United Warned of $6 Billion in Additional Fuel Costs. Why the Profit Forecast Was Raised

United Airlines announced Wednesday that its fuel costs this year will be nearly $6 billion higher than it had anticipated in January. The renewed rise in oil prices has put pressure on the airline’s profit forecasts for the third quarter and the full year, Reuters reports.

At the same time, the company raised the lower end of its annual profit forecast, anticipating that strong demand for air travel, higher fares, and a reduction in the number of seats sold would help it offset rising fuel costs.

United’s fuel costs in the second quarter rose by $2.3 billion, or 84%, compared with the same period a year earlier. In the second quarter, United was able to offset about 50% of the increase in jet fuel costs by raising fares. In the third quarter, the company expects to cover 80–90% of the additional costs this way, and in the fourth quarter, to fully offset them.

The airline reported that rising fuel prices since the beginning of July alone have increased its expected third-quarter expenses by $575 million. This is equivalent to $1.12 in adjusted earnings per share. Amid high volatility in jet fuel prices, United has decided to base its earnings forecasts on current fuel prices, Reuters reports. The third-quarter forecast is based on the forward price curve for jet fuel on the Gulf Coast as of July 14: The airline forecasts adjusted earnings of $2.5 to $3.5 per share, assuming an average fuel price of $3.69 per gallon. The midpoint of the range—$3 per share—was below analysts’ average forecast of $3.6, Reuters reports.

United expects adjusted earnings in 2026 to range from $9 to $11 per share. In April, the company had forecast a range of $7 to $11. But the midpoint of the new range—$10—still falls short of the average forecast by analysts surveyed by LSEG. They had expected $10.46 per share, according to Reuters.

According to the company, oil prices have risen by about 15% since early July following a new escalation of the conflict between the U.S. and Iran. The latest spike in fuel prices shows that risks to airline profits remain, even though carriers managed to implement several rounds of fare increases during the previous price shock, Reuters reports.

United noted that it would be able to exceed the upper end of its earnings guidance for both the third quarter and the full year if fuel prices return to early-July levels. If, however, prices remain high, United is prepared to further reduce the number of flights in the near term.

This article was AI-translated and verified by a human editor