The airline industry finds itself navigating an unprecedented period of uncertainty, with United Airlines bracing for a future where crude oil could reach $175 a barrel and remain above $100 through the end of 2027. This projection, outlined by United CEO Scott Kirby in a recent letter to employees, signals a substantial recalibration for carriers worldwide, reminiscent of the widespread disruptions experienced during the COVID-19 pandemic. The escalating conflict between the U.S. and Israel with Iran has not only sent oil prices soaring but also severely impacted air traffic to crucial Middle Eastern hubs, forcing longer, fuel-intensive routes for many international flights.
Kirby’s communication highlighted the immediate financial strain, noting that jet fuel prices have more than doubled in just three weeks. This surge translates to an additional $11 billion in annual costs for United if current price levels persist. Last year, the airline spent $11.4 billion on fuel, meaning this year’s expenditure could potentially exceed $20 billion. Such figures dwarf United’s adjusted net income of $3.5 billion in 2025 and even surpass its historical best earnings of $5 billion. Despite these daunting projections, Kirby emphasized the airline’s robust financial health, citing strong cash reserves, healthy profit margins, and a solid balance sheet. Demand for air travel also remains buoyant, with United recording its ten biggest booked revenue weeks in history over the past two and a half months.
However, the ability to continuously pass on these elevated fuel costs to consumers becomes increasingly challenging as prices remain high for extended periods. United’s internal planning now incorporates a scenario where oil hits $175 a barrel and does not retreat below $100 until late 2027. While Brent crude recently traded around $112 per barrel and U.S. oil near $98, analysts caution that prices could climb to $150 or even $200 if the Strait of Hormuz, a critical transit point for 20% of the world’s oil, remains largely closed. The situation for jet fuel is even more acute due to refining constraints, with prices in Northwest Europe nearing $239 a barrel and Asian jet fuel approaching $200, both close to recent peaks.
In response to this volatile environment, United plans to make targeted capacity adjustments, even as Kirby expresses hope that the most severe projections might not materialize. This includes reducing flights during off-peak times, specifically redeyes and Tuesday, Wednesday, and Saturday trips in the second and third quarters. The airline will also trim capacity at its Chicago O’Hare hub and suspend service to Tel Aviv and Dubai, regions currently affected by the ongoing conflict. These combined changes represent approximately a 5 percentage point reduction in capacity, though United intends to restore its full schedule by the fall. Kirby underscored that these near-term adjustments do not alter the airline’s long-term strategy for aircraft deliveries or overall capacity targets for 2027 and beyond, stating there is “no point in burning cash in the near term on flying that just can’t absorb these fuel costs.”
Crucially, United remains committed to avoiding employee furloughs, deferring aircraft orders, downgrading to regional jets, or implementing broad cost-cutting measures. The airline still expects to take delivery of about 120 new aircraft this year and plans continued investments in technology, facilities like airport clubs, new infrastructure at hubs, and an expansion at Newark airport. Kirby dismissed conventional cost-cutting as “small dollars at best,” arguing they are distracting, unnecessary for United, and detract from the company’s mission to build a leading airline. This approach contrasts with other carriers globally; Scandinavian airline SAS has already announced the cancellation of around 1,000 flights due to soaring fuel expenses. Similarly, Air France-KLM is considering reducing service to parts of Asia, particularly if fuel costs for return journeys to Europe become prohibitive. CEO Ben Smith noted the unique challenge for Southeast Asian routes, often reliant on fuel from the Gulf, creating a situation where return flights might be impossible if fuel supplies are disrupted. The ripple effects of this geopolitical and economic storm are clearly reshaping operational strategies across the entire aviation sector.
