United Airlines (UAL) 3Q 2023 earnings

United Airlines said more expensive jet fuel and a halt to the carrier’s Tel Aviv flights during the Israel-Hamas war will eat into its profits in the last three months of the year.

United shares tumbled 9.7% on Wednesday to $36.24, a one-year low.

For the current quarter, the Chicago-based carrier estimated adjusted earnings of between $1.50 and $1.80 a share, below analysts’ forecasts of $2.06.

United would then earn between $9.55 and $9.85 a share, on an adjusted basis, down from its forecast in July of between $11 and $12 a share, based on its projection for the fourth quarter. Jet fuel prices in major U.S. airports are up nearly 25% since the start of summer.

The fourth-quarter guidance “is bleak and worse than our estimates,” wrote Helane Becker, an airline analyst at TD Cowen, in a note on Wednesday. “Given the projections that this will be a long war we are looking at the lower end of the forecast range and assuming no service by year end.”

United and other U.S. and international carriers halted their flights to Israel earlier this month. United had more service to Israel than any of the U.S.-based airlines with service from Washington, D.C.; Newark, New Jersey; and San Francisco, accounting for 2% of its capacity.

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United said its fourth-quarter revenue will rise year over year between 9%, if Israel flights remain suspended through the end of the year, and 10.5% if the suspension lasts only through October. Its costs, excluding fuel, will likely rise between 3.5% and 5% in the fourth quarter from 2022, United said.

Speaking to CNBC’s “Squawk Box” on Wednesday, CEO Scott Kirby attributed the increase to “much higher labor costs than anyone anticipated at the start of the year,” delayed aircraft from manufacturers and air traffic controller shortages.

The Israel service suspension comes after a robust summer for air travel with revenue growth for international destinations outpacing sales of domestic tickets. That has put big, global carriers such as United and Delta on better footing than some discount airlines such as Spirit, which focus more on U.S. cities and expect losses.

When asked on an earnings call on Wednesday whether customers were canceling their trips to other international destinations lately, Kirby responded: “We’re not seeing that at all.”

Here’s what United reported for the third quarter compared with what Wall Street expected, based on average estimates compiled by LSEG, formerly known as Refinitiv:

• Adjusted earnings per share: $3.65 vs. an expected $3.35
• Total revenue: $14.48 billion vs. an expected $14.44 billion

United posted third-quarter net income of $1.14 billion, or $3.42 a share, versus $942 million, or $2.86 a share, a year earlier. Adjusting for one-time items, United posted earnings per share of $3.65.

Revenue rose to $14.48 billion from $12.88 billion.