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The U.S.-Israel war on Iran has delivered the biggest disruption to the airline industry since the COVID-19 pandemic, and United is bracing for a future where oil prices remain high through 2027.<\/p>\n
Not only has the price of oil soared, air traffic to key Middle East airport hubs has been disrupted, forcing planes to take alternate routes that burn more fuel.<\/p>\n
In a letter to employees posted on Friday, CEO Scott Kirby pointed out that jet fuel prices have more than doubled in the last three weeks, representing an additional $11 billion in annual costs if prices stay at that level.<\/p>\n
United spent $11.4 billion last year on fuel, meaning current prices could send that total expense past $20 billion this year. The carrier reported\u00a0adjusted net income of $3.5 billion for 2025, and Kirby noted that its best year ever saw earnings of $5 billion.<\/p>\n
But United\u2019s cash position, profit margins, and balance sheet are healthy, while demand remains strong, he added. In fact, the last 10 weeks have seen United\u2019s 10 biggest booked revenue weeks in its history. <\/p>\n
Still, he acknowledged it will be difficult for United to continue passing on the cost of fuel if oil stays higher for longer, revealing that the airline\u2019s plans assume oil hits $175 a barrel and doesn\u2019t go back down to $100 until the end of 2027. <\/p>\n
On Friday, Brent crude rose 3.26% to close at $112.19 per barrel, and U.S. oil gained 2.27% to settle at $98.32. But the Strait of Hormuz, through which 20% of the world\u2019s oil passes, remains largely closed, and analysts have warned that prices could reach $150 or even $200 a barrel if it doesn\u2019t reopen soon.<\/p>\n
Jet fuel prices have surged even more due to tighter refining constraints. Northwest Europe has seen record highs near $239 a barrel, and Asian jet fuel prices are near $200 a barrel, close to recent highs.<\/p>\n
While Kirby thinks \u201cthere\u2019s a good chance\u201d that United\u2019s scenario won\u2019t be realized, he also said capacity will come down in certain times and places. <\/p>\n
That means fewer flights in off-peak times, such as redeyes as well as Tuesday, Wednesday, and Saturday trips during the second and third quarters. United\u2019s will also trim capacity in the Chicago O\u2019Hare airport hub and will pull service from Tel Aviv and Dubai, which are still being bombarded by Iran. <\/p>\n
The combined effect of the changes will be about 5 percentage points of capacity, though United plans to restore the full schedule in the fall.<\/p>\n
\u201cTo be clear, nothing changes about our longer-term plans for aircraft deliveries or total capacity for 2027 and beyond, but there\u2019s no point in burning cash in the near term on flying that just can\u2019t absorb these fuel costs,\u201d Kirby said.<\/p>\n
At the same time, he vowed to avoid furloughing employees, deferring aircraft orders, downgrading to regional jets, going through cost cutting exercises, and delaying investments. United still plans to take delivery of about 120 new aircraft this year, the CEO said.<\/p>\n
More dollars will go into tech and facilities, such as the airline\u2019s clubs, new infrastructure at hubs, and an expansion at the Newark airport.\u00a0<\/p>\n
Kirby dismissed cost cuts and investment deferrals as \u201csmall dollars at best, they\u2019re distracting, they aren\u2019t necessary for United and they deter us from our mission to build the best airline in the history of aviation.\u201d<\/p>\n
Other airlines are making contingency plans too. Scandinavian airline SAS said it will cancel around 1,000 flights because of rising fuel prices.\u00a0<\/p>\n
For Air France-KLM, plans include cutting service to parts of Asia if fuel costs for return trips to Europe become more difficult.<\/p>\n
\u201cSoutheast Asia is much more dependent on fuel coming over the Gulf than Europe is,\u201d CEO Ben Smith told the Financial Times. \u201cWe can get fuel out of Europe, but when we go to [a] south-east Asian city we\u2019re not going to be able to fly the plane back\u2009.\u2009.\u2009.\u2009If there\u2019s no fuel, you can\u2019t fly.\u201d\u00a0<\/p>\n
#United #Airlines #plans #oil #hitting #barrel #staying #year<\/p>\n","protected":false},"excerpt":{"rendered":"
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