[ad_1]
Text size
Southwest Airlines fell early Wednesday after it lowered revenue guidance.
Daniel Slim/AFP via Getty Images
Airline stocks were falling ahead of the open Wednesday as a number of major carriers warned of higher fuel costs.
It’s clear that the third quarter is still going to be a bumper one, or even a record one, for the airline industry. But investors now have another reason to be concerned about the sector, particularly as Labor Day marks the unofficial end of the peak summer travel season.
Southwest Airlines
(LUV) was the sharpest faller, tumbling 4.3%, after cutting its outlook for the third quarter. The low-cost carrier sees revenue per available seat mile falling between 5% and 7% year-over-year, from a previous range of 3% to 7% lower.
The airline said fuel costs per gallon were now expected to be $2.70 to $2.80, from an earlier estimate of $2.55 to $2.65. Southwest added that the Labor Day holiday weekend was a record one for revenue performance, as travel demand proved to be strong. It’s still expecting record third quarter operating revenue.
United Airlines
(UAL) also issued a warning over fuel costs, noting that jet fuel prices have risen more than 20% since the middle of July. It hiked fuel price estimates to between $2.95 and $3.05 per gallon–from a previous range of $2.50 to $2.80.
However, United stuck to the revenue and cost guidance it issued in July, alongside its second-quarter earnings, pointing to a strong performance in the current quarter. Nonetheless, the stock was 1.4% lower in premarket trading.
Alaska Air
said higher fuel costs would hit margins, seeing pretax margins of 10% to 12%, down from 14% to 16%. It also tightened its revenue guidance, now expecting revenue to rise between 1% and 2% year-over-year from an earlier range of 0% to 3%, citing canceled flights due to the wildfires in Maui.
The warnings affected general sentiment toward airline stocks.
Delta Air Lines
(DAL), fell 1.2%, while
American Airlines
(AAL) was 0.8% lower. Both airlines are yet to update on third quarter guidance.
Write to Callum Keown at callum.keown@barrons.com
[ad_2]
Source link
