Airline stocks are climbing Tuesday as crude oil slips, while investors brace for United Airlines’ third-quarter report after the close, a release that could set the tone for the entire sector.
- Airline stocks are among today’s strongest performers. Why are airline stocks up?
Cheaper Crude Gives Carriers Breathing Room
Crude futures dropped 1% to under $97 a barrel after an unverified report suggested Qatar and Pakistan proposed reviving negotiations to end the conflict with Iran, per Trading Economics. The slide is buoying United Airlines Holdings Inc. (NASDAQ:UAL), Delta Air Lines Inc. (NYSE:DAL), American Airlines Group Inc. (NASDAQ:AAL), Southwest Airlines Co. (NYSE:LUV) and Frontier Group Holdings Inc. (NASDAQ:ULCC).
Fuel is one of the biggest expenses on an airline’s books, so cheaper crude directly fattens margins. If prices stay low, carriers pocket more profit from every seat sold, which explains why traders pile into the group whenever oil retreats.
United Airlines Steps into the Spotlight
Analysts expect United Airlines to report earnings of $2.59 per share on $17.89 billion in revenue, a profit figure near the bottom of management’s $2.50 to $3.50 guidance.
The carrier arrives with a solid track record. Last quarter, it delivered $17.67 billion in sales against $17.62 billion forecast and adjusted earnings of $1.99 per share versus the $1.87 Wall Street projected. Sales grew 16% year-over-year, with cargo surging 23% and premium cabins rising 16%. Basic economy and loyalty each added 11%.
Expenses remain the sore spot. Revenue per seat mile grew 12.1% yet cost per seat mile jumped 15.2%. In July, United Airlines also cautioned that oil prices at that point would tack roughly $6 billion onto its 2026 fuel bill versus its initial plan. Management tightened its full-year profit forecast to $9 to $11 per share from $7 to $11, compared with the $10.36 analysts anticipate.
A United Airlines beat would ripple across the industry. As one of the biggest players, the airline shows whether passengers still pay premium prices and whether carriers can pass rising costs along. Strong results and a confident outlook would point to durable demand and pricing power.
Airline Stocks Are Rising
Price Action: Frontier shares were up 6.29% at $4.90, United Airlines shares were up 2.27% at $97.77, American Airlines shares were up 3.94% at $12.14, Southwest shares were up 1.70% at $39.46 and Delta shares were up 2.73% at $76.67 at the time of publication on Tuesday, according to Benzinga Pro.
Image: Miguel Lagoa/Shutterstock
