US airlines warn of lower margins and higher costs in Q3

With just two weeks to go until the third quarter is over, various US airlines have fired warning shots over their financial results for Q3. Many cite rising labor expenses and oil prices and changing booking patterns as reasons for expected lower operating profits.

Spirit Airlines expects Q3 revenues to be lower to between $1.245 and $1.255 billion compared to the previous guidance of between $1.300 billion and $1.320 billion. Fuel costs will be higher at $3.06 per gallon versus $2.80 that was guided in August. The adjusted operating margin will be down to -14.5 to -15.5 percent compared to -5.5 to -7.5 percent. Capacity will grow by 13.4 percent year on year, slightly down from 13.7 percent in the earlier estimate.

Frontier Airlines hasn’t shared revenue guidance but expects a reduced capacity growth of 20-21 percent instead of 21-23 percent. Operating expenses excluding fuel will be slightly lower to between $645 and $655 million versus $650 to $665 million. The ultra-low-cost calculates a higher fuel bill, as fuel will be $3.05 to $3.10 per gallon versus $2.80-$2.90 million in the previous guidance. The pre-tax margin will be between -4 to -7 percent.