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In addition to its shares falling, United Airlines also expects a “Q1 2023 average fuel price per gallon3 of between $3.31 and $3.41.”
United Airlines Holdings Inc (NASDAQ: UAL) stock recently dropped 6% following the company’s bleak Q1 2023 results forecast. On Monday, the Chicago-based major American airline said it expects an adjusted quarterly loss ranging between 60 cents and $1 per share. According to United Airlines, the low expectation is due to smaller demand growth compared to other months. In addition, the airline company ascribed its restrained Q1 2023 performance to increased operating costs, including higher fuel costs.
Probe into United Airlines Q1 2023 Forecast
The latest United Airlines Q1 2023 loss forecast is a step down from the company’s previous adjusted earnings projections. The American airliner had projected earnings of between 50 cents and $1 per share for the period ended March 31st.
In a securities filing following Monday’s market close, United Airlines said:
“While all months of 2023 are expected to produce unit revenue significantly above the corresponding months in 2019, the Company is observing new seasonal demand patterns, with lower-demand months such as January and February 2023 growing less than higher-demand months.”
Furthermore, the Chicago-based company also said that “oil prices and crack spreads have remained elevated as compared to the forward curve used for previous guidance of $3.19 per gallon for the first quarter 2023. As a result, the Company now expects a first quarter 2023 average fuel price per gallon of between $3.31 and $3.41.”
United Airlines said it trimmed its unit revenues estimate to between 22% and 23% over a year earlier. This development marks a 2%-3% drawdown from the company’s previous guidance of a 25% increase. Furthermore, the airline still expects earnings of between $10 and $12 a share in 2023 on an adjusted basis.
United Airlines second-quarter revenue could be higher than it previously anticipated. Based on travelers’ booking patterns, the airliner’s operating revenue could approach a 20% increase compared to last year. A slew of popular vacation periods and holiday breaks could see a spike in traveling activities.
On Tuesday, United Airlines looks to present at a JPMorgan (NYSE: JPM) industry conference alongside other airline companies. These include Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and JetBlue (NASDAQ: JBLU).
JetBlue-Spirit Airlines Pending Acquisition
Last July, JetBlue agreed to acquire Spirit Airlines (NYSE: SAVE) to create the fifth-largest airline in the United States. At the time of the announcement, JetBlue planned to pay $33.50 a share in cash for the Spirit acquisition. This offer represented an increase from the $24.30 Spirit’s shares closed following the day’s trading session.
However, the deal, subject to regulatory approval, hit a stumbling block. The US Department of Justice sued to block the acquisition on competitive grounds. According to the DOJ, JetBlue acquiring Spirit could eliminate the largest ultra-low-cost option to major carriers in the US. As US Attorney General Merrick Garland said last week:
“If allowed to proceed, this merger will limit choices and drive up ticket prices for passengers across the country.”
However, JetBlue and Spirit disagreed with the DOJ’s assertion and vowed to contest the lawsuit. According to both airliners, the merger would enhance carrier competition and ultimately benefit air travelers.