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United Airlines warned Wednesday that the company is raising ticket prices by as much as 20% as it grapples with surging jet fuel costs driven by the war in Iran.
The alarming notice came during the company’s quarterly earnings call, where CEO Scott Kirby said the airline is aiming to “recover 100% of the increase in jet fuel prices as quickly as possible.”
“Sell-in yields for all future travel are now up 20% year-over-year,” Executive Vice President and Chief Commercial Officer Andrew Nocella said, indicating that customers are already booking future flights at prices roughly 20% higher than last year’s levels.
Kirby added that yields likely need to remain near that range to achieve long-term profit margins.
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“Yields need to increase by about 15% to 20%, and we are assuming that fuel may remain higher for longer,” he said.
The CEO added that higher prices are expected to dampen overall demand, but noted there have been no signs of decline yet following earlier fare and baggage fee increases implemented since the war began.
“We believe we have the ability to pass on the increase in fuel due in large part to our brand loyal customers, continued demand strength and preference to fly United even at higher fares,” Executive Vice President and Chief Financial Officer Michael Leskinen said.
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“At this point, we can tell you that the price increases are going well and demand is hanging in there really strong,” Nocella added.
The airline has already implemented five broad price increases since January mostly to offset higher fuel costs, according to the call.
While ticket yields were up just 4% year over year in January and February, they reportedly climbed to 12% in early March, 18% later that month, and have now reached 20% for all future travel.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| UAL | UNITED AIRLINES HOLDINGS INC. | 91.25 | -0.46 | -0.50% |
United further attributed its “robust” demand to a strong base of brand-loyal customers and continued strength in premium and business travel.
Kirby also suggested that if demand does soften, the carrier may respond by supplying fewer seats to the market.
Management noted that the longer fuel prices remain elevated, the more likely higher ticket prices are to become permanent across the industry.
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Fuel costs have surged to multi-year highs following the outbreak of the U.S.–Israel conflict with Iran on Feb. 28, which disrupted roughly 20% of global oil flows passing through the Strait of Hormuz.
As of Wednesday, jet fuel in major U.S. markets averaged $4.23 per gallon, up nearly 70% from levels seen before the war began, according to Argus data published by Airlines for America. At one point in early April, prices reportedly surged more than 95% to $4.88 per gallon.
In response, multiple major airlines have launched efforts to mitigate rising operating costs, including increasing baggage fees and consolidating flights by canceling select routes.
United Airlines specifically raised checked bag fees by $10 to $50 earlier this month.
