Key Highlights
- CEO Scott Kirby issued a Friday memo projecting oil prices potentially reaching $175 per barrel
- The carrier plans to trim approximately 5 percentage points from its annual capacity projections
- Less profitable midweek, Saturday, and red-eye services face reductions during Q2 and Q3
- Service suspensions to Tel Aviv and Dubai continue
- Regional tensions involving Iran have pushed jet fuel costs up nearly 100% since February’s end
Shares of United Airlines ($UAL) declined during Monday’s premarket session following CEO Scott Kirby’s warning to employees about an extended period of elevated fuel expenses stemming from Middle Eastern geopolitical tensions.
United Airlines Holdings, Inc., UAL
By 5:59 ET on Monday, the stock had dropped approximately 1.7% in pre-market activity.
In his Friday communication to employees, Kirby laid out a severe planning model: crude oil surging to $175 per barrel and maintaining levels above $100 through 2027’s conclusion. Under such conditions, he projected United’s yearly fuel expenditure would increase by roughly $11 billion.
For perspective, that $11 billion figure exceeds twice the airline’s profit from its most successful fiscal year on record.
“While there’s a reasonable probability the situation won’t reach that severity,” Kirby stated, “we have little to lose by preparing for such an outcome.”
Since February’s final weeks, jet fuel pricing has approximately doubled. The Iranian situation has additionally compelled carriers to divert flights around restricted zones, compounding operational expenses.
United had begun scaling back certain routes prior to these latest announcements. The airline had been progressively withdrawing from lower-margin midweek, Saturday evening, and overnight operations.
Service Reductions and Capacity Adjustments
The updated strategy involves approximately three percentage points of cuts to off-peak operations throughout the second and third quarters. These adjustments target schedules and routes experiencing softer demand patterns.
United plans to reduce roughly one percentage point of available capacity at its Chicago O’Hare operations center.
Service to Tel Aviv and Dubai remains halted. Collectively, these modifications represent approximately five percentage points in reduced total projected capacity for 2025.
Kirby indicated the carrier anticipates returning to full scheduling by autumn.
Ticket Prices Remain Elevated
Despite mounting challenges, domestic carriers have successfully maintained higher fare structures. Consistent passenger demand coupled with limited seat availability has provided airlines with pricing leverage.
United’s strategy favors leaving capacity unused rather than operating money-losing routes. This represents a strategic calculation — accepting near-term revenue shortfalls to preserve profit margins.
However, this approach has boundaries. Should passenger demand weaken while fuel costs stay elevated, the economics become increasingly challenging.
Crude oil ($CL) declined 6.16% Monday, though this hasn’t offset the substantial fuel cost increases carriers have absorbed since late winter.
Kirby’s communication emphasized that United isn’t anticipating rapid price relief. The carrier is preparing for challenging conditions while maintaining optimism for better outcomes.
