United Airlines (UAL) Stock Falls as Airline Cuts Routes Over Fuel Costs

TLDR

• United Airlines CEO Scott Kirby warned in a Friday memo that oil could hit $175 a barrel
• United is cutting roughly 5 percentage points of planned capacity for the year
• Midweek, Saturday, and overnight flights are being reduced in Q2 and Q3
• Flights to Tel Aviv and Dubai remain suspended
• The Iran conflict has nearly doubled jet fuel prices since late February

United Airlines ($UAL) fell in premarket trading Monday after CEO Scott Kirby told staff the airline is bracing for a prolonged fuel shock driven by the ongoing Iran conflict.

United Airlines Holdings, Inc., UAL

The stock slipped about 1.7% in pre-market by 5:59 ET Monday.

Kirby sent a memo to staff on Friday outlining a worst-case planning scenario: oil climbing to $175 a barrel and staying above $100 through the end of 2027. At those levels, he said, United’s annual fuel bill would rise by around $11 billion.

To put that in context, $11 billion is more than double what the airline made in its best year ever.

Jet fuel prices have nearly doubled since late February. The conflict in Iran has also forced airlines to reroute around restricted airspace, adding further costs.

United had already started trimming routes before this latest round of cuts. The airline had been quietly pulling back on less-profitable midweek, Saturday, and red-eye services.

Route Cuts and Capacity Reductions

The new plan calls for a roughly three percentage point cut to off-peak flying in Q2 and Q3. These reductions focus on routes and time slots with weaker demand.

United will also cut around one percentage point of capacity from its Chicago O’Hare hub.

Flights to Tel Aviv and Dubai remain suspended. Combined, all these moves add up to a roughly five percentage point reduction in total planned capacity for the year.

Kirby said the airline still expects to restore its full schedule in the fall.

Fares Holding, For Now

Despite the pressure, U.S. airlines have managed to push fares higher. Steady travel demand and reduced seat availability have given carriers some pricing power.

United’s position is that it would rather leave some seats unfilled than fly unprofitable routes. That’s a calculated bet — accept some short-term revenue loss to protect margins.

That logic has its limits, though. If demand softens at the same time fuel stays high, the math gets harder.

Crude oil ($CL) fell 6.16% on Monday, but that hasn’t been enough to reverse the broader fuel cost surge airlines have absorbed since February.

Kirby’s memo made clear that United isn’t banking on a quick pullback in prices. The airline is planning for the tough scenario and hoping reality turns out better.

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