An American Airlines 787 is loaded with cargo at Philadelphia International Airport.
Leslie Josephs/CNBC
More corporations are warning that a surge in the associated fee of fuel and worker pay hikes will eat into profits this quarter.
Firms from aerospace manufacturers to package delivery giant UPS are digesting big latest labor deals. Meanwhile, unions from the auto industry to Hollywood are pushing for higher compensation. Airlines, whose biggest expenses are jet fuel and labor, are getting hit particularly hard.
Delta Air Lines on Thursday cut its adjusted earnings forecast for the third quarter to between $1.85 and $2.05 a share, down from an earlier forecast of $2.20 to $2.50. Delta said it’s paying more for fuel than it expected but said maintenance costs were also greater than it anticipated.
U.S. jet fuel at major airports averaged $3.42 a gallon as of Tuesday, up 38% from two months ago, in accordance with Airlines for America, an industry group.
On Wednesday, American Airlines trimmed its earnings forecast, following revisions at Alaska Airlines and Southwest Airlines. American expects to adjusted earnings per share of between 20 cents and 30 cents within the third quarter, down from a previous forecast of as much as 95 cents a share, citing dearer fuel and a latest pilot labor deal.
The corporate expects to acknowledge a $230 million expense for that latest contract, which incorporates immediate 21% raises for pilots, and compensation increasing greater than 46% over the duration of the four-year contract, including 401(k) contributions.
Elsewhere, labor unions from Detroit to Hollywood have pushed hard for raises, higher advantages and schedules in latest contracts. UPS and the Teamsters union representing about 340,000 employees on the package carrier in July reached a latest labor deal that features raises for each full- and part-time employees, and narrowly avoided a possible strike.
UPS employees ratified the agreement ratified last month. By the top of the five-year contract, a driver could make $170,000 in pay and advantages, the corporate said.
Earlier this week, the delivery giant outlined the prices related to the deal and said it the expenses from it is going to increase at 3.3% compound annual growth rate over the following five years.
“Yr one costs greater than we originally forecast,” said Brian Newman, the corporate’s CFO, said on an investor call this week. He said it is going to cost $500 million more within the back half of 2023 than expected, he said.
As of midday Thursday, the United Auto Employees and Detroit automakers appeared far apart on labor talks for brand spanking new labor deals, establishing “likely” strategic strikes at the businesses after an 11:59 p.m. ET Thursday deadline, UAW President Shawn Fain said Wednesday night. The union has sought greater than 30% hourly pay increases, a reduced 32-hour work week, and other improvements.
Other unions are also searching for higher compensation. The Hollywood writers and actors strikes began in May and mid-July, respectively, with members demanding higher pay to match changing industry dynamics within the entertainment-streaming era.
American Airlines offered flight attendants 11% pay increases the date a latest contract starts, and a pair of% raises after that. However the Association of Skilled Flight Attendants said the union wants 35% increases initially of a latest deal, followed by 6% annual raises.
Unions have complained that employees didn’t get raises during high inflation in recent times because the Covid pandemic derailed talks.
Strong travel demand has helped the biggest carriers greater than cover their higher expenses. But some carriers are searching for cracks in sales just as a slower travel period after summer begins. Spirit Airlines on Wednesday said it expects a deeper loss than previously forecast and lower revenue.
Frontier Airlines warned Wednesday that “in recent weeks, sales have been trending below historical seasonality patterns,” and forecast an adjusted loss for the quarter.
– CNBC’s Michael Wayland and Gabriel Cortes contributed to this text.
