United Airlines boosted its full-year profit target by 3.5 percent despite climbing fuel costs that have rattled rival U.S. carriers.
Full-year 2018 earnings per share will be $7.25 to $8.75 a share, a quarter higher than the previous goal as cost management in other parts of the business and initiatives such as the Polaris Business Class program make up for higher raw material costs, United said. Fuel costs rose 43 percent in the three months through June from a year earlier.
That helped drag net income down 17 percent to $684 million, the airline said. Adjusted earnings of $3.23 a share still outperformed the $3.07 average estimate from Wall Street analysts, and shares rose 9 percent to almost $79.13 during mid-day trading in New York.
“Our performance and financial outcome in the second quarter has further increased our confidence that we can offset the higher fuel prices the entire industry is facing,” Chief Executive Officer Oscar Munoz told investors on an earnings call. “Through the end of the second quarter, we recaptured approximately 75 percent of the earnings that went from higher fuel.”
Oil prices began to rise this year after the U.S. reimposed strict sanctions on Iran, requiring companies to cut off all oil imports from the country by November, following President Trump’s withdrawal from a nuclear accord with the Islamic republic that he said was too permissive.
Crude oil output has also been consistently decreasing in Venezuela, as economic and political instability under President Nicolas Maduro’s regime stunts production — adding to a growing global supply shortage.
Other major carriers like Delta and American Airlines warned investors that climbing fuel prices may hurt earnings for the year. Delta reported a $183 million drop in second-quarter net income after fuel costs surged from a year earlier.
“If the fuel environment shifts or, for that matter, anything else in the macro environment changes, we’ve demonstrated the ability to nimbly manage the challenges posed by the current environment,” United’s Munoz said.
