Key Highlights

● United and Southwest are trimming capacity as oil prices surge.

● Brent settled at $109.86, its highest close since May 19.

● United reports Oct 20 after the close, with consensus earnings of $2.60 a share.

● American Airlines faces about $1 billion of added fourth-quarter fuel costs and three target cuts.

Trimming flights as fuel climbs

United Airlines Holdings (NASDAQ:UAL) was among the most-discussed names on the Dow Jones Transportation Average on Friday as the airline industry grappled with a sharp rise in fuel costs. United and Southwest Airlines (NYSE:LUV) are trimming capacity, according to market reports, as carriers respond to soaring oil prices. No closing price move for United was reported in Friday's market coverage.

Reducing capacity, meaning fewer flights or seats, is a common response when costs jump. It can help airlines support fares and conserve fuel, though it also limits the revenue they can generate. Airlines usually adjust schedules months in advance, so trims announced now are likely to show up in fourth-quarter and early winter flying, when carriers also typically shift aircraft toward holiday and seasonal leisure routes. United is one of the largest US carriers, with a major international network and hubs that include Chicago, Denver, Houston, Newark and San Francisco.

The pressure is clearest at American Airlines (NASDAQ:AAL), which faces about $1 billion of added fourth-quarter fuel costs and may cut capacity further, market reports said. BMO, BofA and Goldman Sachs all cut their price targets on American on Friday.

Oil's surge

Crude prices pushed higher again on Friday. Brent climbed $3.94 to settle at $109.86 a barrel, its highest close since May 19, per market data, and touched $110 intraday. West Texas Intermediate traded above $101 intraday, and one report put the December contract at $99.02, up $2.52.

The rally was driven by Iran escalating attacks on tankers in the Strait of Hormuz, along with threats to Russian refining, reports indicated. ING commodities strategists said oil is "pricing in a significant risk premium." President Donald Trump said of Iran, "Now, we're looking at Pickaxe Mountain. We may have to go there."

There was some effort to ease supply. The International Energy Agency pledged to release the remaining 100 million barrels under its March agreement, a Saxo Bank analyst noted.

Transports and the market

The broader market fell. The S&P 500 lost 84.62 points to 7,659.44, the Dow Jones Industrial Average slipped 175.28 points to 52,002.41, and the Nasdaq Composite dropped 572.99 points to 26,140.03. Energy led the sectors, while chip, software and AI-infrastructure stocks sold off on worries about how the artificial-intelligence build-out will be financed.

Within the Dow Transportation Average, J.B. Hunt Transport Services (NASDAQ:JBHT) fell to $228.78 after third-quarter costs, including fuel, rose faster than revenue, according to market data. Budget carrier Frontier Group Holdings (NASDAQ:ULCC) also fell on weak consumer sentiment and higher yields. The Primary Consumer Sentiment Index dropped 5.3 points to 45.2, its lowest since October 2011.

United Oct 20 Report Opens Airline Earnings

On the macro side, University of Michigan consumer sentiment is due Oct 23, and the Federal Reserve's next rate decision is Oct 28, after a quarter-point hike in September.

United reports third-quarter results on Oct 20 after the close, with consensus earnings of $2.60 a share, per market data. Investors will look for updated fuel-cost assumptions, detail on capacity plans for the fourth quarter and commentary on demand, particularly for premium cabins and international routes. Southwest follows on Oct 21 after the close and American Airlines on Oct 22.