United Airlines (NASDAQ: UAL) CEO Scott Kirby warned Wednesday that with rising jet fuel prices may come higher airfares. The company’s stock rose under 1% during early morning trading.
“Higher jet-fuel prices lead to higher ticket prices,” Kirby told CNBC’s “Squawk on the Street.” “Ultimately, we’ll pass that through.”
Regardless of strong travel demand, the sudden rise in fuel prices has stunted the aviation industry once again. Delta Air Lines recently issued a warning of a fourth-quarter pre-tax loss and insinuated that it would need to up consumer fares in order to cover the costs.
United predicts typical fuel prices of USD2.39 a gallon within the fourth quarter, the same time period it anticipates a surge in bookings. Fuel was USD2.14 a gallon in the third quarter and was at USD2.02 a gallon during the fourth quarter of 2019.
According to Kirby, high demand is usually a factor when considering rising fuel prices. However, the rise in demand is a positive as the industry strives to reach profitability once more, following the Covid-19 pandemic. JP Morgan analyst Jamie Baker believes higher fuel prices will be beneficial in the medium- to long term.
The carrier reported a USD473 Million profit for the third quarter, amid USD1.1 Billion in federal aid, though the rise in delta-variant cases impacted results. Furthermore, United Airlines expects 2022 costs, except for fuel, to come in below that of 2019.