By Rajesh Kumar Singh
CHICAGO, Oct 20 (Reuters) - United Airlines on Tuesday forecast fourth-quarter profit well below Wall Street estimates despite expectations for record revenue, as soaring fuel costs were expected to persist, eating into gains from strong travel demand and higher ticket prices.
Airline fares are rising sharply, but fuel costs are climbing even faster, squeezing profits industry wide. With the Iran war threatening to keep fuel prices elevated into 2027, analysts say carriers may
have to raise fares further and risk losing customers, or limit flight growth to support ticket prices and protect profits.
Earlier this month, United's rival Delta Air Lines cut its annual earnings forecast by nearly a quarter after projecting a $6 billion increase in its fuel bill from last year.
Delta CEO Ed Bastian warned that airlines may need to further restrain flight growth next year to sustain higher fares and protect profitability.
United expects to pay $4.80 a gallon for jet fuel in the fourth quarter, about 45 cents more than the market consensus assumption. The difference translates into roughly $1 per share in earnings, the company said.
The Chicago-based carrier expects adjusted earnings of 50 cents to $1.50 per share for the December quarter. LSEG data shows an average analyst estimate of $1.76. The $1 midpoint of the carrier's outlook is 43% below expectations.
Alaska Air Group added to the industry's warnings on Tuesday, forecasting a fourth-quarter adjusted loss of $2 to $2.50 per share, compared with analyst expectations for a $1.04 loss. The carrier expects its fuel bill for the year to run $1.8 billion above its original plan.
Alaska's third-quarter revenue rose 14%, yet its adjusted pretax margin narrowed to 1.1% from 4.6% a year earlier. It expects revenue per unit of capacity to grow by a low-double-digit percentage in the fourth quarter, despite projecting a substantial loss.
HIGHER FARES, THINNER MARGINS
United's third-quarter results show how soaring fuel costs are eating into gains from higher fares.
Its additional fuel spending was equivalent to nearly 70% of the increase in quarterly revenue. Despite record sales, adjusted pretax profit fell and its margin narrowed to 6.2% from 8% a year earlier.
Demand, however, remains strong. United carried a record number of passengers, with revenue from business travelers, premium cabins and basic economy all growing at double-digit rates. The airline generated significantly more revenue without substantially increasing flying capacity.
The squeeze extends across the industry. US air fares rose an average of nearly 23% year-on-year in the seven months through September, according to Labor Department data.
The industry's fuel bill, however, has been climbing even faster. US airlines spent $42.9 billion on fuel in the first eight months of 2026, up $13.2 billion from a year earlier despite slightly lower consumption, government data showed.
Analysts at Deutsche Bank have warned that further fare increases could weaken demand, forcing airlines to slow flight growth to support ticket prices.
The pressure is spreading beyond the United States. Ryanair CEO Michael O'Leary warned on Tuesday that European airfares could rise as much as 20% next year as higher fuel costs and reduced airline capacity squeeze the industry.
United and Alaska Air will discuss their financial results in separate calls with analysts and investors on Wednesday morning.
(Reporting by Rajesh Kumar Singh; Editing by David Gregorio)
