United Airlines Holdings Inc. tumbled the most in three months after warning that high labor costs will result in a surprise loss this quarter.
The carrier expects to lose 60 cents to $1 a share when it reports earnings for the first three months. Analysts had expected a profit of 69 cents a share, according to the average of estimates compiled by Bloomberg.
The latest projection marks a sharp turn from January when United forecasted profit in the first quarter of as much as $1 a share. The company now anticipates expenses from a potential new collective bargaining agreement with its pilot's union to accrue this quarter rather than next quarter. It also said fuel costs were up.
While the costs largely reflect shifted timing, United also reduced its first-quarter revenue guidance due to changes in seasonal travel patterns. The company expects a bounce-back in the second quarter, though investors may focus more on the near-term issues, said JPMorgan Chase & Co. analyst Jamie Baker.
“United diminished its total operating revenue guide by three points,” Baker said in a report. “The company spoke to this phenomenon during its last call, but one is obviously left wondering why emerging patterns didn’t wield more influence over the initial guide.”
United’s shares slid 4.1% at 11:26 a.m. in New York after an earlier decline of 7.1%, the biggest intraday slump since Dec. 13. The stock had soared 30% this year through Monday’s close amid optimism about the global travel recovery.
United, which disclosed the forecast late Monday ahead of an industry conference, is the latest US airline to acknowledge the hefty costs of new labor agreements, as rivals including American Airlines Group Inc. talk with their respective unions. Delta Air Lines Inc., whose pilots approved a new contract this month, surprised investors in January with a worse-than-expected first-quarter profit forecast due to higher labor expenses.
Separately, Southwest Airlines Co. on Tuesday increased its quarterly non-fuel cost projection due in part to fallout from its operational breakdown in December. The company also said it was bolstering its systems, including upgrading a key software tool, to help avoid future disruptions.
United’s loss forecast outweighed a handful of positive updates, with the carrier saying operating revenue in the first quarter will be up 51% from the prior year in a “strong demand environment.” It also said the second quarter is shaping up better than expected.
The airline left unchanged its 2023 per-share earnings target of $10 to $12.