U.S. airlines trim capacity as fuel costs surge on Ukraine crisis

March 15, 2022

By Abhijith Ganapavaram

(Reuters) -Major U.S. airlines trimmed their capacity estimate for the first quarter on Tuesday as higher fuel cost due to the Ukraine crisis takes away some of the benefits from a steady recovery in travel demand.

Oil prices – a major cost component for U.S. airlines already facing high labor expenses – have surged since Russia invaded Ukraine, drawing a raft of sanctions from the United States and other countries.

Delta Air Lines and United Airlines Holdings, which do not hedge against oil price fluctuations, face the added headache of having to take longer routes to some Asian countries to avoid Russian airspace.

The two carriers, along with JetBlue Airways, tempered their capacity expectations.

Delta said it was expecting first-quarter capacity to be about 83% of pre-pandemic level, at the lower end of its prior forecast of 83% to 85%.

United expects capacity to be down about 19% versus previous forecast of down between 16% and 18%.

JetBlue expects capacity to fall about 1%, at the lower end of its prior forecast.

The three airlines, however, raised their revenue expectations and maintained that demand was robust.

Shares of the airlines were up between 2% and 4% in premarket trading, in line with a retreat in oil prices that dropped to below $100 for the first time in a fortnight.

Delta said it was expecting first-quarter adjusted revenue to be about 78% of pre-pandemic level, compared with 72% to 76% it had forecast earlier.

Southwest Airlines Co said it was expecting revenue to fall 8% to 10%, better than its previous estimate of a 10% to 15% fall.

United Airlines Holdings Inc said it was expect a fall in first-quarter operating revenue to be at the “better” end of its prior forecast of 20% and 25% drop, compared with pre-pandemic levels.

(Reporting by Abhijith Ganapavaram in Bengaluru; Editing by Maju Samuel, Saumyadeb Chakrabarty and Anil D’Silva)