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United Airlines planes on the tarmac at Newark Liberty International Airport, in Newark, N.J., on May 12.EDUARDO MUNOZ/Reuters

Southwest Airlines LUV-N on Wednesday flagged softer August leisure bookings and joined two other U.S. airlines in warning of higher fuel costs in the third quarter due to a jump in crude prices.

The largest U.S. domestic carrier said August bookings were at the lower end of its expectations, in part due to seasonal trends, but maintained that overall leisure demand and yields remain healthy.

Shares of Southwest closed 2.6% lower at $29.97.

The forecast comes as early signs emerge of domestic travel demand weakening, with inflationary pressures hurting consumers even as carriers hand out costly contracts to retain workers.

United Airlines UAL-Q and Alaska Air Group ALK-N also warned of higher fuel costs in the current quarter as crude oil prices rose for a third straight month in August, amid signs of tightening supply.

In a regulatory filing, United said jet fuel prices have climbed over 20% since mid-July.

The carrier also said it had no imminent plans to move its headquarters to Denver from Chicago after buying 113 acres of land there. Finance Chief Gerald Laderman at the TD Cowen Transportation Conference said the first order of business is the expansion of the flight training centre in Denver.

Southwest said it continues to forecast a “solid (third-quarter) profit,” but trimmed its expectations for revenue per available seat mile – a proxy for pricing power – to a 5% to 7% fall, compared with a 3% to 7% fall forecast earlier.

Alaska Air expects a quarterly adjusted pre-tax margin of 10% to 12%, lower than its prior expectation of 14% to 16%.

U.S. airlines do not generally hedge against fuel costs, making them vulnerable to price swings.

“The relatively quick up move in fuel has given the industry little time to respond through fares,” Citi Research analyst Stephen Trent said in a note.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 21/05/24 4:00pm EDT.

SymbolName% changeLast
LUV-N
Southwest Airlines Company
-0.82%27.97
UAL-Q
United Airlines Holdings Inc
-2.91%53.03
ALK-N
Alaska Air Group
-0.32%43.75

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