United Airlines forecasts weaker Q4 profit on higher costs

By Rajesh Kumar Singh

CHICAGO (Reuters) -United Airlines Holdings on Tuesday reported stronger-than-expected third-quarter earnings, but forecast weaker profit in the current quarter due to higher costs.

The Chicago-based carrier expects an adjusted profit of $1.50-$1.80 per share in the quarter through December, below $2.06 expected by analysts in a LSEG survey and lower than $2.46 per share a year ago.

For the third quarter, it reported an adjusted profit of $3.65 per share, compared with the $3.35 estimated by Wall Street analysts.

Signs of softening domestic travel demand have raised questions over whether consumers are cutting back on travel spending as household savings are being depleted and interest rates remain high.

Rival Delta Air Lines (NYSE:) 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, led by soaring demand for international travel.

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.

A jump in fuel prices since July, however, is pressuring profits. United has said its fuel costs have climbed over 20% since mid-July.

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 will discuss the results on a call with analysts and investors on Wednesday morning.