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Jet fuel surge in July disrupts airline earnings guidance
Jet fuel prices jumped about 20% during a two week window tied to a Middle East re-escalation, leaving airlines to revise full year estimates days before their second quarter results.
OilPrice reports that a July spike in jet fuel prices forced U.S. airlines to adjust profit guidance shortly before they were set to report second quarter results. The outlet links the move to a re-escalation in the Middle East earlier in the month, which drove a roughly 20% jump in jet fuel prices over a two week period when carriers were reporting April to June earnings and attempting to guide for the third quarter and the rest of the year.
The reporting says the combination of crude oil and jet fuel volatility has made earnings projections difficult, because outcomes can depend on where jet fuel prices land on any given day. For several months, the direction of jet fuel pricing has hinged on which oil chokepoint in the Middle East was closed to traffic, and on whether the U.S. Administration was signaling an effort to temper oil prices.
OilPrice adds that major U.S. airlines have had their earnings outlooks rattled as fuel costs spiked, complicating the translation of strong demand and revenue into profit. The outlet notes that fuel costs are the second highest expense category for airlines after labor costs, and that this dynamic showed up in the second quarter results of United Airlines, American Airlines, and Southwest Airlines.
According to OilPrice, carriers were dealing with spiking jet fuel costs while management teams worked to forecast the effect on full year earnings amid continued extreme price volatility.
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