Shares of major airline United Airlines (NASDAQ: UAL) rallied 13.2% on Wednesday as of 2 p.m. ET.

United reported third-quarter earnings last night. Not only did those earnings surprise to the upside, but management also made news by announcing the company's first buyback plan since before the pandemic.

Kissing COVID goodbye

In the third quarter, United delivered $14.8 billion in revenue, up 2.5% from the past year, with non-GAAP (adjusted) earnings per share (EPS) of $3.33, down 8.8%.

While amounting to only meager revenue growth and an actual decline in profits, results were ahead of what analysts were expecting. Furthermore, management guided for between $2.50 and $3 in adjusted EPS for the fourth quarter, which compared favorably with the $2.68 expected by analysts.

Not only that, but the company reached an "inflection," in a couple of ways, according to management. According to the earnings press release, "revenue trends improved as the industry reached an inflection point in the quarter with unprofitable capacity exiting the market." Airlines are a mature and fixed-cost business, so really anytime a new competitor enters, the industry can suffer from overcapacity. Similarly, if capacity is rationalized, everyone becomes more profitable.

Another inflection was that the company initiated its first share repurchase program since before the COVID-19 pandemic. The board authorized a $1.5 billion repurchase program, which would amount to 7% of the company's shares outstanding, at least before today's stock price surge. Management noted it had also repurchased 2 million shares by retiring some warrants issued to the U.S. government in connection with the CARES Act subsidies given to the company during the pandemic.

Confidence in the near future

The pandemic-era debt increases and dilution put airline stocks like United in a deep hole, and even after today's surge, United shares still trade about 25% below their all-time highs set back in 2018.

However, third-quarter results and the initiation of the first buyback since pre-COVID is a strong indicator United and other airlines are finally beginning to put the long shadow of the pandemic behind them.

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