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Delta Air Lines (DAL) is typically thought of as the cream of the crop in the commercial airline industry when it comes to financial performance and execution, but United Airlines (UAL) is giving the company a run for its money. After the close last night, UAL delivered another strong earnings report, exceeding EPS and revenue estimates, while also announcing a new $1.5 bln share repurchase plan. Thanks to UAL's increasing levels of cash flow, the company stated that this buyback is just the beginning of a consistent and disciplined return of capital approach.

On that note, UAL's cash flow from operations in Q3 grew by more than 70% yr/yr to nearly $1.5 bln. That increasing cash flow generation is a function of UAL's improving profitability which is being driven by the company's solid cost management and a more favorable supply and demand dynamic in the industry.

• Last quarter, CEO Scott Kirby predicted that the industry-wide overcapacity issues that drove fares lower would reach an inflection point in mid-August. That forecast came to fruition as domestic unit revenue turned positive in August and into September. Overall, TRASM was lower by just 1.6% compared to last quarter's 2.6% decline, and also ahead of DAL's decrease of 3.6% in Q3.
• Meanwhile, CASM-ex was higher by 6.5% as UAL operated a busier network -- capacity was up 4.1% yr/yr -- but adjusted pre-tax margin still came in at a healthy 9.7%. For a point of comparison, DAL's adjusted pre-tax margin in Q3 was 8.6%.
• Similar to DAL, UAL continued to capitalize on the strength in the corporate and premium revenue categories. In September, corporate revenue was up by 13% yr/yr, and for Q3, premium revenue was up by 5%, following last quarter's 8.5% increase.
• If there was a disappointment, it was that UAL's Q4 EPS guidance of $2.50-$3.00 was merely inline with expectations. However, we believe that UAL may be taking a conservative approach with its guidance, based on the strengthening trends for both UAL and the industry overall. For instance, Mr. Kirby stated that corporate travel demand became stronger in October, and that holiday bookings for Q4 are looking good.

The main takeaway is that UAL has emerged as the top-performing airline during this swing and correction in capacity across the industry. The company's revenue diversity, including its international, premium, and corporate businesses, is working in its favor and the near-term horizon looks bright as airlines continue to reduce their flight schedules.