More companies, especially airlines, warn higher costs will eat into profits

More
companies
are
warning
that
a
surge
in
the
cost
of
fuel
and
employee
pay
hikes
will
eat
into
profits
this
quarter.

Companies
from
aerospace
manufacturers
to
package
delivery
giant


UPS
are
digesting
big
new
labor

deals.
Meanwhile,
unions
from
the
auto
industry
to
Hollywood
are
pushing
for
better
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.
The
carrier
said
it
is
paying
more
for
fuel
than
it
expected
but
said
maintenance
costs
were
also
higher
than
anticipated.

U.S.
jet
fuel
at
major
airports
averaged
$3.42
a
gallon
as
of
Tuesday,
up
38%
from
two
months
ago,
according
to
Airlines
for
America,
an
industry
group.

On
Wednesday,


American
Airlines
trimmed
its

earnings
forecast,
following
revisions
at


Alaska
Airlines
and


Southwest
Airlines.
American
expects
adjusted
earnings
per
share
of
between
20
cents
and
30
cents
in
the
third
quarter,
down
from
a
previous
forecast
of
as
much
as
95
cents
a
share,
citing
more
expensive
fuel
and
a new
pilot
labor
deal.

The
company
expects
to
recognize
a
$230
million
expense
for
that
new
contract,
which
includes
immediate
21%
raises
for
pilots,
and
compensation
increasing
more
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,
better
benefits
and
schedules
in
new
contracts.


UPS
and
the
Teamsters
union
representing
about
340,000
workers
at
the
package
carrier
in
July

reached
a
new
labor
deal
that
includes
raises
for
both
full-
and
part-time
workers,
and
narrowly
avoided
a
potential
strike.

UPS
workers
ratified
the
agreement
last
month.
By
the
end
of
the
five-year
contract,
a
driver
could
make

$170,000
in
pay
and
benefits,
the
company
said.

Earlier
this
week,
the
delivery
giant

outlined
the
costs
associated
with
the
deal
and
said
the
expenses
derived
from
it
will
increase
at
3.3%
compound
annual
growth
rate
over
the
next
five
years.

“Year
one
costs
more
than
we
originally
forecast,”
said
Brian
Newman,
the
UPS
finance
chief,
said
on
an
investor
call
this
week.
He
said
it
will
cost
$500
million
more
in
the
back
half
of
2023
than
expected,
he
said.

As
of
midday
Thursday,
the
United
Auto
Workers
and
Detroit
automakers
still
appeared
far
apart

in
talks
for
new
labor
deals,
setting
up
“likely”
strategic
strikes
at
the
companies
after
an
11:59
p.m.
ET
Thursday
deadline,
UAW
President
Shawn
Fain
said
Wednesday
night.
The
union
has
sought
nearly
40%
hourly
pay
increases
over
new
contracts
as
well
as
a
reduced
32-hour
workweek
and
other
improvements.

Other
unions
also
are
seeking
higher
compensation.
The
Hollywood
writers
and
actors
strikes

began
in
May
and
mid-July,
respectively,
with
members
demanding
better
pay
to
match
changing
industry
dynamics
in
the
entertainment-streaming
era.

American
Airlines
offered
flight
attendants
11%
pay
increases
the
date
a
new
contract
starts,
and
2%
raises
after
that.
But
the
Association
of
Professional
Flight
Attendants
said
the
union
wants
35%
increases
at
the
start
of
a
new
deal,
followed
by
6%
annual
raises.

Unions
have
argued
that
workers
didn’t
get
raises
during

high
inflation
in
recent
years
since
the
Covid
pandemic
derailed
talks.

Strong
travel
demand
has
helped
the
largest
carriers
more
than
cover
their
higher
expenses.
But
some
carriers
are
seeing
cracks
in
sales
just
as
a
slower
travel
period
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
article.