United Airlines (NASDAQ:UAL) executives told investors they see a strong revenue environment in early 2025 and believe the carrier can potentially offset a major fuel price increase through higher unit revenues and proactive capacity actions, while continuing a multi-year push toward higher margins and an investment-grade credit rating.
Fuel shock response and revenue backdrop
CEO Scott Kirby said United’s stated goal for the year is to “fully offset” higher fuel prices, which he framed as roughly $4.6 billion of revenue needed at current fuel levels. He said that would require RASM (revenue per available seat mile) to rise another 8.5 points and described current demand and pricing trends as supportive.
Kirby said March RASM, which was up about 8% as of late February, was tracking to finish around +14%, and he indicated expectations for double-digit RASM in the second quarter. He said the company believes a credible case can be made that United could recover 100% of the fuel increase “as the environment sits today,” while cautioning the outcome will depend on how conditions evolve.
Capacity reductions and a “proactive” stance
Kirby said United is making adjustments in response to fuel prices even while demand is strong, describing a preference for proactive capacity management rather than risking cash-losing flying if fuel remains elevated. He said United loaded roughly one point of capacity reductions for May and June and is working on additional reductions further out.
He characterized the planned cuts as largely “utilization flying” such as:
- Tuesday/Wednesday/Saturday flying
- Red-eye flights
- Other marginal utilization segments
Kirby also suggested that if fuel prices stay higher for longer, it could accelerate industry restructuring and widen performance gaps, especially benefiting “brand loyal” carriers. He said United remains on its stated path of adding about one point of margin per year toward low double-digit margins, with the possibility—though not a certainty—that a prolonged fuel shock could push industry outcomes toward “mid-double digit” margins over time.
Industry pricing dynamics and gauge strategy
In Q&A, Kirby discussed the speed at which airlines are raising prices and said that in his view the industry is more focused on profitability than market share. He also argued that the ultra-low-cost model has been pressured because it no longer reliably offers a price advantage in key markets, citing United’s ability to be price competitive through Basic Economy and larger-gauge aircraft.
Kirby said overall airline demand is inelastic, estimating price elasticity at roughly -0.5, while acknowledging that higher fares can reduce volume. He said any volume loss would likely come primarily from the “commoditized” portion of the industry, with capacity reductions adjusting to match demand.
On fleet “gauge,” Kirby said United remains undersized in its hubs and believes they can support 170 to 180 seats per departure, versus an average of about 132 in North America currently. He described a multi-year opportunity, saying United has a “unique gauge tailwind” for another five to six years driven by its order book and hub structure, while stressing that gauge works best with connectivity and multiple product choices.
Fuel sourcing and balance sheet priorities
Chief Financial Officer Mike Leskinen said United has about a $400 million headwind in the quarter from higher fuel prices and said the airline has had success passing pricing through to customers. He said United has spent three years improving fuel accounting systems to better understand location-by-location fuel costs and can optimize “around the edges” through limited tankering and sourcing decisions, though he noted the magnitude of fuel price moves can overwhelm small optimization gains.
Leskinen also said no major U.S. carrier currently has fuel hedges, describing the “natural hedge” as the industry’s ability to pass fuel costs through via pricing.
Geopolitical disruptions, credit rating goals, and loyalty changes
Chief Commercial Officer Andrew Nocella said United is managing volatility by reallocating aircraft. He said roughly 2% of capacity had been tied to Tel Aviv and Dubai flying, and United canceled both and redeployed widebodies into the domestic system, including transcontinental missions where demand is strong (such as New York–San Francisco and New York–Los Angeles). Nocella said United does not expect to return to Dubai until later in the fall and hopes to resume Tel Aviv service this summer. He estimated the changes freed up about seven widebodies.
On credit ratings, Leskinen reiterated United’s goal to reach investment grade. He said leverage and margin trends are supportive, but the main constraint is the industry’s rating profile. He added that United recently issued $2 billion of unsecured debt “right on top of where investment grade paper is trading,” and said he hopes the airline can reach investment-grade metrics toward the end of this year, and “no later than next year.”
Kirby also addressed regulatory topics, praising current U.S. transportation leadership and saying air traffic control issues account for the majority of delays and cancellations. On proposed interchange fee legislation, he argued rewards cards are broadly popular, saying 86% of people have rewards cards and that lawmakers are generally reluctant to act against that level of consumer adoption.
Regarding MileagePlus program updates, Nocella said United researched changes for 18 months with focus groups and aimed to create a value proposition where customers can “earn more” and “redeem for less.” He said credit card acquisitions are running well above last year’s pace, and that United is confident the changes will work.
About United Airlines (NASDAQ:UAL)
United Airlines Holdings, Inc operates United Airlines, a major U.S. full-service passenger carrier providing scheduled air transportation for passengers and cargo. The company offers a comprehensive route network that covers domestic markets across the United States as well as extensive international service to Europe, Asia, Latin America, and the Pacific. United operates a mixed fleet of narrow- and wide-body aircraft on point-to-point and hub-and-spoke routes, and supports corporate and leisure travel through offerings such as premium cabins, basic economy, and ancillary services including baggage, seat selection and in-flight amenities.
In addition to passenger operations, United provides cargo services through United Cargo, handling freight, mail and specialized shipments.
