United Airlines Holdings Inc. is projecting a fourth-quarter profit that falls short of analysts’ estimates as the carrier faces pressure from a suspension of flights to Tel Aviv and higher jet fuel costs.
(Bloomberg) — United Airlines Holdings Inc. is projecting a fourth-quarter profit that falls short of analysts’ estimates as the carrier faces pressure from a suspension of flights to Tel Aviv and higher jet fuel costs.
Adjusted profit will be $1.80 a share if Tel Aviv flights are grounded through Oct. 31, and $1.50 if the ban lasts through the end of 2023, United said Tuesday in a statement. That compares to an average $2.10 from analyst estimates compiled by Bloomberg.
US carriers suspended service to Tel Aviv earlier this month after the Hamas attack on Israel, and United has said it won’t restart flights “until conditions allow.” United has the most service to Tel Aviv among US-based airlines, accounting for 2% of the carrier’s annual capacity, with flights from San Francisco, Washington, Chicago and Newark, New Jersey. United operates 28 weekly flights between the US and the Israeli city.
United shares fell 4.5% to $38.30 as of 4:05 p.m. in New York after the close of regular trading. The stock had climbed 6.4% this year.
Airlines also have been hit by a more than 25% jump in jet fuel prices since June. United has said it hasn’t been able to recover the higher costs through fare increases as quickly as in the past, which is normally a one- to three-month lag. The airline forecast Tuesday that fuel prices will increase to an average $3.28 a gallon in the fourth quarter from $2.95 in the third.
Fuel and labor are the two largest expenses for carriers. Every 10-cent per gallon increase in the price per year of fuel adds $2 billion in costs for the US passenger and cargo airline industry, according to Airlines for America.
Fourth-quarter revenue will climb between 9% and 10.5%, United said, while analysts expect a 9.7% increase. Costs to fly each seat a mile, a gauge of efficiency, will increase 3.5% to 5% in the quarter, while capacity will climb 14% to 15.5% depending on the Tel Aviv situation.
A group of 12 US carriers is expected to report a $4.3 billion operating profit in the third quarter, with $4.09 billion of that generated by the three largest airlines, according to Michael Linenberg, a Deutsche Bank analyst. The cohort — American Airlines Group Inc., United and Delta Air Lines Inc. — will have combined revenue of $58 billion.
United had an adjusted third-quarter profit of $3.65 a share, compared with analysts’ average expectation of $3.34. Revenue was $14.5 billion, while analysts expected $14.4 billion. Adjusted pre-tax margin was 10.8%.
Delta reported a third-quarter profit on Oct. 12 that topped analysts’ estimates, but cut the high end of its full-year outlook on increased fuel and maintenance costs. American reports results Thursday.
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