United Airlines' (UAL.US) Q2 performance surpasses expectations but cannot conceal the impact of rising oil prices! The annual fuel costs are expected to increase by $6 billion, potentially dragging down profits.

United Airlines (UAL.US) announced that its second-quarter performance exceeded Wall Street expectations, but the airline also warned that billions of dollars in additional fuel costs are still dragging down profitability. The financial report shows that United Airlines' second-quarter revenue was $17.67 billion, a 16% year-on-year increase, surpassing analysts' expectations of $17.61 billion; net profit decreased by over 17% year-on-year to $805 million; adjusted net profit was $649 million; adjusted earnings per share were $1.99, higher than analysts' general expectation of $1.88. In the second quarter, United Airlines' capacity increased by 3.5% year-on-year, while unit revenue increased by 12.1%, the highest since early 2023. The company stated that premium cabin, corporate customer, and basic economy ticket revenue all grew, and both domestic and international route unit revenue also increased. Looking ahead, United Airlines expects adjusted earnings per share in the third quarter to be between $2.50 and $3.50, while analysts generally expected $3.60. The company also predicts that full-year adjusted earnings per share will be between $9 and $11, compared to the forecast range of $7 to $11 given in April. At that time, the company had lowered its full-year profit forecast issued in January due to the U.S. and Israel attacks on Iran at the end of February. According to Argus data released by the aviation industry organization American Airlines Group Inc., as of this Tuesday, aviation fuel prices at major U.S. airports had already risen by 34% in July alone. Against the backdrop of the ongoing escalation and de-escalation of tensions between the U.S. and Iran, aviation fuel prices have shown drastic fluctuations. Aviation fuel is the second largest cost item for airlines after labor costs. United Airlines stated that based on current fuel prices, fuel costs this year are expected to increase by nearly $6 billion compared to early 2026. The company's second-quarter fuel expenses increased by 84% year-on-year to $2.3 billion. The above calculations are based on Tuesday's fuel prices. United Airlines stated that in this quarter, it will be able to absorb up to about 90% of the additional fuel costs, and plans to fully cover the additional costs in the fourth quarter. Competitor Delta Air Lines, Inc. (DAL.US) had previously stated that the company is passing more of the rising fuel costs onto passengers. Both airlines noted that despite ticket price increases, market demand remains strong. United Airlines stated that due to the dramatic fluctuations in fuel prices, the company has updated its performance guidance to incorporate the latest fuel prices into its forecasts. The company stated that since early July, the rise in fuel prices has reduced adjusted earnings per share for the third quarter by $1.12. United Airlines also stated that due to the continued increase in fuel costs this year, the company may further lower its capacity expansion plans. As of the time of writing, United Airlines' stocks fell over 2% after hours on Wednesday.