United Airlines flags fuel cost gap behind weaker fourth-quarter profit outlook

The carrier guided fourth-quarter earnings as low as $0.50 a share, well short of the $1.76 Wall Street had expected, as fuel costs climb.

United Airlines told investors on Tuesday that fourth-quarter adjusted earnings per share will land between $0.50 and $1.76, far below the $1.76 analysts had forecast, according to CNBC. The carrier said it expects to pay an average of $4.80 a gallon for fuel in the quarter, up from $3.90 in the third quarter, CNBC reported.

Chief executive Scott Kirby told CNBC's Phil LeBeau on Tuesday that United is currently passing on about 72% of the oil price surge to customers through fares, and that he wants that figure closer to 100%. The comment marks a retreat from guidance chief financial officer Michael Leskinen gave in July, when he said United expected to recover 80% to 90% of the fuel cost increase in the third quarter and all of it by the fourth, according to Skift.

Third-quarter fuel costs had already risen close to 62% from a year earlier to $4.84 billion, Skift reported, even as revenue climbed 17% to about $17.9 billion, with premium, loyalty and basic economy revenue all up 16% to 17%. US air fares rose nearly 23% year-on-year in the seven months through September, according to Labor Department data cited by Reuters. Delta Air Lines separately cut its own adjusted earnings forecast on higher fuel costs ahead of United's announcement, according to TokenPost.

Those fare increases had been read as a sign that airlines were regaining pricing power heading into the fourth quarter. Kirby's admission that United will not recoup the full fuel cost increase shows that power remains partial even after the across-the-board hikes. The gap between list prices and what airlines actually recover points to margin pressure persisting into year-end regardless of how travel demand holds up, and raises the question of whether further fare increases follow if fuel costs stay elevated.