United Airlines Expects Lower Profits as Fuel Costs Rise

UNITED AIRLINES HOLDINGS INC has revised its financial expectations for the second quarter and the full fiscal year, citing a sharp increase in fuel costs as a primary factor squeezing profit margins. Although the carrier continues to see robust demand for premium travel within the United States, the Chicago-based company expects these energy headwinds to impact its near-term profitability. For the second quarter, the airline anticipates adjusted earnings per share to fall between $1 and $2. The midpoint of this range, $1.50, is significantly below the average analyst estimate of $2.08. Looking at the full year, the company anticipates profits of $7 to $11 per share, which also trails the market expectation of $9.58. The airline highlighted the pressure from fuel expenses, estimating a cost of approximately $4.30 per gallon for the current quarter based on recent market curves. This surge in energy prices has created a challenging environment for maintaining margins. Management expects to recover the increased fuel costs through fare adjustments and other revenue measures, though the impact will be phased. The company anticipates recovering 40% to 50% of the fuel price hike in the second quarter, with that figure rising to 70% to 80% in the third quarter. By the fourth quarter, the airline aims to recover between 85% and 100% of the increased costs.