Shares of airline operators were broadly lower on Wednesday as United Airlines Holdings Inc.'s warning of a profit miss due to the Israel-Hamas war cast a pall on sentiment.
U.S. Global Jets ETF Sinks in Premarket Trading
The U.S. Global Jets ETF (JETS) sank 1.3% in premarket trading, after rallying 1.9% in the past two sessions to bounce off Friday's one-year closing low of $15.90. In comparison, futures for the S&P 500 index eased 0.4%.
Concerns over Rising Fuel Costs
A run-up in crude oil prices, which stoked concerns over rising fuel costs, also raised investor concerns.
United Airlines Stock Takes a Dive
United Airlines' stock dove 5.4% toward a nine-month low, leading the Jets ETF's losers, after the air carrier beat third-quarter profit expectations but provided a downbeat fourth-quarter outlook, citing flight suspensions to Tel Aviv. The longer the Israel-Hamas war lasts, the lower the expected profit.
TD Cowen's Helane Becker is assuming the worst for United for the fourth quarter.
"Given the projections that this will be a long war, we are looking at the lower end of the forecast range and assuming no service until at least year-end," Becker wrote in a note to clients.
Capacity Exposure to Tel Aviv
Among legacy U.S. international airlines, Raymond James analyst Savanthi Syth said United had the most capacity exposure to Tel Aviv, at 1.8% of its total. Delta Air Lines Inc. was next at 1.2%, and American Airlines Group Inc. was at 0.4%. Delta President Glen Hauenstein said when the company reported results on Oct. 12 that he was confident that full-year guidance can be met even with the worst-case scenario in Israel. American is expected to report results on Thursday.
Other Airline Stocks
Among the more-active stocks of other air carriers, JetBlue Airways Corp.'s stock fell 0.2%; Southwest Airlines Co. gave up 1.1%; Hawaiian Airlines parent Hawaiian Holdings Inc.'s stock declined 0.4%; and Spirit Airlines Inc. shares slid 1.5%.
