Oil prices translate into airline costs. Only some of them can be passed on to customers. There is a threshold of acceptance for ticket prices, and above this threshold, planes would mainly carry air.
Read also: This may save fuel prices in Poland. Possible move by the government
United Airlines, the third airline in the US in terms of the number of passengers transported (over 170 million passengers per year), announced that it intends to reduce the number of unprofitable flights over the next two quarters. This is to be preparation for a prolonged period of high aviation fuel prices due to the war with Iran. This is not helped by the high demand for travel, which has allowed American carriers to raise prices.
$175 per barrel of oil
United Airlines CEO Scott Kirby said in a memo Friday that the airline is preparing for increasing oil prices to $175 per barrel and keeping them above $100 by the end of 2027. At this level United's annual fuel bill would increase by about $11 billion.which is more than twice the profit achieved in the best year in history, he added.
On Friday, the price of a barrel of American WTI crude oil increased by 2.3 percent to $98.32 (62 cents per liter). European Brent crude oil prices increased by 3.3%. to $112.19 (71 cents per liter).
Aviation fuel prices have doubled
The war in Iran has sent airlines into a fuel shock, writes Reuters. Jet fuel prices have almost doubled since late February, raising costs across the industry and disrupting the global flight pattern with rerouting changes and airspace restrictions.
Read also: This is how much a diesel may cost soon. “We're heading in that direction”
Still, U.S. carriers have managed to push through ticket price increases for now, helped by stable travel demand and lower capacity.
“There's a good chance it won't be that bad,” Kirby wrote of the airlines' fuel economy assumptions. “But … there are not many negative consequences for us in preparing for such a scenario.”
In a staff memo shared by the company, Kirby said the airline intends to cancel approximately 3%. off-season flights in the second and third quarters, targeting routes and periods with weaker demand.
This will also reduce the capacity of Chicago O'Hare Airport by approximately one percentage point and suspend flights to Tel Aviv and Dubai. This will add up approximately five percentage points reduction in planned capacity for this year.
The scenario currently adopted by United Airlines assumes that the flight network will be restored only in the fall of this year.
Rival airline Delta Air Lines – second in the US market (over 200 million passengers per year) – this week raised its revenue forecast for the first quarter and also announced that it may reduce transport capacity if fuel prices remain high – reports Reuters.
