NEW YORK (AP) -- J.P. Morgan is trimming its forecast for 2013 profit at United Airlines parent UAL Corp., citing terms of a new contract with pilots.
Analyst Jamie Baker said Wednesday that UAL's 2013 earnings should be $4.84 per share, down from his previous forecast of $5 per share. He also lowered his price target on UAL's stock to $30 from $31.
Baker said United's tentative agreement with union pilots was expensive, with upfront pay increases averaging 22 percent, which he said will boost labor costs by $400 million in the contract's first year. After no raises next year, pilots would get 8.5 percent raises in 2014 and 3 percent per year from 2015 through 2017.
Baker said the United wages appeared similar but one year behind those recently negotiated by Delta Air Lines Inc. However, he said, the lag in increases at United may be offset by more generous initial terms on profit sharing and defined-contribution benefits.
UAL did not immediately respond to a request for comment.
Negotiators for the Air Line Pilots Association voted Monday to accept the tentative agreement and send it to pilots for a ratification vote. Approval would mark another step in combining United and Continental, which merged in 2010 and had separate pilot contracts.
In a down day for airline stocks, UAL shares fell 96 cents, or 4.6 percent, to close at $19.98. Delta shares lost 65 cents, or 6.4 percent, to close at $9.56; US Airways Group Inc. fell 58 cents, or 4.6 percent, to $12.01; and Southwest Airlines Co. dropped 27 cents, or 3 percent, to $8.76.
Jet fuel is the biggest expense at many airlines, and oil prices rose Wednesday after Israel launched airstrikes in Gaza, raising new fears about a disruption in supplies from the Middle East.
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