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Tags: airline fuel costs | southwest | united | alaska air

Airlines Warn of Higher Fuel Costs in 3rd Quarter

Airlines Warn of Higher Fuel Costs in 3rd Quarter
(Dreamstime)

Wednesday, 06 September 2023 09:47 AM EDT

Three U.S. airlines Wednesday warned of higher fuel costs in the third quarter due to a jump in crude prices, adding to pressures the industry faces from expensive labor contracts.

Shares of Southwest Airlines fell 4.1%, United Airlines was down 1.3% and Alaska Air Group edged lower about 1% before the bell.

U.S. airlines do not generally hedge against fuel costs, making them vulnerable to price swings. However, strong travel demand over the last two years has allowed them to mitigate such cost pressures.

But there are early signs that domestic travel demand is weakening, as inflationary pressures hurt consumers when carriers are grappling with costly contracts handed out to retain workers.

Since mid-July 2023, jet fuel prices have climbed over 20%, United said in a regulatory filing. The airline expects all-in fuel price per gallon to be between $2.95 and $3.05, up from its prior forecast of $2.50 to $2.80 per gallon.

It did not outline any impact to profit, but the company is scheduled to speak at a conference later in the day.

Southwest Airlines, the largest U.S. domestic carrier, said it expects revenue per available seat mile - a proxy for pricing power - to fall 5% to 7% in the current quarter. It had earlier forecast a 3% to 7% fall.

Alaska Air, meanwhile, expects an adjusted pre-tax margin of 10% to 12% in the third quarter, lower than its prior expectation of 14% to 16%.

The Washington State-based company also revised its estimate for revenue growth in the third quarter to 1% to 2%, from flat to 3%.

The forecasts come at a time when changing travel patterns due to shifting post-pandemic consumer habits have also increased airlines' operational costs.

American Airlines and Delta Air Lines were also down about 1% each, premarket.

© 2024 Thomson/Reuters. All rights reserved.


StreetTalk
Three U.S. airlines Wednesday warned of higher fuel costs in the third quarter due to a jump in crude prices, adding to pressures the industry faces from expensive labor contracts.
airline fuel costs, southwest, united, alaska air
298
2023-47-06
Wednesday, 06 September 2023 09:47 AM
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