Travel demand is stronger than ever, even as violence engulfs the Middle East and oil prices rise, United Airlines CEO Scott Kirby said Thursday.
“Demand hasn’t gone back one small step,” Kirby said. “It’s really strong; better than we thought it was going to be.”
“Revenues recorded since Saturday have increased more than 20%,” he added.
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Kirby’s comments came during a small group interview with several journalists following an appearance at the Harvard School of Engineering and Applied Sciences in Boston. In the interview, Kirby discussed topics ranging from opportunities for the use of AI in airlines to career advice for students.
Internationally, Europe has led bookings since the conflict began, and demand for business and leisure travel remains uninterrupted and slightly boosted by diversions amid the Gulf war.
The strong reserves are the foundation of a resilience in travel demand that Kirby said he expects to continue even if the war drags on and leads to a sustained rise in oil prices. The price of oil rose more than 30% from the previous week, standing at almost $88 per barrel on Friday morning.
Each day, more than 14 million barrels of oil are typically shipped through the Strait of Hormuz, which has been virtually closed since the war began. Meanwhile, the cost of processed jet fuel rose 58% Thursday evening to $3.95 per gallon, according to the Argus US Jet Fuel Index.
While rising fuel prices will have a “significant” impact on airlines’ financial results, they will offset some of that impact pass the cost on to consumers – a move that “will likely begin quickly,” Kirby said.
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“This is a huge increase. This is the biggest price increase in the cost of jet fuel that I can remember,” he said.
Kirby noted that the operational impact for the airline has not been significant given that the airline only operates a few routes to the Middle East. However, the airline is in talks with the US State Department to use its available aircraft to help repatriate Americans stranded in the Gulf region. However, he stressed that “nothing is happening yet.”
While regular demand for United remains strong, Kirby noted that an unexpected sector has grown substantially: people traveling from Australia to Europe.
While those travelers typically fly through one of the Persian Gulf hubs, current airspace closures have led them to seek alternative routes, including those that may be longer and less efficient. More than 25,000 flights have been canceled since the conflict began.
“Each day this week, we have booked more than 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 increase in fuel prices will mean for summer travel. Kirby noted that while summer bookings appear to be living up to expectations, he is more focused on travel bookings within the next 60 days; This tends to offer a more useful view of current trends. While he declined to speculate on how much price increase customers would be willing to absorb before backing down, Kirby said he believes “the overall economy is in better shape than most people think.”
Kirby’s comments came two weeks before JP Morgan Industrials’ annual conference, during which airlines are expected to provide more details about the expected impact of the war on their finances and operations.
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