Rising Costs Threaten Profits for Airlines and Businesses


Several companies are warning that rising fuel costs and increased labor expenses will impact their profits in the current quarter. These challenges are affecting a range of industries, from airlines to package delivery companies and automakers. Here’s an overview of the situation:

Airlines: Airlines are facing a significant hit to their profits due to soaring fuel prices and labor expenses. Delta Air Lines recently cut its earnings forecast for the third quarter, citing higher fuel costs and maintenance expenses. U.S. jet fuel prices have surged by 38% in just two months. American Airlines also lowered its earnings outlook, attributing it to expensive fuel and a new pilot labor deal that includes substantial pay raises.

Package Delivery: UPS reached a new labor agreement with the Teamsters union, resulting in raises for both full- and part-time workers. While UPS workers ratified the deal, the company expects the associated costs to increase at a 3.3% compound annual growth rate over the next five years. This includes an additional $500 million in expenses for the latter half of 2023.

Automakers: Labor unions, including the United Auto Workers (UAW), are pushing for higher wages and better benefits in new contracts with automakers. Negotiations between the UAW and Detroit automakers appeared to be at an impasse, increasing the likelihood of strategic strikes. The union is seeking nearly 40% hourly pay increases, among other improvements.

Entertainment Industry: Labor disputes in the entertainment industry have also resulted in higher labor costs. Hollywood writers and actors have been on strike, demanding better pay to align with the changing dynamics of the entertainment-streaming era.

Airlines (Again): Strong travel demand has helped some airlines offset their rising expenses. However, smaller carriers like Spirit Airlines and Frontier Airlines have reported challenges in sales and anticipate lower revenues. Spirit Airlines expects a deeper loss than previously forecast.

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