Shares of major US airlines saw a decline on Wednesday, October 18, triggered by United Airlines‘ disappointing fourth-quarter forecast, which had shaken investors the day before and heightened concerns about rising operational costs affecting carriers’ profits.
United Airlines witnessed an approximate 8% drop in its shares, hitting a one-year low. This decline had a domino effect on its peers, with Delta Air Lines, American Airlines, and Southwest Airlines all experiencing approximately a 4% drop in their respective share prices.
United’s forecast for adjusted profit in the current quarter ranged between US$1.50 and US$1.80 per share, which was well below the average expectations of US$2.06 by analysts, as reported by LSEG data. This downward projection was due to increased expenses associated with higher jet fuel prices and costly labour contracts.
US carriers have faced profit pressures due to a surge in jet fuel prices during the July-September quarter, resulting from tighter crude oil supplies.
Delta recently adjusted its profit outlook for the full year, narrowing it to US$6 to US$6.25 per share, down from the previous estimate of US$6 to US$7 per share in July.
Additionally, the suspension of flights to Israel is anticipated to contribute to United’s non-fuel costs, with projections of up to a 5% increase in the fourth quarter compared to the same period the previous year.
The escalating costs, combined with signs of reduced domestic travel demand, have raised concerns about the industry’s profitability, leading to a sell-off in airline stocks and prompting analysts to revise their earnings forecasts. (£1.00 = US$1.22 at time of publication).
