March 6 (Reuters) - United Airlines CEO Scott Kirby said on Friday he expects a "meaningful" hit to the carrier's first-quarter results from surging fuel prices following the deepening war in Iran, even as travel demand remains resilient.
If the conflict prolongs, the airline could see an impact in the second quarter as well, CNBC reported, citing Kirby's speech at a university event on Thursday.
Jet fuel prices have jumped 15% in the past week, adding to the pressure on an airline industry already hit hard by the conflict, which has led to more than 20,000 flight cancellations and left thousands of passengers stranded.
Shares of United fell 4.5% in morning trade on Friday, while other major carriers including American Airlines, Delta Air Lines and Southwest Airlines were down between 3% and 5%.
U.S. airlines have largely stopped hedging fuel costs over the past two decades. The practice uses financial contracts to guard against fuel price spikes, but it can backfire when prices fall, leaving carriers locked into higher rates.
Airlines are unlikely to immediately recoup the sudden surge in fuel costs because many tickets were sold weeks or months in advance at prices that did not factor in higher fuel expenses.
As a result, carriers may have to absorb the increase in the near term, pressuring margins until fares adjust to reflect the higher fuel environment.
A $1 change in the price of a barrel of aircraft fuel would alter United's 2026 projected fuel expense by about $116 million, according to an SEC filing from the airline.
United's first-quarter adjusted profit per share could come in at 5 cents to 22 cents, according to TD Cowen estimates that factor in current jet fuel prices. The estimate is far short of the airline's January forecast of $1 to $1.50 per share.
Reporting by Apratim Sarkar and Aishwarya Jain in Bengaluru; Editing by Sriraj Kalluvila and Maju Samuel
Source: Reuters