Key Takeaways

• United Airlines' second-quarter earnings exceeded analyst expectations, with full-year adjusted earnings per share projected between $9 and $11.
• The airline faces a significant challenge from a projected $6 billion increase in fuel costs for the year, driven by renewed geopolitical tensions.
• Despite rising ticket prices, United reports that customer demand remains robust.

United Airlines (UAL) reported strong second-quarter financial results that topped Wall Street's projections, but the carrier warned that escalating fuel costs could add approximately $6 billion to its expenses for the year. This significant increase in operational costs is largely attributed to a recent spike in jet fuel prices, influenced by ongoing geopolitical conflicts.

For the quarter ending June 30, United Airlines announced adjusted earnings per share of $1.99, surpassing the consensus estimate of $1.88. Revenue for the quarter reached $17.67 billion, also exceeding the expected $17.61 billion.

Looking ahead, the airline provided a third-quarter adjusted earnings per share forecast of $2.50 to $3.50, falling short of analysts' expectations of $3.60 per share. However, United revised its full-year adjusted earnings per share outlook to the higher end of its previous range, projecting between $9 and $11, up from the $7 to $11 range initially forecast in April. This adjustment follows a previous cut to its January forecast after tensions escalated between the U.S. and Iran earlier in the year.

The surge in jet fuel prices, up 34% in July alone according to Argus data, is a primary concern. These price increases, driven by the volatile U.S.-Iran conflict, represent a substantial cost for airlines, second only to labor. United estimates that these higher fuel prices could inflate its annual expenses by nearly $6 billion compared to initial 2026 projections. The airline reported that second-quarter fuel costs alone climbed 84% year-over-year to $2.3 billion. To mitigate these impacts, United plans to cover up to 90% of its increased costs in the current quarter and 100% in the fourth quarter.

Similar to United, Delta Air Lines (DAL) has also indicated plans to pass on increased fuel costs to customers. Despite the higher fares, both carriers report that demand for air travel remains strong. United noted that fuel price volatility has necessitated an update to its forecast, with the recent price increases impacting third-quarter adjusted earnings by an estimated $1.12 per share.

In response to the elevated fuel costs, United may also scale back its capacity plans for the remainder of the year. The airline had expanded its flying capacity by 3.5% in the second quarter, which contributed to a 16% year-over-year revenue increase to $17.67 billion. Total unit revenue saw a significant boost of 12.1% compared to the previous year, marking the strongest unit revenue growth since early 2023.

While net income saw a decrease of over 17% to $805 million ($2.46 per share), the adjusted net income, excluding one-time items, was $649 million, or $1.99 per share. United executives are scheduled to discuss these results and outlook on an earnings call on Thursday at 10:30 a.m. ET.