United Airlines warns of nearly US$6 billion fuel hit as oil-price surge weighs on outlook

Source: Reuters

CHICAGO — United Airlines said on Wednesday (Jul 15) it expects nearly US$6 billion in additional fuel expense this year compared with its estimate at the start of 2026, as a renewed surge in oil prices weighed on its third-quarter and full-year profit outlooks.

The Chicago-based carrier raised the low end of its full-year profit forecast, betting that strong travel demand, higher fares, and capacity cuts will help absorb the fuel shock. It now expects 2026 adjusted earnings of US$9 to US$11 per share, compared with its April forecast of US$7 to US$11.

The midpoint of the new range, at US$10, compares with analysts' average estimate of US$10.46 per share, according to LSEG. Shares of United were down about 2% in extended trading.

Third-Quarter Outlook

For the third quarter, United forecast:

• Adjusted earnings: US$2.50 to US$3.50 per share
• Average fuel price: US$3.69 per gallon
• Midpoint: US$3.00 per share, compared with analysts' average estimate of US$3.60

The airline said the increase in fuel prices since the beginning of July alone had added US$575 million to its expected third-quarter costs, equivalent to US$1.12 per share in adjusted earnings.

Amid the volatility, United said it would begin basing its earnings guidance on the most current fuel prices. Its third-quarter forecast is based on the Gulf Coast jet fuel forward curve as of Jul 14. United said it would exceed the high end of both its third-quarter and full-year earnings forecasts if fuel prices returned to early July levels.

Second-Quarter Results

United reported second-quarter adjusted earnings of US$1.99 per share, topping analysts' estimate of US$1.88. Revenue rose 16% to US$17.7 billion.

Pricing Power Offsets Fuel Hit

Major US airlines have raised fares sharply during this year's fuel shock, testing whether they can pass higher costs on to travellers without weakening demand.

• United's second-quarter fuel expense rose US$2.3 billion, or 84%, from a year earlier.
• The airline recovered about 50% of the increase in fuel costs during the second quarter.
• It expects to recover 80% to 90% of the current increase in the third quarter and fully offset the increase by the fourth quarter.

Revenue trends remain strong. United expects total revenue per available seat mile — a key measure of pricing power — to grow faster year-on-year in both the third and fourth quarters than the 12.1% increase posted in the second quarter.

Geopolitical Risks and Capacity Adjustments

The company said oil prices had risen about 15% since the start of July following renewed hostilities between the US and Iran. The renewed fuel surge highlights the continuing risk to airline earnings, even after carriers successfully pushed through a series of fare increases during the earlier shock.

United expects fourth-quarter capacity to be lower than currently published schedules and said it was prepared to further moderate near-term flying if fuel prices remain elevated.

Demand Across Segments

Demand remained strong across the business:

• Premium revenue: Up 16% in Q2
• Basic economy and loyalty revenue: Each up 11%
• Cargo revenue: Up 23%
• Contracted business revenue: Up 27%

Liquidity and Financing

United raised US$3.7 billion in new liquidity through private bank transactions. The company described the financing as insurance against geopolitical uncertainty and the possibility of an extreme spike in oil prices.

United will discuss its financial results in a call with analysts and investors on Thursday morning.