United Airlines CEO Scott Kirby said on Wednesday the carrier expects fuel prices to remain elevated throughout 2027.
Kirby said achieving United’s goal of double-digit pretax margins next year would probably require lower fuel costs, slower industry capacity growth or airlines continuing to prioritize higher fares over fuller planes.
The Iran war has disrupted oil and jet fuel shipments from the Middle East, while attacks on energy infrastructure have further strained supplies. Restoring production and rebuilding depleted fuel inventories could take months, even if the fighting eases.
Kirby’s warning came a day after United forecast fourth-quarter profit well below Wall Street expectations, despite sharply higher ticket prices.
The airline recovered only 72% of its additional fuel costs through revenue gains in the third quarter. On the company’s earnings call, Kirby said industry capacity appeared set to accelerate next year. More seats could weaken airlines’ pricing power, making it harder to raise fares enough to close that gap.
HIGHER FARES, PERSISTENT FUEL PRESSURE
United expects to pay about $4.80 a gallon for fuel in the fourth quarter. US jet fuel spot prices stood at $4.77 a gallon on Tuesday, according to the Argus US Jet Fuel Index published by Airlines for America.
United Chief Financial Officer Mike Leskinen said the carrier expects to recover a similar proportion of its higher fuel costs in the fourth quarter as in the third, below the full recovery it had previously anticipated.
The company aims to recover all additional fuel costs through revenue gains in 2027, but executives acknowledged that fare increases take time to catch up with rising fuel prices.
Kirby said United’s investments in products and technology should boost revenue next year, but those gains alone would probably not be enough to achieve double-digit pretax margins.
United said it was scrutinizing capacity on every flight and in every market and would remain flexible in setting its 2027 schedule.
Rival Delta Air Lines warned earlier this month that airlines may need to restrain flight growth next year to sustain higher fares and protect profitability.
(Reporting by Rajesh Kumar Singh in Chicago and Shivansh Tiwary in Bengaluru; Editing by Nia Williams)