Shares in United Airlines (NASDAQ: UAL) soared by 29.6% in September, according to data provided by S&P Global Market Intelligence. The startling rise is mainly due to a relief rally after a heavy sell-off in the stock from the spring and through the summer.

What the market was worried about

The airline industry is known as highly cyclical, and for good reason. The traditional cycle works like this: Airlines like United Airlines see passenger numbers growing and load factors (how much seating capacity is used) increasing. They can raise ticket prices in response to solid demand. Consequently, they increase routes to maximize profits in response to rising demand.

After a while, demand starts to wane, leading to pressure on load factors and, ultimately, pricing and profitability. If airlines aren't disciplined in swiftly cutting routes, this could lead to a sharp decrease in profitability.

The latter was what the market was concerned about over the spring and summer, as airlines such as United Airlines talked of overcapacity in the industry. In addition, investors were worried about any potential lingering impact from the CrowdStrike update incident that caused flight delays and cancellations.

What caused the relief rally

However, the good news in the fall is that demand remained strong in the third quarter, while, according to Delta Air Lines and United Airlines' management, the industry was disciplined in reducing capacity where necessary. Both managements were expecting to pass a point of inflection in their revenue per available seat mile (RASM) metric in August, and both did so.

Given that RASM is a crucial indicator of pricing power, an improving RASM implies an industry that isn't suffering from overcapacity issues. This is a positive sign for United Airlines' forthcoming third-quarter earnings report in mid-October.

Where next for United Airlines?

With interest rates peaked and on the way down, consumer discretionary spending is likely to strengthen, which could be good news for airlines. Moreover, an improving global economy is good news for higher-margin corporate travelers, as airlines like United and Delta are better tailored to serve them.

Turning to valuations, Wall Street has United Airlines generating $9.80 in earnings per share in 2024, growing to $11.35 in 2025. While those figures are not set in stone, especially for an industry as cyclical as airlines, the recent news gives confidence in the numbers, putting United at less than 5 times earnings in 2025.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

Here's Why United Airlines Stock Soared Nearly 30% in September was originally published by The Motley Fool