The Airline Miss
Despite record summer travel sales and lingering pent-up demand for vacations, airlines have still forecasted a gloomy outlook headed into the end of the year. Chicago-based airline United just reported its fiscal third-quarter earnings report along with its future guidance. For the third quarter, United Airlines posted beats on both top and bottom lines, with an earnings per share of $3.65 compared to the estimated $3.34 and revenues of $14.48 billion compared to $14.42 billion. This beat was, however, not at the forefront of its earnings call, as its company guidance for the fourth quarter really caught investor attention. United lowered its estimated fourth-quarter earnings per share to be between $9.55 and $9.85, down from its estimates in July between $11 and $12 per share.
The two major proponents cited that would drastically affect its margins were rising fuel costs and the Israel-Hamas war. With both Saudi Arabia and Russia cutting production to increase prices on natural oil, the costs to fuel commercial airliners have increased proportionally. In response to the war abroad, United, and other carriers who have flights through Israel have halted these services, decreasing a small portion of potential sales. Despite beating earnings for the last quarter, these uncertainties created the bleak forecasts that led to a Wall Street sell-off, with United stock falling 4.66% during after-hours trading. As these issues may hopefully be short-term, investors should turn their heads to the consumer to judge if “higher rates for longer” may negatively affect several big-ticket purchases such as flight fares.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.