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United Airlines says first-quarter fuel cost will be higher than expected
February 9, 2015 / 10:58 PM / 3 years ago

United Airlines says first-quarter fuel cost will be higher than expected

People are seen at the United Airlines terminal at Newark International Airport in New Jersey, July 22, 2014.Eduardo Munoz

(Reuters) - United Continental Holdings Inc (UAL.N) said on Monday that it expects to pay more per gallon of fuel in the first quarter than it had previously forecast as a recent rise in oil prices chips away at airlines' energy savings.

The Chicago-based airline estimated it will pay on average $2.10 to $2.15 per gallon of fuel for the first quarter of 2015, including the impact of taxes and cash-settled hedges. This revises its guidance from last month that had estimated United would pay between $1.96 and $2.01 per gallon for the quarter.

Global oil prices have risen by more than 21 percent in the past two weeks, which also pushed up the quarterly guidance of American Airlines Group Inc (AAL.O) to between $1.81 and $1.86 per gallon, from a prior forecast of $1.71 to $1.76, the carrier reported on Monday.

The price rise caused American, the world's largest carrier by passenger traffic, to lower its forecast for quarterly pre-tax profit margin.

Still, U.S.-based airlines are poised to save hundreds of millions of dollars more on fuel compared to last year since global prices are down nearly 50 percent since June, even after their recent rally. Fuel is typically an airline's largest variable cost, representing a third or more of operating expenses.

The airline also announced that its consolidated traffic increased 1.1 percent in January year-over-year.

Shares in United, which ended regular trading 4.5 percent lower, rose about 0.66 percent in after-hours trading.

Reporting by Jeffrey Dastin in New York, editing by G Crosse

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