More companies warn higher costs will eat into profits

More companies warned that soaring fuel costs and employee pay increases would eat into profits this quarter.

Companies from aerospace manufacturers to package delivery giants ups Big new labor deals are being digested. Meanwhile, unions from the auto industry to Hollywood are pushing for better pay. Airlines, whose biggest expenses are jet fuel and labor, have been particularly hard hit.

Delta Airlines On Thursday, it lowered its third-quarter adjusted earnings per share forecast to $1.85 to $2.05 per share, down from the previous forecast of $2.20 to $2.50 per share. Delta said it paid more for fuel than expected, but said maintenance costs were also higher than expected.

The average price of jet fuel at major U.S. airports was $3.42 per gallon as of Tuesday, up 38% from two months ago, according to industry group American Airlines.

Wednesday, American airlines Earnings forecast lowered after revision Alaska Airlines and Southwest Airlines. American expects third-quarter adjusted earnings of 20 cents to 30 cents a share, down from its previous forecast of 95 cents a share, citing higher fuel prices and a new pilot labor agreement.

The company expects to recognize $230 million in fees for the new contract, which includes an immediate 21% raise for pilots and a more than 46% pay increase over the four-year contract period, including 401(k) contributions.

Elsewhere, from Detroit to Hollywood, unions are pushing for new contracts with pay raises, better benefits and schedules. ups The Teamsters union, which represents about 340,000 workers at the package carrier, reached a new labor deal in July that included pay raises for full- and part-time workers and narrowly avoided a potential strike.

UPS staff approved the agreement, which was approved last month. The company said a driver’s salary and benefits can reach $170,000 by the end of the five-year contract.

Earlier this week, the delivery giant outlined the costs associated with the deal, saying fees would grow at a compound annual rate of 3.3% over the next five years.

“First-year costs are ahead of our original expectations,” Chief Financial Officer Brian Newman said on an investor call this week. He said costs in the second half of 2023 will be higher than expected. That’s $500 million higher.

UAW President Sean Fein said Wednesday night that as of noon Thursday, the UAW and the Detroit automakers appeared to be far apart in labor talks over a new labor deal. A strategic strike against the companies was “possible” after the 11.59pm deadline. . The union is seeking an increase in hourly wages of more than 30 percent, a reduction of 32 hours in the work week, and other improvements.

Other unions are also seeking higher compensation. The Hollywood writers’ and actors’ strikes began in May and mid-July respectively, with members demanding higher pay to adapt to changing industry dynamics in the era of entertainment streaming.

American Airlines is giving flight attendants an 11% pay increase on the start of the new contract, followed by 2% raises thereafter. But the Professional Association of Flight Attendants said the union wanted a 35% pay increase at the start of the new deal and 6% increases each year thereafter.

Unions have complained that workers have not received pay rises during a period of high inflation in recent years since the coronavirus pandemic derailed negotiations.

Strong travel demand has helped the largest airlines pay higher fees. But some airlines are looking for sales breakthroughs as the post-summer travel slowdown begins. spirit airlines It said on Wednesday it expected losses to be larger than previously forecast and revenue to fall.

Frontier Airlines warned on Wednesday that “sales have been below historical seasonal patterns in recent weeks” and Forecast adjusted losses for this quarter.

–CNBC’s Michael Wayland and Gabriel Cortes contributed to this article.