Fuel Prices To Weigh On United Airlines Stock In The Near Term

Fuel Prices To Weigh On United Airlines Stock In The Near Term

United Airlines Boeing 767-400 ER Extended Range with 2x CF6-80 engines aircraft landing at ... [+] Amsterdam Schiphol International Airport AMS EHAM in The Netherlands, the Dutch capital. The airplane has registration N66057 and its type is exactly Boeing 767-424(ER) . UAL / UA is a major American airline headquartered in Chicago, Illinois connects Amsterdam with ChicagoO'Hare, Houston Intercontinental, Newark, Washington Dulles and seasonal to San Francisco (Photo by Nicolas Economou/NurPhoto via Getty Images) The shares of United Airlines (NASDAQ: UAL) observed a strong rally in recent weeks assisted by pent-up travel demand and declining coronavirus infections. However, the benchmark oil prices have surged by 26% from $75/bbl in early January to $95/bbl at present – weighing on the bottom line of all transportation companies. Per annual filings, aircraft fuel accounts for 22% of the total United Airlines' operating expenditure – making it the second biggest cost head after salaries & wages. Given the company's thin net margin of less than 10%, a sudden rise in fuel prices will weigh on earnings and subsequently shareholder returns in the near-term. Per the Trefis machine learning engine which analyses historical stock price movements, UAL stock has a 47% chance of a rise