United Airlines Holdings (UAL.O) on Tuesday forecast weaker fourth-quarter earnings due to higher costs, sending its shares down more than 4%.
The Chicago-based carrier estimated an adjusted profit of $1.50-$1.80 per share in the quarter through December, below the $2.06 expected by analysts in a LSEG survey and lower than $2.46 per share a year ago.
A jump in fuel prices since July is pressuring profits at U.S. carriers. United has said its fuel costs have climbed over 20% since mid-July. The company's average fuel bill is projected to increase by 11% in the quarter through December from the last quarter.
Meanwhile, a reduction in capacity due to the suspension of flights to Israel is expected to add to United's non-fuel costs, which are projected to be up as much as 5% in the December quarter from a year ago.
United, which has the biggest exposure to Israel among the U.S. carriers, has suspended flights to Tel Aviv "until conditions allow them to resume." In the December quarter, Israel accounted for 1.9% of its planned global capacity, a Reuters analysis of Cirium data showed.
The company's shares were down $1.84 at $38.28 in extended trading.
Rising costs as well as signs of softening domestic travel demand have raised worries about the industry's profitability, sparking a sell-off in airline stocks and prompting analysts to slash their earnings estimates.
Rival Delta Air Lines (DAL.N) said last week the travel boom is not over. United's earnings report reinforced that view as the carrier's passenger revenue jumped about 15% in the third quarter from a year ago.
"United experienced a strong and steady domestic demand environment in the quarter," it said.
The company said revenue from premium products was up 20% year-over-year in the third quarter and accounted for more than half of its passenger revenue.
Consumer spending through its loyalty credit cards is up double digits year-to-date from a year ago, it said.
In a sign that lucrative business travel is picking up, the carrier said bookings for trips closer to the departure date in August and September were well ahead of the trend a year ago.
Adjusted profit for the third quarter came in at $3.65 per share, higher than the $3.35 estimated by Wall Street analysts.
United will discuss the results on a call with analysts and investors on Wednesday morning.
