The ongoing conflict involving Iran and potential disruptions to oil shipments through the Strait of Hormuz are forcing airlines to prepare for a sustained period of high fuel prices. United Airlines CEO Scott Kirby recently warned employees that the company is planning for oil to remain at $175 per barrel through 2027, with limited relief before prices potentially drop back to $100. This isn’t mere speculation; jet fuel accounts for 25–33% of airline operating costs, and prices have already doubled in the last four weeks.
Flight Cuts and Capacity Adjustments
To mitigate the impact, United Airlines will reduce its planned flight schedule by 5% in the second and third quarters of this year, with deeper cuts planned for less profitable routes, such as red-eye flights and travel on Tuesdays, Wednesdays, and Saturdays. The airline acknowledges that while this scenario may not fully materialize, proactive preparation is essential.
“Honestly, I think there’s a good chance it won’t be that bad,” Kirby wrote in the memo, “but … there isn’t much downside for us to prepare for that outcome.”
Broader Economic Implications
This move by United isn’t isolated; it’s a signal that broader economic consequences are likely. According to Jason Miller, a supply chain management professor at Michigan State University, airlines are particularly sensitive to oil price fluctuations due to their reliance on refined petroleum products. If oil remains elevated for an extended period, the ripple effect will be felt across multiple sectors.
Worst Timing for Global Economy
The energy shock arrives at an inopportune moment, coinciding with a sluggish job market and ongoing global economic uncertainty caused by trade tensions. The Iran conflict is dragging on longer than initially predicted, raising concerns that disruptions to the Strait of Hormuz may persist.
American Airlines CEO Robert Isom has already reported that the company spent an additional $400 million on fuel in recent weeks. Despite strong demand, with United Airlines seeing record booking revenue in the past 10 weeks, the sustainability of this trend depends on whether travelers are proactively booking before prices rise further.
Uncertainty and Long-Term Risks
Prolonged uncertainty poses the greatest threat to the industry. Ahmed Abdelghany, an airline operations professor at Embry-Riddle Aeronautical University, warns that the longer the crisis continues, the more challenging it will become for airlines to adapt.
The reality is that airlines will have to remain agile, adjusting capacity to balance supply and demand if oil prices remain high. The question remains: how long will the industry – and passengers – endure this volatility?
The situation underscores the fragility of global supply chains and the interconnectedness of geopolitical events with economic stability. While airlines adapt, consumers will ultimately bear the brunt of increased ticket prices and potential travel disruptions.
