TLDR
- United Airlines CEO Scott Kirby cautioned that skyrocketing jet fuel costs may significantly damage Q1 performance, with Q2 also at risk.
- Over the last week, jet fuel costs have surged between 15% and 20% following escalating tensions in Iran.
- Analysts now project United’s Q1 adjusted EPS could drop to just 5–22 cents, far below the company’s earlier forecast of $1–$1.50.
- Shares of UAL have declined approximately 10% since the Middle East crisis intensified, with an additional 3.6% drop in Friday’s premarket session.
- Among U.S. carriers, Alaska Air (ALK) faces the greatest exposure to rising fuel costs, while JetBlue (JBLU) remains relatively insulated due to regional pricing variations.
United Airlines’ top executive Scott Kirby issued a stark warning on Thursday, revealing that rapidly climbing jet fuel prices are poised to deliver a “meaningful” blow to the airline’s first-quarter financial performance, with potential spillover effects into Q2 should the Iran conflict persist.
United Airlines Holdings, Inc., UAL
The CEO delivered these remarks during an appearance at Harvard’s John A. Paulson School of Engineering and Applied Sciences. While passenger demand continues to hold strong, Kirby emphasized that fuel expense volatility presents a completely different challenge.
Jet fuel costs have climbed 15–20% in just seven days. For an industry where fuel expenses routinely consume roughly one-third of total operating costs under stable conditions—and can exceed 40% during geopolitical turbulence—this represents a substantial financial headwind.
Most airlines abandoned fuel hedging strategies years ago, primarily because hedging the differential between crude oil and gasoline prices proved exceedingly complex. This leaves carriers completely vulnerable to the kind of volatile price movements witnessed this week.
Citi Research analysis shows that crack spreads—the profit margin separating crude oil from refined fuel products—have shifted dramatically and inconsistently across regions. Singapore Jet fuel has climbed more than $3 per gallon in the past week, while NY Jet has increased just over $1.
Regional Exposure Matters
These geographic pricing disparities mean carriers experience vastly different financial impacts. Alaska Air (ALK), with its concentrated West Coast operations, faces maximum vulnerability to Singapore-linked price increases. Conversely, JetBlue (JBLU), which operates predominantly from New York’s JFK airport, benefits from the more modest NY Jet price movements.
The airline sector broadly has suffered losses. The U.S. Global Jets ETF has shed approximately 6% over five trading days, with market indicators pointing to another 3% decline at Friday’s opening bell.
For United in particular, the financial implications are severe. TD Cowen analysts have revised their Q1 adjusted earnings per share estimate downward to a range of 5 cents to 22 cents. This stands in sharp contrast to United’s January guidance of $1 to $1.50 per share—representing a potentially massive shortfall.
UAL Stock Under Pressure
UAL shares declined 3.6% during Friday’s premarket trading session. Through Thursday’s closing bell, the stock had already retreated roughly 10% since Middle East tensions escalated.
The crisis has additionally resulted in more than 20,000 canceled flights worldwide and left thousands of travelers stranded, adding operational complexity on top of financial pressures facing airlines.
United Airlines had not provided a response to Reuters’ request for comment at press time.
Kirby’s public statement marks one of the most explicit cautions issued by any major U.S. airline executive regarding the financial consequences stemming from the Middle East situation.
The revised TD Cowen projections, which incorporate current fuel pricing dynamics, offer the most up-to-date indication of where United’s first-quarter results may ultimately settle.
