United CEO says travel demand is strong despite Iran war

Travel demand is as strong as ever, even as violence engulfs the Middle East and the price of oil surges, United Airlines CEO Scott Kirby said on Thursday.

“Demand has not taken even a tiny step back,” Kirby said. “It’s really strong; better than we thought it was going to be.”

“Booked revenue since Saturday is up over 20%,” he added.

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Kirby’s remarks came during a small group interview with several reporters following an appearance at the Harvard School of Engineering and Applied Sciences in Boston. In the interview, Kirby discussed topics ranging from opportunities for AI use at airlines to career advice for students.

Internationally, Europe has led bookings since the conflict began, with business and leisure travel demand continuing uninterrupted and slightly boosted by reroutings amid the war in the Gulf.

The strong bookings underlie a resilience in travel demand that Kirby said he expects to see continue even if the war drags on and leads to a sustained increase in oil prices. The price of oil was up more than 30% from a week earlier, sitting at nearly $88 per barrel Friday morning.

Each day, more than 14 million barrels of oil are typically shipped through the Strait of Hormuz, which has been essentially closed since the war began. The cost of processed jet fuel, meanwhile, was up 58% as of Thursday night to $3.95 per gallon, according to the Argus U.S. Jet Fuel Index.

While the increase in fuel prices will have a “meaningful” impact on airlines’ financial results, airlines will offset some of that impact by passing the cost onto consumers — a move that will “probably start quickly,” Kirby said.

“This is a big increase. This is the biggest price increase in the cost of jet fuel that I can remember,” he said.

Kirby noted while the operational impact to the airline has not been significant given that the carrier only operates a few routes to the Middle East. However, the airline is in discussions with the U.S. State Department to use its available aircraft to help repatriate Americans stranded in the Gulf region. He stressed that “nothing’s happening yet,” though.

Even as United’s normal demand remains strong, Kirby noted that one unexpected pocket has grown substantially: people traveling from Australia to Europe.

While those travelers typically fly through one of the Persian Gulf hubs, the current airspace closures have led them to seek alternative routes — even those that may be longer and less efficient. More than 25,000 flights have been cancelled since the conflict began.

“We, each day this week, have booked over 1,000 people from Australia and New Zealand to Europe.” Kirby said. “Last year, we booked less than one a day.”

One big question is what a prolonged surge in fuel prices will mean for summer travel. Kirby noted that while summer bookings are shaping up to be on par with expectations, he is more focused on bookings for travel within the coming 60 days; this tends to offer more useful insight into current trends. While he declined to speculate on how much of a price increase customers would be willing to absorb before pulling back, Kirby noted that he believes “the overall economy is just in better shape than most people think.”

Kirby’s comments came two weeks before the annual JP Morgan Industrials conference, during which airlines are broadly expected to provide more details about the expected impact of the war on their financials and operations.

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