US Airline Stocks Plummet Amid Soaring Fuel Costs and Earnings Concerns
Translated & summarized from Bizportal by baba
US airline stocks plunged this week due to soaring jet fuel costs and concerns over upcoming earnings reports. United Airlines lost over 10%, with Delta, American, and Southwest also experiencing significant drops. Rising fuel prices are impacting profitability, forcing airlines to revise earnings forecasts and potentially leading to reduced demand if further ticket price increases are implemented. United's upcoming report will be closely watched for its annual profit outlook.
The story in 6 lines · by baba
- US airline stocks, including United, Delta, American, and Southwest, fell significantly this week due to rising fuel costs.
- United Airlines' stock dropped approximately 10.6% as Brent crude oil prices surged.
- Delta Air Lines revised its annual earnings forecast downward after fuel costs rose 62% in the third quarter.
- Market fears suggest further ticket price hikes could negatively impact consumer demand for air travel.
- United Airlines is set to release its earnings report on Tuesday, with investors focused on its annual profit outlook.
- Israeli airline El Al is also exposed to rising jet fuel prices and will be affected by competitor reports.
Major US airline stocks experienced a significant downturn this week, with United Airlines losing approximately 10.6% and closing around $96 per share. The decline precedes the company's upcoming earnings report, which will kick off the reporting season for the sector. On Friday alone, United's stock fell 5.1%, coinciding with a 3.7% jump in Brent crude oil prices to around $110 per barrel.
Other leading carriers also saw substantial losses: Delta Air Lines dropped 8.3%, American Airlines 6.9%, and Southwest Airlines 5.2%. The US airline industry ETF shed about 5.8% of its value. These drops are largely attributed to the sharp increase in jet fuel prices, a major expense for airlines. United paid $4.19 per gallon in the second quarter, a 79% increase from the previous year, and had warned that fuel costs could add nearly $6 billion to its annual expenses beyond initial projections.
Delta, which owns a refinery through its subsidiary Monroe Energy, reported third-quarter revenues of $17.6 billion (excluding refining operations) but saw its average fuel price climb 60% to $3.61 per gallon, increasing fuel expenses by 62% to approximately $4.1 billion. Consequently, Delta revised its annual earnings per share forecast downward.
Market concerns are mounting that airlines have passed most of the increased costs to consumers, and further price hikes could dampen demand. Despite this, Delta maintains that consumer demand for travel remains strong. In response to the challenging environment, Delta is slowing its growth, planning less than a 2% increase in available seats.
United is scheduled to release its earnings report on Tuesday, followed by Southwest on Wednesday and American Airlines on Thursday. A key focus will be whether United maintains its annual profit forecast, which was based on significantly lower oil prices than current market rates. Israeli airline El Al is also set to be affected, as it is directly exposed to jet fuel prices and will be included in the TA-35 index.