As conflict continues in the Middle East, oil and jet fuel prices have risen sharply, prompting United Airlines CEO Scott Kirby to note that these higher costs could soon translate into higher ticket prices.
What's happening?
Since the beginning of the war in Iran, United says its jet fuel expenses have gone up by over $340 million, spurring the airline to consider strategies to protect its margins.
At an academic event in March, Kirby was asked when higher oil prices would result in higher flight costs. The CEO stated that the fuel costs would likely raise ticket prices and that this would "probably start quick," the New York Times reported.
Since then, Kirby has doubled down, explaining in an April 22 interview with CNBC that summer flight prices may be raised by up to 20% to offset the higher costs of jet fuel.
United is certainly not the only airline planning to make drastic changes to adapt to rising fuel costs. Airlines — including Delta, Lufthansa, Air Canada, and others — have reduced or eliminated less profitable routes as well as reduced seat capacities.
Meanwhile, most of America's largest airlines — including United, Delta, Southwest, JetBlue, and American Airlines — have all raised baggage fees to offset their higher fuel costs.
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What's next?
Kirby warned that even if jet fuel prices stabilize, airline tickets are still likely to increase, according to TheStreet. And despite fuel cost hikes, United has reported higher profits than at the same time last year.
In his interview with CNBC, the CEO explained that even with these headwinds, earnings grew, something he called "a pretty remarkable achievement … I'm really proud of the team for doing that."
So even though United is maintaining and growing earnings, consumers might expect higher airfares and fees across most airlines. Budget airlines are expected to be hit especially hard by the fuel price increases, providing United with a leg up against these competitors.
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