United Airlines Lifts Full-Year Profit Outlook Despite Soaring Fuel Costs

United Airlines raised its full-year profit forecast on Wednesday, signaling confidence that strong travel demand will offset soaring fuel costs, even as it issued a third-quarter earnings outlook that fell short of Wall Street estimates. The mixed guidance sent the company's shares down 5% in extended trading.

A Tale of Two Forecasts

The Chicago-based carrier now expects its 2026 adjusted earnings per share to be at the high end of its previously announced range of $9 to $11. The top end of this forecast is approximately 5% above the analyst consensus of $10.46 per share, according to data from LSEG. This optimistic full-year view comes despite the airline's fuel bill being projected to be about $6 billion higher than anticipated at the start of the year.

In contrast, United's near-term outlook was weaker than anticipated. For the third quarter, the airline forecast adjusted earnings between $2.50 and $3.50 per share. The midpoint of this range, $3.00, is significantly below the average analyst estimate of $3.60 per share, as per LSEG. The company reported second-quarter adjusted earnings of $1.99 per share on revenue of $17.7 billion, topping analyst estimates.

Navigating Fuel Headwinds

The primary challenge facing the airline is a recent spike in jet fuel prices. United based its forecasts on oil prices as of July 14, noting that prices had risen about 15% since the start of the month amid renewed geopolitical tensions. The company calculated that this surge increased its expected fuel expenses by approximately $575 million in just two weeks.

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United stated that its third-quarter earnings estimate would have been $1.12 per share higher if fuel prices had remained stable. The airline has been using its pricing power to manage these costs, successfully recovering about 50% of the fuel cost increase in the second quarter. It expects to recover 80% to 90% of the current increase in the third quarter and fully offset the impact by the fourth quarter.

Outlook and Strategy

For investors, a key indicator of this strategy is total revenue per available seat mile (TRASM), a measure of pricing power. United expects TRASM to grow faster year-over-year in both the third and fourth quarters than the 12.1% increase it posted in the second quarter. This suggests the carrier is confident it can continue to pass higher costs on to consumers without significantly weakening demand.

In a move to maintain pricing discipline, United also noted that its fourth-quarter flight schedules, which are now on sale, are likely to be reduced from current levels. The company's executives are scheduled to discuss the results and outlook in more detail on a call with analysts and investors on Thursday morning.