United Airlines (UAL.US) Plans to Cut 5% of Flights! As High Oil Prices Erode Profits, the Aviation Industry Enters a Profitability Defense Battle!

United Airlines (UAL.US), a leader in the U.S. airline industry, announced on Friday that it plans to cut its scheduled flights by 5% in the second and third quarters to cope with the long-term high fuel prices following the surge in airline fuel costs caused by the Iran war. United’s latest decision highlights that, despite strong travel demand helping U.S. airlines significantly raise ticket prices to buffer the impact of high oil prices, they remain committed to reducing operating costs to maintain profit growth.

CEO Scott Kirby stated in an employee memo that the airline is preparing for oil prices potentially rising to $175 per barrel and remaining above $100 through the end of 2027. Kirby said that if oil prices stay at these rare levels, United’s annual fuel expenses could increase by about $11 billion, more than doubling its best-ever annual profit.

The Iran war has pushed airlines into the latest phase of the fuel shock. Since late February, Brent crude oil prices, the international benchmark, surged by as much as 80% at peak, and are now hovering around $100 to $110. Jet fuel prices have nearly doubled compared to before the Iran war. Rising energy costs are affecting the entire industry, and Middle East geopolitical tensions have led to rerouted North American flights and airspace restrictions, further driving energy costs higher.

Although major U.S. airlines say strong demand allows them to continue raising ticket prices, these cuts are expected to further support the industry’s pricing power.

Goldman Sachs recently released a research report stating that oil prices are likely to continue rising in the short term due to extremely low flow through the Strait of Hormuz. If sluggish flow raises concerns about prolonged disruptions, Brent futures could surpass the 2008 record high. The firm believes that recent attacks on energy infrastructure make it highly likely that Iran’s war will push oil prices above $100 for the long term.

“Executing flights that cannot absorb these fuel costs in the short term, thereby continuously depleting cash, makes no sense,” Kirby said. He also mentioned on Tuesday that if fuel costs remain high, the airline would prefer to leave some demand unmet rather than operate routes at a loss.

The Chicago-based North American airline leader has already cut weaker-performing flights, such as some mid-shift, Saturday morning, and overnight flights.

In the employee memo, Kirby said United will cancel about 3% of off-peak flights in the second and third quarters, including red-eye flights and mid-week flights with lower demand.

The airline will also cut 1% of capacity from Chicago O’Hare and continue to suspend flights to Tel Aviv and Dubai—two key Middle Eastern routes—bringing the total capacity reduction for the year to about 5%. Kirby stated that the airline plans to restore its full flight schedule this fall.

Despite still experiencing exceptionally strong demand for business and international travel routes, the capacity cuts will proceed. Kirby noted that the top 10 weekly booking revenue weeks all occurred within the past 10 weeks, a trend further confirmed by other major U.S. airlines reporting strong spring bookings.

North American industry leaders like Delta Air Lines (DAL.US) and American Airlines (AAL.US) have said that strong market demand allows them to partially offset recent fuel price surges by raising ticket prices. However, Kirby emphasized that United will still cut flights that are at significant risk of operating at a loss under current fuel prices.