United Airlines Holdings has projected a decrease in earnings for the fourth quarter due to escalating costs, leading to a more than 4% drop in its shares. The Chicago-based airline anticipates an adjusted profit per share of $1.50-$1.80 for the quarter ending in December, falling short of the $2.06 predicted by analysts in an LSEG survey and lower than the $2.46 per share from the previous year.
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The surge in fuel prices since July is impacting U.S. carriers' profits, with United reporting a more than 20% increase in fuel costs since mid-July. The airline's average fuel bill is expected to rise by 11% in the December quarter compared to the previous one. Additionally, a decrease in capacity due to the suspension of flights to Israel is anticipated to contribute to United's non-fuel costs, which are projected to increase by up to 5% in the December quarter year-on-year. United, which has the largest exposure to Israel among U.S. carriers, has halted flights to Tel Aviv "until conditions allow them to resume."
In the December quarter, Israel represented 1.9% of its planned global capacity, according to a Reuters analysis of Cirium data. The company's shares fell by $1.84 to $38.28 in extended trading. Concerns about rising costs and indications of weakening domestic travel demand have sparked worries about the industry's profitability, leading to a sell-off in airline stocks and causing analysts to cut their earnings estimates. Despite these challenges, United reported a roughly 15% increase in passenger revenue in the third quarter compared to a year ago, indicating strong and steady domestic demand. Revenue from premium products increased by 20% year-over-year in the third quarter and accounted for over half of its passenger revenue.
The airline also reported double-digit growth year-to-date in consumer spending through its loyalty credit cards compared to a year ago. Indicating a recovery in business travel, United noted that bookings for trips closer to departure dates in August and September were significantly higher than the trend from a year ago. Adjusted profit for the third quarter was reported at $3.65 per share, exceeding Wall Street analysts' estimate of $3.35 per share. United plans to discuss these results on a call with analysts and investors on Wednesday morning.
