Key Takeaways
- CEO Scott Kirby cautioned that escalating jet fuel costs may significantly impact Q1 performance, with risks extending into Q2.
- Over the past week, jet fuel prices have surged between 15–20% following escalating tensions in Iran.
- Analysts now project United’s Q1 adjusted EPS could drop to just 5–22 cents, well below the company’s original $1–$1.50 forecast.
- Since conflict escalation, UAL stock has declined approximately 10%, with an additional 3.6% drop in Friday’s premarket session.
- Geographic fuel pricing variations mean Alaska Air (ALK) faces the highest exposure, while JetBlue (JBLU) remains less affected.
United Airlines’ chief executive Scott Kirby issued a stark warning Thursday that rapidly climbing jet fuel costs will likely deliver a “meaningful” blow to the airline’s first-quarter financial performance, with potential spillover effects into the second quarter if Middle East tensions 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 pressures tell a markedly different tale.
The airline industry has witnessed jet fuel costs climb 15–20% within just seven days. This spike carries enormous weight for a sector where fuel expenses regularly consume roughly one-third of total operating costs under normal circumstances, potentially exceeding 40% when geopolitical crises emerge.
Most carriers abandoned fuel hedging strategies years ago, recognizing the extreme difficulty in hedging the differential between crude oil and gasoline pricing. This decision leaves airlines completely vulnerable to market volatility like the current situation.
Citi Research analysis reveals that crack spreads — representing the price difference between crude oil and refined products — have shifted dramatically and unevenly across regions. Singapore Jet fuel has climbed more than $3 per gallon in the past week, while NY Jet increased just over $1.
Geographic Disparities Create Uneven Impact
These regional pricing discrepancies mean airline carriers face vastly different cost pressures. Alaska Air (ALK), with significant West Coast operations, confronts maximum vulnerability to Singapore-linked price increases. Meanwhile, JetBlue (JBLU), concentrated at New York’s JFK airport, benefits from comparatively modest NY Jet price movements.
The entire aviation sector has absorbed substantial losses. The U.S. Global Jets ETF has shed approximately 6% over five trading days, with projections indicating another 3% decline at Friday’s opening bell.
For United particularly, the financial implications are severe. TD Cowen analysts have revised their Q1 adjusted earnings per share forecast to a range of just 5 to 22 cents. This stands in sharp contrast to United’s January guidance calling for $1 to $1.50 per share — representing a dramatic shortfall should lower projections materialize.
Stock Performance Takes Hit
UAL stock declined 3.6% during Friday’s premarket trading hours. Following Thursday’s closing bell, shares had already fallen roughly 10% since the Iran situation intensified.
The conflict has additionally triggered more than 20,000 flight cancellations worldwide, stranding thousands of travelers and amplifying operational challenges for airlines across the industry.
United Airlines had not provided immediate comment to Reuters’ inquiry at publication time.
Kirby’s public statements mark among the most direct acknowledgments from a major U.S. airline executive regarding the financial consequences stemming from Middle East instability.
The revised TD Cowen projections incorporating current fuel market conditions represent the latest available analysis of where United’s first-quarter results might ultimately settle.
