United Airlines Flags Profit Pressure on Fuel Costs Rise

Key Moments

Guidance Cut as Fuel Costs Weigh on Outlook

United Airlines on Tuesday projected second-quarter and full-year profits below analysts’ expectations, citing a sharp rise in jet fuel prices that is compressing margins and clouding its near-term earnings trajectory, even as demand for higher-end travel remains solid.

The Chicago-based airline’s shares, which had been under pressure, reversed course and moved higher in after-hours trading. The shift came as easing geopolitical concerns following U.S. President Donald Trump’s extension of the Iran ceasefire lifted hopes that fuel prices might moderate.

Analysts at Jefferies said United’s softer guidance was driven primarily by elevated fuel expenses, while its underlying operations were broadly consistent with expectations.

United noted that its projections are based on the Gulf Coast jet fuel forward curve as of April 17. The company cautioned that actual results could land at the high end of its guidance range if fuel prices fall, or at the low end if they move higher.

Fuel Shock Reshapes Airline Economics

The airline’s cautious tone underscores how the spike in fuel costs linked to the Iran war is altering cost structures across the U.S. airline sector.

Delta Air Lines has already scaled back planned capacity growth, while Alaska Air scrapped its full-year outlook and indicated that recent fare increases offset only about one-third of its increased fuel expenses. Weaker players such as Spirit Airlines are coming under renewed financial pressure.

GE Aerospace, a major supplier to the industry, has also indicated that elevated oil prices are creating a more challenging environment for its airline customers.

United’s Earnings Forecast and Fuel Assumptions

For the second quarter, United expects adjusted earnings of $1 to $2 per share. The midpoint of that range, $1.50, trails the analysts’ average estimate of $2.08, based on data compiled by LSEG.

The carrier projected full-year profit of $7 to $11 per share, compared with a consensus expectation of about $9.58 per share.

United said it anticipates paying about $4.30 per gallon for fuel in the current quarter, highlighting the intensity of the energy cost headwind.

Cost Recovery Strategy Over 2024

The airline expects to recoup only 40% to 50% of the current quarter’s increase in fuel costs through fares and other revenue initiatives. That recovery ratio is expected to improve to 70% to 80% in the third quarter and 85% to 100% by the fourth quarter.

This trajectory indicates that United anticipates a gradual strengthening of its ability to pass higher fuel costs through to customers over the course of the year, though not sufficiently in the near term to neutralize the recent fuel cost spike.

First-Quarter Results: Premium Segments Outperform

United reported first-quarter adjusted earnings of $1.19 per share, ahead of analysts’ expectation of $1.07. Total revenue rose 10.6% year-on-year to $14.6 billion.

Premium revenue increased 14% from the prior year, while corporate revenue also advanced 14% and loyalty revenue grew 13%. These gains highlight ongoing strength in the airline’s higher-margin customer segments.

Fuel expenses jumped by $340 million in the quarter, up 12.6% from a year earlier, illustrating the scale of the cost pressure.

Capacity Discipline and Flexibility

Looking ahead, United expects capacity in the third and fourth quarters to be flat to up 2% compared with the same periods a year earlier. This signals a more measured stance on growth as carriers focus on protecting profitability.

The airline emphasized that it will adjust capacity as needed, adding or cutting flights depending on demand trends.

United plans to review its performance and outlook in greater detail on a call with analysts and investors on Wednesday morning.