United Airlines is warning that airfares could rise up to 20% if the cost of jet fuel remains elevated for longer due to the spike in oil prices amid the war in Iran.
United CEO Scott Kirby said in an interview on Bloomberg TV on Tuesday that the airline anticipates consumer demand for air travel will soften if higher fuel prices continue to push ticket prices higher.
Kirby added that United has already moved to cut 5% of its capacity on routes that aren’t profitable and don’t cover the cost of higher fuel prices, though he said that demand remains very strong for now.
“Demand is incredibly strong right now,” Kirby told Bloomberg, adding that he does think that oil prices will be “higher for longer.”
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“It’s reasonable for us to plan for that regardless, because the downside is pretty limited. If we leave a little bit of demand on the table by not flying as much this summer, so what, that’s not a big deal. But it gives us more optionality on the other side for the recovery,” he said in the interview.
Kirby said the firm’s forecast that oil prices may rise as high as $175 a barrel and remain above $100 a barrel through the end of next 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 if oil prices surge to the peak of the company’s forecast it would be a “stress event” for the airline industry, and would be “nowhere near the magnitude of what happened in COVID.”
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| UAL | UNITED AIRLINES HOLDINGS INC. | 93.44 | -0.52 | -0.55% |
While some global airlines have historically hedged against spikes in fuel costs through investment strategies, Kirby said in the interview that because of the company’s size it’s “really tough for us to hedge” because it moves the market when it tries to do so.
He said the company has been focused on its margins and has tripled the amount of cash it keeps on its balance sheet as an alternative to hedging fuel costs.
Kirby added that if oil prices remain at their current level it amounts to about an $11 billion expense for United, which would translate to about a 20% increase in airfares for the company to break even and cover that cost.
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He also noted that while prices are up relative to a year ago, airfares in 2025 were 2% lower than they were in 2019, even as inflation was up 25%, so the 15%-20% rise in airfares in recent weeks is “covering half to 60% of the inflationary increase.”
Kirby was asked about the incident at New York City’s LaGuardia Airport over the weekend, in which an Air Canada jet collided with a fire truck while the airliner was landing. Both the pilot and first officer were killed, while dozens of injuries were reported.
He told Bloomberg that the U.S. air travel system is safe and is “by far the safest way to travel of any mode of transportation.”
Kirby added that he thinks there should be more investment in technology and staffing for the Federal Aviation Administration (FAA) and that he sees the Trump administration as being committed to those priorities, which the CEO said should garner bipartisan support.
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