Introduction

United Airlines has announced that its profits for the last three months of the year will be impacted by more expensive jet fuel and the suspension of its Tel Aviv flights during the Israel-Hamas war.

Profit Forecast

For the current quarter, United Airlines estimates adjusted earnings of $1.50 to $1.80 per share, which is below analysts’ expectations of $2.06. On an adjusted basis, the airline is projected to earn between $9.55 and $9.85 per share, down from its previous forecast of $11 to $12 per share. This decrease in profitability is primarily due to the rise in jet fuel prices, which have increased nearly 25% since the start of summer.

Impact on Stock

Following this announcement, United Airlines’ shares dropped approximately 4% in after-hours trading.

Flight Suspension to Israel

United Airlines, along with other U.S. and international carriers, suspended their flights to Israel earlier this month. United Airlines had the most service to Israel among U.S.-based airlines, with flights from Washington, D.C.; Newark, New Jersey; and San Francisco.

Revenue and Costs

United Airlines expects its fourth-quarter revenue to increase between 9% and 10.5% year over year, depending on the duration of the flight suspension. However, the airline also anticipates a rise in costs, excluding fuel, of 3.5% to 5% in the fourth quarter compared to 2022.

Industry Context

The suspension of flights to Israel comes after a successful summer for air travel, with international destinations experiencing higher revenue growth compared to domestic tickets. This has placed major global carriers like United Airlines and Delta in a better position than discount airlines like Spirit, which primarily focus on U.S. cities and are expecting losses.

Third Quarter Performance

United Airlines reported better-than-expected results for the third quarter:

• Adjusted earnings per share: $3.65 compared to an expected $3.35
• Total revenue: $14.48 billion compared to an expected $14.44 billion

Financial Highlights

In the third quarter, United Airlines achieved a net income of $1.14 billion, or $3.42 per share, compared to $942 million, or $2.86 per share, in the previous year. After adjusting for one-time items, the airline posted earnings per share of $3.65. Additionally, revenue rose from $12.88 billion to $14.48 billion.

Analyst Call and Future Outlook

United Airlines will hold a call with analysts and media to discuss fourth-quarter demand and strategies to address rising costs on Wednesday at 10:30 a.m. ET.