United Airlines CEO says fuel prices will impact first-quarter results

BOSTON — United Airlines CEO Scott Kirby said the spike in fuel prices since the United States and Israel attacked Iran on Saturday would have a “measurable” impact on the carrier’s financial results this quarter, but added that demand was resilient.

The price of jet fuel, airlines’ biggest expense after labor, has risen 58% since last Friday, reaching $3.95 a gallon on Thursday, according to the Argus U.S. Jet Fuel Index.

“If it continues, we’ll feel it in the second quarter, too,” Kirby said after an event Thursday afternoon where he discussed the future of air travel at Harvard’s John A. Paulson School of Engineering and Applied Sciences.

United, like most major U.S. airlines, does not hedging fuel, a practice in which airlines or other companies fix prices using futures contracts or other products. A Boeing The 737-800 can hold 6,875 gallons of fuel, according to the manufacturer’s manual.

“Nobody hedges anymore, and even if you do, hedging a crack spread is very difficult,” Kirby said. The crack spread is the difference between the price of crude oil and products such as gasoline.

When asked when higher fuel costs would start impacting airfare prices, Kirby said it would “probably start quickly.”

He added that travel demand was generally resilient, with booked revenue up 20% on last year. Demand “has not taken even a small step backwards,” he said.

Kirby spoke less than two weeks before airlines were set to attend a closely watched JPMorgan industry conference where airline executives often update their financial forecasts.

His comments are an early sign of how global airlines have been affected by the war, which has left more than a million people stranded after more than 25,000 flights were cancelled, forcing customers to find alternatives to the Middle East’s aviation chaos.

A new sector is emerging for United because many customers have been caught up in widespread airspace closures and flight cancellations in the Middle East since Saturday’s attacks and other strikes throughout the week.

Dubai International Airport in the United Arab Emirates is the busiest international airport in the world, according to Airports Council International, while Hamad International Airport, which serves Doha, Qatar, is another major hub.

Airports are gateways for millions of passengers flying to and from destinations including Australia, India, Europe and North America. But customers were forced to avoid the Middle East amid airspace closures.

“Every day this week, we’ve booked more than 1,000 people from Australia and New Zealand to Europe. Last year, we booked less than one person a day,” Kirby said, adding that Europe is the strongest region in the world in terms of bookings now.

United is also in talks with the Trump administration about possible charter flights to get citizens out of the Middle East, but those plans have not yet been determined, Kirby said.