United Airlines CEO Scott Kirby said Wednesday that jet fuel prices have risen to levels not seen since before the Covid epidemic, which is expected to raise airfares.
“Increased jet fuel prices translate to higher ticket pricing,” Kirby remarked last week on CNBC. “Eventually, we’ll get that through.”
United anticipates average fuel expenses of $2.39 (A$3.20) per gallon in the fourth quarter when it anticipates a boom in reservations from the end-of-year holidays and recently relaxed international travel restrictions. This is an increase from $2.14 (A$2.82) per gallon in the third quarter and $2.02 (A$2.70) on average in the fourth quarter of 2019.
Delta Air Lines warned last week that higher fuel costs would hurt its bottom line in the fourth quarter.
According to S&P Global Platts data, US jet fuel was $2.33 (A$3.12) per gallon on Tuesday, up more than 115 per cent from a year ago.
According to Kirby, increasing demand typically raises fuel prices. The increase in travel is a positive trend for a sector that is still struggling to regain profitability.
United reported a $473 million profit for the third quarter, mainly to $1.1 billion in federal subsidies; however, an increase in Covid-19 delta variant cases dragged on its bottom line. The Chicago-based airline underlined that it expects its costs, excluding fuel, to be lower in 2022 than in 2019.
When asked why United hadn’t seen the widespread cancellations experienced by competitors such as Southwest Airlines last week, Kirby attributed it to the carrier’s comparatively prudent capacity additions in recent months. Southwest recently reduced its fall schedule, and after cancelling more than 2,200 flights earlier this month due to severe weather and a staffing shortage, announced it may slash even more.
On a conference call with analysts and reporters on Wednesday, he added, “We didn’t get out over our skis.”
Kirby further stated that the Biden administration’s vaccine mandates could jeopardise the operations of some of its competitors. United claims that more than 96 per cent of its employees had already been vaccinated against Covid-19, following the implementation of its requirement in August, which threatened employees with termination if they did not comply or obtain an exemption.
American Airlines, Southwest Airlines, and other federal contractors, such as United, have stated that they comply with the government mandate. American and Southwest announced this week that they would not place employees on unpaid leave if they are applying for or have gotten medical or religious exemptions, in contrast to United, which stated that employees with exemptions would be placed on unpaid leave.
However, a federal judge in Fort Worth, Texas, temporarily barred United from due to a complaint filed by employees against the practice.
The government mandate’s compliance deadline is December 8.
“Customers can book with confidence on United now that we’ve completed [implementation of the mandate],” Kirby added. “However, if you book on an airline that does not need vaccinations, they are bound by federal regulations.” “Buyer beware.”
Both American and Southwest refused to comment. Both airlines are expected to release third-quarter earnings before the market starts on Thursday.
One area of uncertainty at United and other carriers is whether the regional airlines that fly many of their routes will be subject to the federal contractor mandate, which does not allow for testing, or upcoming rules for large companies, which will likely allow employees to test regularly rather than being vaccinated.
By Joe Cusmano