Key Highlights
- CEO Scott Kirby indicated jet fuel costs will impact Q1 earnings “meaningfully,” with Q2 also at risk.
- Jet fuel costs have surged 15–20% over the past week amid Iran tensions.
- Q1 adjusted EPS projections for United now sit at 5–22 cents, down sharply from January guidance of $1–$1.50.
- UAL shares have declined approximately 10% since conflict escalation, dropping 3.6% in Friday’s premarket session.
- Geographic fuel pricing differences leave Alaska Air (ALK) most vulnerable while JetBlue (JBLU) faces less exposure.
United Airlines CEO Scott Kirby delivered a stark warning Thursday about how rapidly rising jet fuel costs will deliver a “meaningful” blow to the airline’s first-quarter financial performance, with risks extending into Q2 should the Iran conflict persist.
United Airlines Holdings, Inc., UAL
Kirby shared these remarks during an appearance at Harvard’s John A. Paulson School of Engineering and Applied Sciences. While passenger demand continues holding strong, fuel expenses tell a troubling story.
The past week has seen jet fuel costs climb 15–20%. This increase carries significant weight in an industry where fuel expenses commonly consume roughly one-third of operating budgets under standard conditions, sometimes exceeding 40% when geopolitical tensions flare.
Airlines abandoned fuel hedging strategies years ago due to the complexity of hedging the differential between crude oil and gasoline prices. This decision leaves carriers completely vulnerable to the kind of volatility witnessed recently.
Citi Research data shows crack spreads — representing the price difference between crude oil and refined fuel products — have shifted dramatically and inconsistently across regions. Singapore Jet fuel prices have climbed more than $3 per gallon during the past week. NY Jet has increased just over $1.
Geographic Factors Create Uneven Impact
This regional pricing disparity means carriers experience different levels of pressure. Alaska Air (ALK) faces the greatest exposure due to its substantial West Coast operations, where Singapore-linked pricing dominates. JetBlue (JBLU) enjoys relatively better positioning thanks to its concentration at New York’s JFK, where NY Jet price increases have been more modest.
The airline sector broadly has suffered losses. The U.S. Global Jets ETF has declined approximately 6% during the past five trading days, with another 3% decrease anticipated at Friday’s opening bell.
United faces particularly challenging numbers. TD Cowen’s latest analysis projects UAL’s Q1 adjusted earnings per share landing somewhere between 5 cents and 22 cents. This represents a dramatic departure from United’s January guidance range of $1 to $1.50 per share. Should these lower projections materialize, the shortfall would be substantial.
UAL Shares Face Selling Pressure
UAL stock declined 3.6% during Friday’s premarket trading session. Through Thursday’s closing bell, shares had fallen approximately 10% since the Iran conflict intensified.
The Middle East situation has also triggered more than 20,000 flight cancellations worldwide and left thousands of travelers stranded, adding operational challenges to the financial pressures airlines face.
United Airlines had yet to provide comment to Reuters when contacted for this story.
Kirby’s statements mark among the most direct public acknowledgments from a major U.S. airline chief executive regarding the financial consequences stemming from the Middle East crisis.
TD Cowen’s revised estimates incorporating current fuel price levels provide the freshest available insight into where United’s Q1 performance may ultimately settle.
