In a significant downturn, United Airlines shares plummeted by over 7% on Wednesday. This bleak development cast a long shadow over the aviation industry, predominantly driven by the carrier’s pessimistic projection of their fourth-quarter earnings, which face a significant cutback due to escalating jet fuel prices.
Moreover, the ongoing suspension of flights to Israel, persisting due to the hostility between Israel and Hamas, may result in further disappointment for United’s revenue stream.
After markets closed on Tuesday, United disclosed earnings of $1.14 billion for the third quarter, surpassing the expectations of Wall Street for both profit and revenue.
However, investors swiftly shifted their attention to United’s sobering projection for fourth-quarter earnings – a forewarned figure falling between the range of $1.50 and $1.80 per share. A substantial dip from analysts’ earlier forecast of $2.09 per share.
Whether United’s profits position themselves at the peak or the pit of their estimated earnings hinges on if flights to Tel Aviv can resume within the next month, or if they remain suspended until the end of the year.
In a note to clients, Cowen analyst Helane Becker prepared for the worst-case scenario, stating, “Given the projections that this will be a long war, we are looking at the lower end of the forecast range and assuming no service until at least year-end.”
Labeling United’s fourth-quarter outturn as “bleak and worse than our estimates,” Becker highlighted the gloom shrouding future earnings.
Before the conflict, United operated flights to Tel Aviv out of San Francisco, Washington, and Newark, New Jersey. Offering more services to Israel than competitors Delta Air Lines and American Airlines, United, with the others, suspended their operations shortly after the attack on Israel by Hamas militants on Oct. 7.
