By Rajesh Kumar Singh
March 20 (Reuters) – United Airlines said on Friday it would cut its scheduled flights by 5% in the second and third quarters, planning for prolonged higher oil prices after the Iran war sent jet fuel costs soaring, even as strong travel demand helps U.S. carriers raise fares and cushion the hit.
Chief Executive Scott Kirby said in a staff memo the airline is preparing for oil to rise as high as $175 a barrel and stay above $100 until the end of 2027. United’s annual fuel bill would rise by about $11 billion, more than twice the profit in its best year, if prices stay at those levels, Kirby said.
The war in Iran has pushed airlines into a new phase of fuel shock. Jet fuel prices have nearly doubled since late February, raising costs across the industry and disrupting global flying patterns through reroutings and airspace restrictions.
While big U.S. airlines say strong demand is giving them room to raise fares, the cuts are expected to hold up the industry’s pricing power.
“There’s no point in burning cash in the near term on flying that just can’t absorb these fuel costs,” Kirby said.
Kirby had said on Tuesday the airline would rather leave some demand unmet than fly routes that lose money if fuel costs stay high.
The Chicago-based carrier had already trimmed weaker flights, such as some midweek, Saturday and overnight services.
In the staff memo, Kirby said United would cancel about three percentage points of off-peak flying in the second and third quarters, including red-eye and weaker midweek flights.
It will also pull about one point of capacity at Chicago O’Hare and keep service to Tel Aviv and Dubai suspended, bringing the total reduction to about five percentage points of this year’s planned capacity.
Kirby said the airline plans to restore the full schedule this fall.
The capacity cuts come even as demand remains unusually strong. Kirby said the airline’s 10 biggest booked revenue weeks have all occurred in the past 10 weeks, a trend echoed by other large U.S. carriers that have reported strong spring bookings.
Airlines including Delta and American have said strong demand has allowed them to push through fare increases to recover part of the recent surge in fuel prices.
But Kirby said United would still trim flying that risks losing money at current fuel levels.
(Reporting by Akanksha Khushi in Bengaluru; Editing by Alan Barona, Chris Reese and Tom Hogue)
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