, reaching US$45,532 million in 2023, before continuing to rise to US$50,212 million in 2025. The stabilization and subsequent growth in invested capital suggest a shift in the company’s capital structure, with equity gains partially offsetting the decline in debt. The increase between 2024 and 2025 was relatively small, at US$777 million.

The interplay between decreasing debt and increasing equity suggests a strengthening financial position. While the initial decrease in invested capital might have raised concerns, the subsequent stabilization and modest growth indicate a more balanced and potentially sustainable capital structure.

The economic spread ratio exhibited significant fluctuation over the five-year period. Initially negative, the ratio improved substantially before declining again. Economic profit transitioned from substantial losses to a modest profit, then reverted to losses. Invested capital decreased initially, then increased over the subsequent years.

Economic Spread Ratio

The economic spread ratio began at -10.29% in 2021, indicating a significant shortfall in returns relative to the cost of capital. A marked improvement was observed in 2022, with the ratio increasing to -3.37%. This positive trend continued into 2023, reaching 0.85%, signifying that returns exceeded the cost of capital for the first time in the observed period. However, the ratio subsequently declined to -1.85% in 2024 and further to -2.68% in 2025, suggesting a weakening of profitability relative to invested capital. The overall trend demonstrates volatility, with a brief period of value creation followed by a return to negative economic spread.

Economic Profit

Economic profit demonstrated a clear progression from substantial losses to a modest profit and back to losses. A loss of US$5,407 million was recorded in 2021, which decreased to a loss of US$1,395 million in 2022. The company achieved a profit of US$385 million in 2023. This positive result was not sustained, as economic profit decreased to a loss of US$912 million in 2024 and further to a loss of US$1,346 million in 2025. The pattern suggests challenges in consistently generating returns exceeding the cost of capital.

Invested Capital

Invested capital decreased from US$52,534 million in 2021 to US$41,357 million in 2022. Following this decrease, invested capital increased steadily, reaching US$45,532 million in 2023, US$49,435 million in 2024, and US$50,212 million in 2025. The increasing trend in invested capital, coupled with the fluctuating economic profit, suggests that the company continued to deploy capital even during periods of negative economic profit.

The interplay between these metrics indicates a complex financial performance. While the company reduced its capital base initially, subsequent increases in invested capital did not consistently translate into positive economic profit or an improving economic spread ratio.

The economic profit margin exhibited significant fluctuation over the five-year period. Initially negative, it improved substantially before declining again. A review of the economic profit reveals a similar pattern, transitioning from substantial losses to a modest profit and then back to losses.

Economic Profit Margin Trend

In 2021, the economic profit margin was -21.68%. This represents a considerable loss relative to revenue. A marked improvement occurred in 2022, with the margin increasing to -3.08%, indicating a reduction in the loss position. The year 2023 saw the margin turn positive, reaching 0.71%, signifying the generation of economic profit. However, this positive trend was short-lived, as the margin decreased to -1.59% in 2024 and further to -2.27% in 2025. This indicates a return to an economic loss position, with the magnitude of the loss increasing in the most recent year.

Relationship between Economic Profit and Margin

The economic profit margin directly reflects the economic profit. The negative economic profit values in 2021, 2022, 2024, and 2025 correspond to negative economic profit margins. The positive economic profit in 2023 is mirrored by a positive margin. The magnitude of the margin change closely follows the changes in economic profit, suggesting a strong correlation between overall profitability and the economic profit generated.

The adjusted operating revenue consistently increased throughout the period, from US$24,941 million in 2021 to US$59,406 million in 2025. Despite this revenue growth, the economic profit margin did not consistently improve, indicating that revenue increases were not sufficient to offset increasing costs or capital charges, particularly in the later years of the period.

Recent Performance

The most recent two years, 2024 and 2025, demonstrate a concerning trend. While revenue continued to grow, the economic profit margin deteriorated, suggesting increasing inefficiencies or a less favorable economic return on invested capital. The margin in 2025, at -2.27%, is the lowest observed in the period, excluding the significantly negative value in 2021.