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The basics:

• Jet fuel prices more than double in three weeks, raising cost pressure
• United planning for oil as high as $175 per barrel through 2027
• Airline to cut about 5% of capacity short term, focused on off-peak travel
• Company will continue investing in aircraft, tech, infrastructure

United Airlines CEO Scott Kirby explained to employees in a March 20 memo how the airline is navigating the fallout from the war in Iran, and a sharp spike in fuel prices. He laid out both the scale of the challenge and a strategy built on lessons from the COVID era.

Kirby began, underscoring the magnitude of the crisis, “The reality is, jet fuel prices have more than doubled in the last three weeks. If prices stayed at this level, it would mean an extra $11 billion in annual expense just for jet fuel. For perspective, in United’s best year ever, we made less than $5 billion. That may sound scary, but the first piece of good news is that, for now at least, demand remains the strongest we’ve ever seen. The 10 biggest booked revenue weeks in our history have been the last 10 weeks.

“But it may be a challenge to continue passing through much of the increased fuel price if oil stays higher for longer.”

He pointed to three key steps United took during and coming out of COVID to prepare for moments like this: Significantly increasing cash reserves, leading the industry in profit margins, and strengthening its balance sheet to achieve its highest credit rating in more than 30 years.

“Because we’ve done all the above, we can manage what we need to in the short term while also staying focused on our long-term plan to grow and build the world’s best brand loyal airline,” Kirby wrote.

Not much downside to being prepared

Looking ahead, he said the airline is planning for a prolonged period of elevated fuel costs. He noted, “Our plans assume oil goes to $175/barrel and doesn’t get back down to $100/barrel until the end of 2027.” He added, “Honestly, I think there’s a good chance it won’t be that bad, but as you’ll read below, there isn’t much downside for us to preparing for that outcome.”

Kirby outlined a series of short- and long-term steps, including targeted capacity reductions.

He said United will cut about 3% of off-peak flying, bringing total planned capacity reductions to roughly 5% in the short term, with a full restoration expected in the fall. Meanwhile, United will continue long-term investments in aircraft, technology and infrastructure.

We’re ready, we have a plan and we’re going to continue executing that plan.
—Scott Kirby, CEO, United Airlines

At the same time, Kirby emphasized what the airline will not do: “cost cutting or deferring investments in the future. Those are small dollars at best, they’re distracting, they aren’t necessary for United and they deter us from our mission to build the best airline in the history of aviation.”

Kirby emphasized confidence in United’s position despite the uncertainty. “We’re ready, we have a plan and we’re going to continue executing that plan,” he said.

He concluded by reassuring employees amid the uncertainty, writing, “I realize this note may seem like a lot, but the simplest thing I can say to all of you is the bottom line – I want you to sleep well at night knowing United prepared for this and I’m asking you to stay 100% focused on what you’ve been doing to take care of each other and our customers.”

Illinois-based United operates an East Coast hub at Newark Liberty International Airport.