A United Airlines Boeing 787-10 Dreamliner taking off from Barcelona Airport in Barcelona on March 28, 2023.

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United Airlines said Tuesday that more expensive jet fuel and a halt to the carrier’s Tel Aviv flights during the Israel-Hamas war would hurt its profits in the final three months of the year.

The airline’s shares were down 8% in early afternoon trading.

For the current quarter, the Chicago-based airline estimated adjusted earnings of $1.50 to $1.80 per share, below analysts’ forecasts of $2.06.

United would then earn between $9.55 and $9.85 per share on an adjusted basis, down from its July forecast of $11 to $12 per share based on fourth-quarter guidance . Fuel prices at major U.S. airports have risen nearly 25% since the start of the summer.

The fourth-quarter forecast is “bleak and worse than our estimates,” Helane Becker, airline analyst at TD Cowen, wrote in a note on Wednesday. “Given the predictions that this will be a long war, we are looking at the lower end of the forecast range and assume there will be no service until the end of the year.”

United and other U.S. and international airlines suspended flights to Israel earlier this month. United had more flights to Israel than any U.S.-based airline with service from Washington, DC; Newark, New Jersey; and San Francisco, which accounts for 2% of capacity.

United said fourth-quarter revenue will rise 9% year-over-year if flights to Israel remain suspended through the end of the year, and 10.5% if the suspension lasts only through October. Non-fuel costs are expected to rise 3.5 percent to 5 percent in the fourth quarter starting in 2022, United said.

Speaking to CNBC’s “Squawk Box” on Wednesday, CEO Scott Kirby attributed the increase to “much higher labor costs than anyone expected at the beginning of the year,” delayed aircraft from manufacturers and a shortage of air traffic controllers.

The suspension of Israel service comes after a robust summer for air travel, in which revenue growth to international destinations outpaced domestic ticket sales. That puts major global airlines like United and Delta in a better position than some discount airlines like Spirit, which focus more on U.S. cities and are expecting losses.

Asked whether customers had recently canceled trips to other international destinations, Kirby said on a conference call Wednesday: “We’re not seeing that at all.”

Here’s what United reported for the third quarter compared to Wall Street’s expectations, based on average estimates from LSEG, formerly known as Refinitiv:

  • Adjusted earnings per share: $3.65 versus expected $3.35
  • Total sales: $14.48 billion versus expected $14.44 billion

United had third-quarter net income of $1.14 billion, or $3.42 per share, compared with $942 million, or $2.86 per share, a year earlier. Adjusted for one-time items, United had earnings per share of $3.65.

Sales rose from $12.88 billion to $14.48 billion.

Source : www.cnbc.com

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