United Airlines may raise fares by up to 20% as a result of rising fuel prices linked to the Iran war, CEO Scott Kirby said on an earnings call on Tuesday.
Speaking on the call, Kirby said the airline would do “whatever it takes to recover 100 percent of the increase in jet fuel prices as quickly as possible”. Currently, the airline is transferring only about half of the elevated costs to customers.
Oil prices have skyrocketed due to the closure of the Strait of Hormuz, a vital shipping lane. On Wednesday, Iran seized two container ships in the waterway, hours after President Donald Trump announced an indefinite ceasefire. The Pentagon has reportedly told lawmakers that it could take up to six months to clear the strait of Iranian mines.
Despite the crisis, United beat first-quarter earnings expectations but reduced its full-year profit guidance. Lufthansa has announced it will cancel 20,000 flights to save 40,000 metric tonnes of jet fuel. The European Union is also taking measures to head off a potential “systemic” summertime fuel shortage that could cause “significant” harm to the EU economy.
Kirby previously warned that high oil prices could topple airlines, noting that an extra $11bn in annual fuel expenses would exceed United’s best-ever profit of $5bn. “If prices stayed at this level, it would mean an extra $11bn in annual expense just for jet fuel,” he wrote in a memo to employees.
