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United Airlines has cautioned that flight prices could climb by as much as 20% if the cost of jet fuel persists at an elevated level for an extended period, owing to the sharp increase in crude oil rates amid the conflict in Iran.
United’s CEO, Scott Kirby, stated during an interview on Bloomberg TV on Tuesday that the airline anticipates a softening in consumer demand for air travel should higher fuel expenses continue to drive up ticket prices.
Kirby further mentioned that United has already initiated a 5% reduction in its service capacity on non-lucrative routes that fail to offset increased fuel expenses, though he observed that demand remains remarkably robust for the time being.
“Demand is exceptionally strong right now,” Kirby informed Bloomberg, adding that he does believe oil prices will be “elevated for an extended duration.”
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United Airlines CEO Scott Kirby indicated that increased crude oil costs might cause flight prices to climb, potentially exceeding 20%. (AaronP/Bauer-Griffin/GC Images)
“It’s sensible for us to prepare for such an outcome irrespective, because the potential negative impact is quite restricted. If we forego some consumer interest by reducing summer flights, that’s inconsequential, it’s not a major concern. However, it provides greater flexibility for eventual recuperation,” he commented during the discussion.
Kirby said the firm’s projection indicating that oil prices could reach $175 per barrel and stay over $100 per barrel until the close of the upcoming year is “reasonable, I hope it’s better and there’s a good chance it’s better, but I think it’s also reasonable.”
The United Airlines CEO told Bloomberg that should crude oil costs reach the zenith of the company’s forecast, it would represent a “period of strain” for the aviation sector, though it would be “far from the severity experienced during the COVID pandemic.”
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| UAL | UNITED AIRLINES HOLDINGS INC. | 93.96 | +4.01 | +4.46% |
While some global airlines have traditionally guarded against sudden increases in fuel expenses by means of financial maneuvers, Kirby stated in the interview that due to the company’s substantial size, it’s “exceedingly difficult for us to secure against” such risks because its actions influence market dynamics when attempting this.
He mentioned that the company has prioritized its earnings and has increased its cash reserves threefold on its financial statement as an alternative to mitigating fuel price risks.
Kirby further added that if oil prices persist at their present rates, it equates to roughly an $11 billion expenditure for United. This would necessitate an approximately 20% rise in airfares for the company to achieve profitability and absorb that expense.
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Kirby remarked that United is expecting shifts in consumer interest that might happen if crude oil costs stay high. (Al Drago/Bloomberg via Getty Images)
He also pointed out that while current prices exceed those of a year prior, flight costs in 2025 stood 2% below their 2019 levels, even with a 25% surge in inflation. Consequently, the 15%-20% climb in flight prices recently “offsets 50% to 60% of the inflationary growth.”
Kirby faced questions concerning the event at New York City’s LaGuardia Airport over the weekend, involving an Air Canada aircraft impacting a fire engine as the passenger plane was touching down. The pilot and co-pilot both perished, with numerous individuals sustaining wounds.
He informed Bloomberg that the American aviation network is secure and is “unquestionably the most secure method of transit among all options.”
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Kirby further stated his view that greater capital injection is required for the technological infrastructure and personnel of the Federal Aviation Administration (FAA). He perceives the Trump government as dedicated to these objectives, a stance which, according to the CEO, ought to attract cross-party endorsement.