United Airlines may need to increase fares by as much as 20 per cent due to rising fuel costs linked to the Iran war, its chief executive has said. Speaking on an earnings call on Tuesday, Scott Kirby said the carrier hoped to eventually offset the full increase in jet fuel prices.
Kirby told CNBC that the airline was currently transferring about half of the higher fuel costs to customers, as oil prices have soared following the closure of the Strait of Hormuz, a vital shipping lane. “We’ll do whatever it takes to recover 100 per cent of the increase in jet fuel prices as quickly as possible,” he said.
Despite the pressure, United reported first-quarter results that beat earnings expectations, though it reduced profit guidance for the full year. Kirby described the performance as “a pretty remarkable achievement” given the doubling of fuel prices.
Other airlines are also taking action. Lufthansa announced it would cancel 20,000 flights to save 40,000 metric tonnes of jet fuel. The European Union, meanwhile, has moved to optimise fuel distribution among member states to avert a potential “systemic” summer shortage that could cause “significant” harm to the bloc’s economy.
Kirby warned last month that high oil prices could topple some airlines, noting that an extra $11 billion in annual fuel costs would exceed United’s best-ever annual profit. On Wednesday, Iran seized two container ships in the Strait of Hormuz hours after President Donald Trump announced an indefinite ceasefire. The Pentagon has reportedly told lawmakers that clearing the strait of Iranian mines could take up to six months.
