US carriers cut margin outlook on fuel costs, Frontier flags lower bookings

THREE US carriers on Wednesday (Sep 13) cut their third-quarter margin forecasts on higher fuel costs, sending shares of other airlines in the country lower over concerns related to rising expenses.

US airlines have warned of headwinds related to surging fuel costs in the current quarter, as oil prices have risen due to extended production cuts by Saudi Arabia and Russia.

The supply cuts could lift Brent futures above the US$100 a barrel threshold before the end of the year, Bank of America analysts said.

Shares of low-cost carrier Frontier were down 9 per cent after it warned of a “recent significant unexpected change in the booking trajectory,” adding it experienced a greater volume of “recent operational cancellations” than previously forecast.

“In recent weeks, sales have been trending below historical seasonality patterns,” Frontier said in a regulatory filing.

The forecast comes against the backdrop of early signs of domestic travel demand weakening, with inflationary pressures hurting consumers and airlines handing out costly contracts to retain workers.

American Airlines said it expects a profit of 20 to 30 US cents per share in the current quarter, down from its prior forecast of 85 to 95 US cents per share, sending its shares down 4 per cent.

The airline also tightened its forecast for total revenue per available seat mile, a proxy for pricing power. It is now expected to fall 5.5 per cent to 6.5 per cent, compared with its earlier forecast of a 4.5 per cent to 6.5 per cent fall. Its shares fell 1.71 per cent.

“Unsurprisingly fuel guidance revisions are placing pressure on implied EPS guides while revenue updates are more mixed, reiterating softness in the domestic market,” Raymond James analyst Savanthi Syth said.

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Stocks of larger US carriers such as Delta Air Lines, Southwest Airlines and United Airlines also fell about 2 per cent each. REUTERS