It’s obviously an incredibly challenging time for the airline industry, due to impacts of the conflict with Iran, plus the spike in fuel prices that we’ve seen. It’s interesting to get a pulse on how different airline executives are approaching this situation. Some seem to basically be viewing this as a temporary blip, while United…
Continue reading: United Hopes To Turn High Oil Prices Into An Advantage, As It Cuts Flights
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Another month of high gas prices and Americans will quickly turn on Trump and this pointless war
Ben is absolutely right that UA will spin anything as positive when it is clear that a 5% cut in capacity in the short term is very significant, esp. since UA was the first of the big 4 to even suggest that the Gulf crisis would impact the US airline business.
Second, multiple airlines have talked about "the highest revenue days" recently but when fares are higher than they have been and capacity is up, revenue is going to grow - but that doesn't make capacity that is being sold as sustainable and the mere fact that UA is cutting capacity says they know that - and are admitting before anyone else that they can't sustain their high growth scenario.
Third, UA admits that they know they are going to cut ORD capacity and that 2% comes from Middle East flying which they can't add back; they aren't even planning to return to DXB until this fall - and only in Kirby's rose expectations will they return capacity in the fall when he sees fuel much higher than it was on Feb 27.
Next, UA can take delivery of all the planes they have on order - and they have no choice because neither Airbus or Boeing are going to defer airplanes on short notice. The risk of UA's high capex fleet replacement has always been of a black swan event such as we are in. Spending even $7 billion on capex on top of $11 billion more on fuel just doesn't translate into reality. UA is simply not going to generate $10 billion more in revenue on the same capacity. As much as Kirby tried to argue otherwise at the JPM conference, there is a high degree of elasticity when air fares rise by 20-30% which is what it will take to cover sustained high fuel costs.
and finally, UA pays the most of the big 4 for jet fuel per gallon and right up there w/ AS. The US west coast has been a high fuel cost environment and is only getting worse as refineries and pipelines close in California. Add on, UA's high growth fleet plan involves using much less fuel efficient aircraft than competitors including over the Pacific and the economics of growth fall apart very quickly. E. Asia is highly dependent on Gulf oil and there are already shortages in some Asian cities. Even if the Strait reopens tomorrow, fuel prices to Asia will remain elevated far longer than in the US where jet fuel is over $4/gallon - a huge increase from the $2.65 that UA paid for jet fuel in 2025.
and let's keep in mind that UA has no choice but to settle with multiple labor groups and end the $1 billion plus labor cost advantage that UA has "enjoyed" to support its growth.
This is the black swan event that we all knew could hit UA and, despite the bravado coming out of Willis Tower, UA will come ouf of this far weaker than other carriers.
DL's exec spoke first at the JPM conference - because the first slot is reserved for the airline that generates the highest percentage of industry profits (55% for DL, and no, UA doesn't generate the other 45%) and pays the most in profit sharing - more than the rest of the entire rest of the US industry combined.
DL execs said that the refinery will begin to really positive impact DL's fuel costs in the 2nd quarter and beyond. The refinery is specifically designed to benefit DL when fuel prices quickly rise, in high crude and refined costs, and when there is a large imbalance between gasoline and both diesel and jet fuel - all of which exist now.
The refinery saved DL $777 milliion in fuel costs in 2022 as Russia started the war in Ukraine and Russian oil was embargoed by western governments. This event now is a far bigger shock to crude supplies AND the ability to refine medium distillates including jet fuel and diesel.
DL's fuel cost advantage in 2026 could easily exceed $1 billion which simply means that it will be DL, not UA or any other airline that can hold capacity in the market longer and return to growth sooner when fuel prices begin to trend down
caring about the speaker order at a conference you're never invited to = weird
I can't even imagine the mental derangement that causes someone to wake up and write 11 paragraphs of poorly thought out commentary about a company they hate after being up until bed last night doing the same.
what derangement and mental illness
being smacked down by the FAA and the host of one of the most significant airline investor conferences - which UA most certainly did participate in - matters alot it.
Jamie Baker opened the conference stating that DL gets the first slot because it consistently delivers the best results and says that any of AA, UA and WN's execs are free to take the first slot if they deliver - and then closed the DL presentation by saying he expects Ed Bastian to be back in the number one position next year.
For an airline that incessantly thinks it is a leader in the industry, UA has been given the back hand multiple times over the past week.
and you can't counter the facts including that UA will hemorrhage money given the trajectory of the industry no matter how much Kirby wants to argue otherwise. Go go go UA is the first to make cuts which goes to show that their growth plan never was really sustainable under the endless pressures which the US airline industry is under.
United has considerable exposure in East Asia and the west Pacific. These areas have the greatest problem with even getting jet fuel, much less the current 2x pricing above Brent crude. Kirby's happy talk might be a bit gloomier in a few months.
I detest the man but his cult will stick with him no matter what. He might lose 1-2% of his supporters. His support is already historically low. Those continuing to support him right now will not budge under any circumstances.
As Covid demonstrated Kirby is an opportunist who has studied past airline shocks. Taking decisive short term action to cut flying that becomes unprofitable at higher fuel prices is smart as is using UA's cash balance, strong balance sheet and low net debt to sustain longer term investments. This could be rough for airlines that don't have those financial strengths. He also learned from Munoz how to communicate with the troops. Chess v checkers.
What he's not telling his employees is that the airline will park planes, cut routes and frequencies and furlough staff. Planes are full but many of those tickets were purchased weeks or months ago. Let's see what happens when ticket prices rise 50%. Presuming the price oil continues to rise and stays at elevated levels for a period of time.
Hope and communication doesn't change economics, little boy.
UA faces $11 billion in increased fuel costs (jet fuel is already above $175/bbl because the crack spread, not just the price of crude, matters as much if not more) as well as high airplane deliveries that neither Airbus or Boeing are willing to defer this late in the delivery cycle.
UA is parking older aircraft and the growth rate is falling no matter how much you have touted UA's massive order book and fleet size even as late as yesterday.
UA already pays the most per gallon for jet fuel and that is made worse by UA's use of older, less fuel efficient aircraft than UA's competitors. a 20% difference in fuel burn makes a big difference on a 4000-6000 mile flight.
This is the black swan event that some of us knew would knock the wheels off UA's plans.
The bigger subplot is that other airlines will be affected but one, specifically, DL is better positioned to handle the current crisis and to grow its leadership in the industry.
Whether you can admit that reality or not doesn't matter because that is what will happen no matter how much hopium Kirby puts into a memo that is released late at night on Friday after the markets are closed.
"This was my strategy all along. Wait for someone to crash the world economy and simultaneously cause staggeringly high oil prices and watch my competitors go bankrupt then swoop in and scoop up their assets at bargain basement prices." I bet that scheme would go over well at Harvard Business School. He better count on lots of revenue from Reward Programs. Employees better budget for a smaller bonus. Good timing for the raises for the pilots, although you can only collect if you have a job.
UA has its best debt rating in over 25 years, highest cash position and net debt as low as any US carrier other than SW. UA is correctly anticipating these fuel prices staying high and being proactive by cutting flying that doesn't cover those elevated costs. And yes, this is likely going to be about outrunning others and not the bear.
in your usual zeal to carry the water for UA and Scott Kirby, you highlight how little you know or understand about business or the airline industry
1. UA carries so much cash because it has such high capex. It is precisely events like this that can quickly drain UA's cash via much higher costs even as Airbus and Boeing will not defer deliveries this close to delivery. UA's cash will be substantially lower by the end of the year. Credit risk is much higher.
2. Covid and the present situation are entirely different. Covid was a global destruction of demand for which it might have made sense for a company to return capacity faster than competitors, esp. given that the US locked down for a shorter period of time and the stock market post covid was very strong, fueling alot of travel. This is a severe cost issue that will impact all airlines even as demand will only be destroyed by the required price hikes that will come. UA is in the worst position of the big 4 in terms of facing higher costs in the midst of high cash drain.
3. You and UA incessantly think it is about winning against others and yet UA will have no choice but to fight for its own financial life this year even if other airlines face the same crisis. And UA is NOT the best positioned airline no matter how much you or Kirby want to believe. DL has a better balance sheet, had more conservative growth and capex and much higher earnings on top of the fuel cost advantage. WN still has the strongest balance sheet in the US airline industry. AA is by far the most fragile of the big 4 but it is hardly consolation if you are at best 3 out of 4 and the smaller LCCs and ULCCs that will fail before UA are largest in your competitors' strength markets.
You have a long year ahead of you even as it is certain that you, not me, will be backtracking on your hopium and endless predictions of how well UA will weather this.
You don't
say what?
I hate Kirby and his cult-inspired clan because they are so devoid of reality.
I knew this day would come.
It speaks volumes that Kirby released this memo on Friday night after the markets closed.
You don't release good news in the dark of night.
UA's strategies under Kirby were never sustainable and some of us knew it including other people who have already commented on this thread.
UA's employee paid internet chorus tries desperately to drown out any bad news but no one is or will be fooled.
This situation is going from bad to worse for UA
United is cutting flights because its 75 year old 777s require spare parts more difficult to source. The leisure premium play is in its 7th inning. The US economy is headed for a deep, stagflation pronounced recession, and one of its own making.
Right, but that doesn't mean it'll end. Iran has a say on that. Just because TACO tucks tail and runs in a month doesn't mean Iran will reopen the strait.
Ironically, thanks to Trump lifting sanctions, they're actually making *more* money now than they were before the war. And they've talked about long term implementing a toll fee on every passing tanker.
All this is to say that mango mussolini has opened this Pandora's box and he can't close it. Not without humiliating himself (and unfortunately, our country). America and Israel ending their side of the war doesn't mean the hit to oil markets and the global economy will automatically be lifted.
UA is cutting flights because the economics of keeping old, maintenance heavy, fuel INEFFICIENT aircraft no longer works.
At $2.50 jet fuel, UA could justify keeping older aircraft flying - even if there were multiple fleet types that have had significantly more maintenance issues than other airlines. Holding onto older aircraft long after other airlines is not an advantage esp. in times like this.
Demand will be reduced as demand falls dramatically even though Kirby just argued about how airline demand is inelastic in a comment that aged very poorly.
UA has no choice but to take capacity out and the oldest airplanes will be the first to go at every airline.
UA had the largest order book and deliveries for 2026 and they will simply be using a high percentage of new deliveries for fleet replacement rather than growth which will simply drain their cash faster and deliver no revenue benefits while the new technology is not enough to offset higher costs.
UA is in the perfect storm of their own making, driven by unrealistic plans which always were subject to fail when a downturn comes - and they invariably do for the airline industry. Covid recovery was just five years ago. The frequency and timing between new crises is increasing.
attack the messenger because you can't admit he is right - including that he said this day would come a long time ago.
We are here and the best people like you can do is keep repeating the hopium or attack the messenger.
I am being vindicated by the minute.
I've always wondered, how do these "internal employee memos" get in the hands of bloggers within minutes of release on internal channels? Do you work for United? How else is it possible?
LTD says, "UA is cutting flights because the economics of keeping old, maintenance heavy, fuel INEFFICIENT aircraft no longer works."
Average Aircraft Age (years)
AAL: 14.3
DAL: 14.8
UAL: 15.3
Too funny.
In other words, "We will exploit this avoidable global crisis that is killing innocent school girls as an excuse to raise prices higher than our costs are rising, to gouge our customers and make more money." Gtta love US capitalism!
You must have missed that so far the price increases are covering the fuel increases. DL specified it at +25% YOY or about +15b/year which is > $11b.
Boy, you are such a unique 'analyst'. Too funny.
Kirby put out a lot of words but there's not much substance. Sure United may very well be in a healthy financial situation to withstand the oil price shocks, and can ride it out longer than probably Spirit. But he doesn't actually outline much of other strategies apart from some minor frequency cuts. Also, it might be true that demand and bookings are strong despite the war in the last 3 weeks, but I suspect it's a lof of bookings that were pulled forward. I know because I made a lot of bookings for later this year expecting prices to go up (and they did), since there's no change fee so I think people who can afford to are incentivized to go ahead and make those bookings that they have been waiting on. Who knows what demand will be like in two months if the war drags on and the fuel cost surge is being passed along to ticket prices. I was going to book a couple of premium economy trips for next January but since the prices went up $350 each I decided it's maybe wise to wait and see.
average age of aircraft doesn't matter.
Costs do.
UA has been holding airplanes together with bailing wire -if they could even buy said wire.
UA's fuel costs are simply going to grow at the high end of the industry.
This big growth strategy that you were convinced was going to take place is not happening. UA has already wiped away all of their planned growth for the 2nd quarter and it will only get worse.
Some of us predicted this day would come and we aren't surprised n omatter how much you try to bob and deflect from the reality of the situation that UA finds itself in.
Kirby's strategies were reckless and highly risky. He is trying desperately to unwind them before severe, long-term damage is done to UA
Lol wait what is Delta doing flying so many ancient 767 .
It's so funny you are blind when it come to reality.
'Analyst' LTD says, "average age of aircraft doesn't matter. Costs do."
CASM
AAL: 17.76
DAL: 19.31
UAL: 16.46
First, you, just like rebel, can't grasp that fleet age is not directly correlated to fuel cost.
2nd, Delta is and has been retiring 767s in contrast to UA which has bragged for 5 years that it hasn't retired a widebody.
Airplanes have lifespans which are driven as much by economics more than by the ability to keep older aircraft flying
But the whole notion that UA and the entire fan club can't grasp is that UA has committed to massive capex to support growth which simply is not viable at very high fuel prices.
UA not only faces the highest fuel prices among the big 4 - that is usual for UA - but fleet fuel INEFFICIENCY and high growth rates.
UA will have to take delivery of new aircraft but will be using them for fleet replacement rather than growth.
that is ALL a recipe that was certain to fall apart as soon as the very predictable black swan event happened.
This one just happened to hit every one of UA's vulnerabilities much more than any other US airline.
Timbits, you are engaging in wishful thinking at a level that hasn't been seen since Baghdad Bob. You want UA to fall apart so badly that it physically hurts you that they aren't dying and will still make a profit on the level of Delta. Meanwhile, why don't you meditate on the fact that Delta customers are having, shall we say, quite a difficult time getting to their planes given the security wait in Atlanta?
All this back-bitting amongst ‘friends’ is all very entertaining, however, who will suffer the own goal brought about by the orange ‘rump? Which U.S. airlines will survive this latest downturn. Which fanboy group will weather the turbulence ahead and which will cry in the corner after throwing all of their toys out of their prams?
You really are a strange bunch of misfits …. 🙂
two other pieces of United news that are worth considering
1. LALF has obtained a UA memo to FAs that says that the suite doors on the new Polaris seats will have to remain locked open until UA obtains full certification of the seats - in line w/ what every other US airline that has installed new generation seats over the last year or so has faced.
2. The DOT has finalized its Air Travel Consumer Report data for 2025.
UA ended up for 2025 in sixth place out of 10 airlines in on-time which is the bottom half statistically. HA led the industry followed by DL. WN also ran a more on-time operation than UA.
In cancellations, UA and DL were tied mid-ranking for cancellation rates. HA, AS and WN did better than both DL and UA.
In baggage handling, UA was dead last for the year, right next to AA. WN did better than any of the big 3 while DL was noticeable better than AA or UA.
UA had a better than average invol DB rate but not as good as DL with ZERO or WN but certainly better than AA.
bottom line is that, in aggregate, UA ran an operation that was only marginally better than average and worse than DL and WN but better than AA.
There really aren't bragging rights involved in saying you beat AA in operational performance.
I see some chapter 11s in the industry's future by fall if fuel prices don't come down quickly.
Even $3/gallon crude will significantly decimate demand and raise costs. The chances of jet fuel being below $3/gallon are very low.
Higher labor costs have been layered on the industry over the past 3 years in the midst of low fuel costs.
High fuel costs along w/ much higher fuel costs are not compatible w/ the current level of industry capacity - or even a single digit amount of capacity less than what was scheduled a week ago.
You can argue what carriers will be most impacted but the notion that UA will not be impacted heavily is supremely naive.
5% capacity cuts within 90 days is very significant and more than "minor"
and UA has just pulled more capacity than NK flies, most of which is in other carrier networks.
The most fragile carriers are not in UA strength markets which means that UA will obtain less benefit even if several weaker carriers fail.
Time’ll tell whether Kirby’s right or not, but it’s nice to see someone with moxie for a change. I’ll take a memo like that anytime over the LinkedIn word salads coming out of Virginia Avenue.
I have no desire to see any carrier fail.
I am very much ready to pounce on the incessant happy talk that has come out of Willis Tower and its internet crowd has lapped up for more than five years.
The TSA issues will get solved and they far from impact more than just DL hubs.
Undoing 5+ years of UA progress and being set back because of overaggressive plans which some of us knew would fail is far more significant than any checkpoint which serves all airlines.
except "moxie" right now is simply Kirby trying to extricate himself and UA's future from the failure that could easily swamp UA in the midst of a tsunami of challenges which no other airline is facing.
DL has long been conservative and didn't try to grow as aggressively or get into market share contests but focused on rebuilding its balance sheet and building a company that would thrive in good times and survive in bad times.
DL didn't put a memo out after market hours stating that it was pulling out 5% of capacity in the next 90 days; UA can't possibly recoup the cost of the employees and airplanes that were committed to support that flying.
UA blinked first and biggest which says volumes about how sustainable UA's plans ever were in an industry that sees black swans predictably show up way more frequently than ever.
testosterone fueled lack of restrained should not be confused with "moxie"
it's worth noting that UAL stock is down about 20% over the past month, only slightly better than what AAL and LUV are down.
ALK and JBLU are down in the 30% range.
DAL is down 9%.
Actual investors don't see UAL as being significantly better positioned than most of the industry and nowhere near in as good of shape as DAL.
Facts are facts. Markets don't pick sides.
...which is why UA's paid employee social media warriors would rather piggyback on existing platforms.
Now, having someone say "I told you so" seems very unwelcome. This will turn out to be one of the lowest comment counts on an industry topic involving UA - and I have made almost half of the comments.
Suddenly, flying kites seems like a good idea for some people whose previous preoccupation night and day was to hawk UA.
when you have tens of thousands of employees someone (likely dozens of someones) will leak stuff.
United ceo hopes oil hits $175 a barrel. They will make more money if that happens? Wow! He be a dancing fool.
Tim, did you just hear someone on TikTok say black swan?
You repeat it so many times.
And typical fluffy Tim.
It is not a black swan event.
The problem is that UA is last among US carriers in fuel efficiency per passenger mile. The highest is Frontier, with high density seating and no long haul. So UA seems more exposed to high fuel prices than their competitors.
to add on to your comment, part of the reason is that UA uses the CRJ550 which is the least fuel efficient aircraft in the US carrier fleet on a per seat basis; originally designed as a 70 seat aircraft, the CRJ550 tries to get a premium cabin by shrinking the number of seats on an aircraft that is already less fuel efficient than mainline aircraft - there is no such thing as a new generation powered regional jet in the US carrier fleet.
On the top end, UA has the world's largest fleet of 777-200ERs which has the worst fuel efficiency among US carrier widebodies (at least among the aircraft that are flying because of engine issues).
UA is increasing its large mainline domestic fleet - MAX9s and 321NEOs - but they still have low gauge.
AA has lower average gauge because of its heavy use of large RJs which are more efficient than UA's RJ fleet but RJs are just less fuel and labor efficient than mainline aircraft. Half of AA's widebody fleet is 777-200ERs; their decision to hold onto those planes looked good at $65/bbl oil but will bite if jet fuel is close to $250/bbl - which is well below where it is today.
DL has the highest average gauge of the big 3 in part because of a much smaller RJ fleet; they have 717s which are essentially a mainline regional jet but with better labor economics than RJs and the A220 which is so much more fuel efficient than any other small mainline let alone RJ.
and DL is a master of matching the right fleet to the route.
low cost carriers and ultra low cost carriers have more seats but don't offer the amount of premium seats or fly longhaul international routes.
The real differnence here will be what the refinery contributes to lower DL's fuel costs but it will likely be $750 million to $1 billion in 2026 based on comments even Kirby made. WN might have gained alot of things from Elliott but being forced to walk away from fuel hedges will hurt - alot.
and UA as well as AS is more exposed to high west coast fuel costs, again because of UA's SFO hub which uses a fairly large number of less fuel efficient 777s to fly the Pacific.
and, to the comment below, I'm not sure what you call a black swan event, but having a cost item nearly double over the course of a year is as close to a black swan as there can be.