Exactly one year ago, Scott Kirby struck an upbeat tone in the face of economic headwinds, insisting United would not shrink or retreat. He is singing from the same hymnal again, but this time the stakes are much higher.
Scott Kirby Boldly Doubles Down As Oil Spikes: Reckless Move Or Brilliant One For United?
In a message to employees on Friday, United Airlines CEO Scott Kirby acknowledged the obvious: war in Iran, surging fuel prices, and tremendous uncertainty are suddenly testing every airline. But instead of announcing a defensive crouch, Kirby is once again choosing offense.
Kirby told employees that United is prepared for this moment because it has spent years building up cash, margins, and its balance sheet. He noted that United now has about three times as much cash as it did going into COVID, ended 2025 with its highest credit rating in more than 30 years, and together with Delta represented roughly 100% of total U.S. airline profitability last year.
That is quite a flex. It is also a wager.
Kirby says United is planning for oil to rise to $175 per barrel and not fall back to $100 until the end of 2027. He says demand, at least for now, remains extraordinarily strong, with the 10 biggest booked revenue weeks in United’s history occurring over the last 10 weeks.
If that demand holds, this could be the moment Kirby has been preparing for.
United is not talking about furloughs, deferred aircraft orders, or broad cost-cutting. Kirby explicitly says the airline will continue “full speed ahead,” taking delivery of about 120 new aircraft this year, including 20 Boeing 787s, and another 130 aircraft by April 2028. He also says United will invest more in technology, airport clubs, hub infrastructure, and expansion at Newark, where he specifically referenced getting to 100 widebody departures per day.
Bold indeed…
The more prudent piece is that United is also trimming flying that cannot absorb these fuel costs right now. Kirby says the airline is canceling about three points of off-peak flying in the second and third quarters, cutting another point of capacity at Chicago O’Hare once the FAA process concludes, and pulling Tel Aviv and Dubai service, for a total of about five points of planned capacity in the short term. He says the current plan is to restore the full schedule this fall.
That is precisely what Kirby was telegraphing a year ago when he told employees United would not revert to its old playbook of shrinking, furloughing, and cutting investment when demand weakened. He argued then that a tough environment early in the “DOGE” era could actually widen United’s lead. He is making the same argument now, only with much more dramatic geopolitical circumstances and much higher fuel prices.
> Read More: United Airlines CEO Says Short-Term Pain Won’t Hinder Long-Term Gain, Hints At Major Announcement
The gamble is obvious.
If oil stays elevated for a prolonged period and demand softens, Kirby could look reckless. It is one thing to keep investing when your competitors are wounded. It is another thing to keep spending aggressively if your own revenue base starts to wobble and premium demand finally cracks.
But if fuel stabilizes and demand remains steady, Kirby could be setting United up for a major leap forward.
He all but says so in his note. Kirby told employees that if United is right and oil stays higher for longer, the airline will be first on decisions that others will be forced to follow, and that the industry stress could create opportunities “to buy assets, absorb network changes, etc.” (ahem, JetBlue) He also mocked peers whose strategy he summarized as some version of “hope is our strategy.”
“I listened to most of our competitors at the J.P. Morgan conference this week and many said some version of “hope is our strategy.” It’s possible they’re right and that the war ends quickly. But if it doesn’t, this will be our opportunity down the road to buy assets, absorb network changes, etc.”
That is classic Kirby: candid, combative, and very willing to frame a crisis as a competitive opportunity.
Let’s not forgot that a big part of why United has approached Delta in the first place is that the airline 1.) accurately predicted just how bad the pandemic would be and 2.) how to prepare for the recovery better than any other carrier.
Delta, of course, remains the benchmark. But if Kirby is right, if United can keep its nerve while rivals retreat, and if oil eventually cools without a broader demand collapse, this could be the sort of inflection point that helps United move past Delta in both perception and performance.
That is a big “if.”
CONCLUSION
One year ago, Kirby told employees that short-term pain would not derail United’s long-term plan. He is making the same case again, only now with a real war, a real fuel shock, and a much bigger test of his theory.
I think this is a bold move. It could backfire badly if oil remains high and demand finally weakens in a meaningful way. But if oil stabilizes and demand remains resilient, Kirby may look prescient again. And if that happens, United will not merely weather this period. It may use it to widen the gap over weaker competitors and perhaps even catapult past Delta.
That is clearly what Kirby is betting on…
image: United
Within 3-6 weeks the US (and then ultimately a multi-national force of interested parties) will control the Hormuz strait for the foreseeable future. That always was, and remains, the purpose of the war. Oil is not going to $175 for any meaningful duration. Doesn’t mean jetBlue won’t fail and get split among DL, UA, AA and AS in some fashion, though.
You might want to reference the aftermath of the Houthi’s attacks in the Red Sea and the Bab el-Mandeb Strait. 90% of the pre-conflict shipping traffic is still avoiding those shipping lanes and the Houthi’s haven’t taken any shots in six months.
You don’t seem to have taken into account the extensive damage Iran has done to the oil and gas infrastructure throughout the Gulf. That alone will take years to rebuild, if and when it can be.
This alone will keep the price of oil and gas throughout the world elevated for years. At what price? Nobody knows. But what we do know is that it will be much higher than it is now, and remain so.
This was a reasonable memo considering we are still less than a month into the war. While optimistic it acknowledges both oil prices and trimming flights. I don’t know about using this as a time for growth quite yet, and Kirby focuses on winning perhaps more than necessary. But if you’ve must choose a course, its again a reasonable take on a terribly uncertain future.
Kirby and his team, especially their CFO, are exceptionally adept in a crisis as demonstrated during Covid.
Thanks for flying the friendly skies… *knocks Dr. Dao the F out*
did you actually read the memo?
UA is the first of the big 4 to announce major capacity cuts while saying fuel costs will go up by $11 billion for the year.
Earlier this week, DL said the value of the refinery will be evident in the 2nd quarter and beyond. In 2022, the refinery saved DL $777 million in fuel costs – while UA pays the highest per gallon for jet fuel among the big 4.
Higher fuel costs cannot be recovered by higher revenue on a sustained basis; UA’s high growth strategy was always subject to the black swan event which you just said is lurking around the corner.
Capex far exceeds cash flow even at previous fuel cost levels; UA’s debt will soar.
Scott Kirby cannot admit that his strategies failed but that has happened in NYC and at ORD w/ capacity which the FAA had to slap down.
UA might do better than other airlines but certainly not against DL which doesn’t have to pull as much capacity and has the only fuel cost mitigation strategy among US airlines w/ its refinery.
Wow, this is United propaganda. United is the first to announce capacity and it is being spun as “moving forward”. Reason why United is first is cutting capacity, is they have done the most growth. Continuing to take new planes makes sense as they can early retire older ones if they need to.
Kirby is failing, United is doing well despite Kirby not because of him.
His latest failure in ord is a perfect example of this.
Delta still owns Monroe Energy which is an oil refinery that has helped the airline since it purchase save over a billion dollars in fuel cost.
Delta isn’t just sitting on the sidelines they still have over 65 A220s, over 80 A321NEOs, 20 A350-1000s and 100 737 MAX10s. Most of those Airbuses mentioned are slated for delivery between now and the end of 2028. The 737s are contingent on the aircraft being certified, if that should happen by the end of this year Delta should have 40-50 MAX10s in their fleet by 2028. Delta like United has a lot of aircraft coming in between now and the end of 2028. New aircraft isn’t going to push United past Delta when Delta still owns their own refinery which most likely is going to once again be the difference maker should oil prices continue to rise.
You might want to reference the aftermath of the Houthi’s attacks in the Red Sea and the Bab el-Mandeb Strait. 90% of the pre-conflict shipping traffic is still avoiding those shipping lanes and the Houthi’s haven’t taken any shots in six months.
Prosch
DL’s capex is less than half of UA’s for 2026. DL will have a fuel cost and cash flow premium to UA. The refinery contributed $777 million in fuel cost savings to DL in 2022, adding on to the $2 billion plus the refinery has saved DL over the past 15 years.
and rebel, the Strait is far more important strategically to E. Asia than the Red Sea is. And it also is highly important to the entire fortunes of the Middle East countries esp. the ones that border the Gulf. UA is far larger in E. Asia than any US airline which could see severe economic impacts that will not be fixed overnight even if the Strait opens tomorrow which it will not.
Air France/KLM’s CEO says they are on the verge of having to consider cancelling flights to/from E. Asia not because of high fuel prices but because jet fuel is just not available. Hawaiian has gotten fuel for Hawaii from SIN, one of the hardest hit areas for jet fuel availability. The jet fuel crack spread in E. Asia and on the west coast of the US is far higher than on the east coast.
This is the perfect storm of things that could wrong for UA esp. in its strongest regions.
All the hopium and happy talk in the world can’t undo the reality which is about ready to hit UA like a Mack truck.
“Let’s not forgot that a big part of why United has approached Delta in the first place is that the airline 1.) accurately predicted just how bad the pandemic would be and 2.) how to prepare for the recovery better than any other carrier.”
God… I’m going to sound like Tim Dunn but he is right about this: the biggest reason United has approached Delta in margins is not paying their employees what AA and DL pay their employees. United would be pretty much smack dab in the middle between 2025 AA and DL profitability, closer to AA margins, if they were doing that.
I have nothing against what they are or are not doing with their unions — it’s part of the RLA game and AFA helped United enormously by a hugely dumb bet working with APFA to get a deal for AA flight attendants before their own members. Delta gets enormous cost advantage every year from being mostly non-union in terms of work rules and efficient staffing (that someone on here pretends isn’t a big part of Delta’s profitability for some reason) and United is playing the Railway Labor Act game just like unions do. So it’s real profitability but it’s because United is paying employees significantly less than peers.
Their current profitability has little to do with what they did or did not predict about the pandemic. To the extent UA is middle of the pack vs AA margins? That’s more to do with what United started in 2016-2017 by building their dismal domestic network into a very good network with DEN, in particular. But I think you’d be hard pressed to suggest current United margins have much to do with seeing china bookings drop two months before other carriers in 2020 or preparing for another pandemic — no CEO would create an airline designed to survive another global pandemic. That would be a waste of liquidity.
Just my two cents.
UA says it has factored anticipated labor costs into its profitability forecasts. Is it lying?
max has posted a number of very realistic comments of late.
I am impressed. This is one of them.
Providing guidance is not the same as current costs. UA’s costs have been depressed by up to a $1 billion/yr labor cost advantage compared to AA and DL which not only involves the AFA but also their mechanics which are perhaps even more vocal (see the billboards in downtown Chicago).
UA generated 2/3 of DL’s profits while flying 10% more ASMs than DL in 2025. They are inherently much less efficient in turning their higher capacity into profits and have a whole lot more “dead wood” in their network than DL and probably even AA and WN. UA has built its growth – which pushes down CASM – on much lower quality incremental revenue.
A cost crisis like we are in makes it impossible to continue to add capacity – which is why UA is the first of the big 4 to cut capacity as aggressively as they are doing.
Your optimism that UA will come out of this stronger is admirable if not at least a tad naive. This is the perfect black swan event you recently wrote about but just happens to hit UA harder than other airlines for multiple reasons.
“UA says it has factored anticipated labor costs into its profitability forecasts. Is it lying?”
No, and what some conveniently forget is the amount of debt UA has paid down to where its net debt is equal to DL and their superior cash flows and capex.
4Y: OCF/Capex/FCF
AAL: 13.1/11.6/1.5
DAL: 29.2/20.5/8.7
UAL: 30.9/23.4/7.5
Middle? Whatever you say.
Yes. Middle. You’re literally proving my point with your own data. The OCF and FCF would be significantly lower the last 4 years using your own numbers. By about $1B+ per year if United were paying their employees what AA and DL do. Because you’d have more salary expense (I forget which UA unions have the higher profit sharing already, but I’d imagine you’d also have the higher profit sharing formula to impact FCF too)
Calm down, Rebel. UA is a great company and I have nothing against them but 1. Margins are talking about Income Statements, not cash flow and 2. your own number reaffirm that UA would be middle of the pack with the added salary expense.
1. I was talking about 2025 results not future profitability
2. Until you have a Tentative Agreement with your union to know what they’re actually going to accept and when they’ll accept it and when you’ll get the deal, then yes. it’s pretty easy to “build labor deals into your forecast”, tell the street you do, and just have a low estimate or a delayed implementation “built into your forecast”.
With the current administration, United management would be very aware that no one is going to force United into a deal they don’t like with their unions so it would be easy for United to say “it’s built into our forecast” and having a cost number their unions won’t accept and UA will just wait until they do or the next administration.
If you consider United’ good margins the last ~2 years, if they’d been paying what AA and DL were paying employees then no. Their margins would have been better than AA but worse than Delta’s margins — again, probably middle of the pack but nothing anyone would be excited about.
To be clear, it would still be a great story for UA — they were the worst for quite a few years before Scott Kirby turned things around.
But again “Let’s not forgot that a big part of why United has approached Delta in the first place is that the airline 1.) accurately predicted just how bad the pandemic would be and 2.) how to prepare for the recovery better than any other carrier.”
This statement? Not, in my opinion, why United margins approached Delta last year.
But again. Just my two cents. Doesn’t make it gospel truth.
25 Rev/Net Income ($b)
AAL: 54.6/0.1
DAL: 63.4/5.0
UAL: 59.1/3.4
25 OCF/Capex/FCF ($b)
AAL: 3.1/3.8/-0.7
DAL: 8.3/3.7/4.6
UAL: 8.4/5.7/2.7
Not sure what you’re still trying to prove.
Again, your own numbers affirm my point: UA would be middle of the pack paying more salary and the incremental profit sharing in 2025
This is turning into your weird rant the other day suggesting only Scott Kirby knows AA hub profitability as opposed to the cfo of American — lol. A weird stance to take
No need to be a weird united fanboy
MaxPower, “Again, your own numbers affirm my point”
Quite the contrary.
MaxPower, “I’m going to sound like Tim Dunn ”
🙂
So, does he closely follow the stock market?
What if the price per barrel rises to $200?
It’s a fact that the future doesn’t look so rosy for ultra-low-cost carriers.
I’ve always wondered, how do these “internal employee memos” get in the hands of bloggers within minutes of release on internal channels? Do you work for United? How else is it possible?
it’s worth noting that UAL stock is down about 20% over the past month, only slightly better than what AAL and LUV are down.
ALK and JBLU are down in the 30% range.
DAL is down 9%.
Actual investors don’t see UAL as being significantly better positioned than most of the industry and nowhere near in as good of shape as DAL.
Facts are facts. Markets don’t pick sides.
General George S. Patton Jr. advocated for relentless, aggressive, and fast-paced warfare, famously stating, “There is only attack and attack and attack some more”. His philosophy focused on speed, initiative, and overwhelming the enemy, arguing that “in case of doubt, ATTACK!”. He despised, defensive foxholes.
Wikipedia
Key aspects of Patton’s views on attacking include:
Constant Offense: Patton believed that “nobody ever defended anything successfully” and that victory required constant aggression.
Speed and Initiative: He taught that speed was essential and that “a good plan violently executed now is better than a perfect plan next week”.
No Digging In: He famously argued that foxholes only slow down an offensive and told his troops to keep moving.
Prevent Enemy Recovery: He advised that when an opponent is on the ropes, one must “keep punching the hell out of him and not let them recover”.
Signal v. Noise
Kirby has been reading his Patton. The lessons may sloppily apply, but the pugnacious attitude perfectly applies
Ed,
Patton was a military leader and that breed in a democracy almost always can convince elected officials to hand over more money.
Scott Kirby runs a for-profit business that has to use the means it is given by its shareholders, the owners of the company.
For years, UA has been a much less efficient user of capital than other airlines and esp. DL. UA had already committeed to far more capex than DL while generating substantially less revenue with higher production.
The current crisis is one of costs where DL not only benefits from a stronger balance sheet – DL, like WN, has investment grade credit ratings, but also more conservative growth. DL simply has less fat that it needs to cut.
And when you factor in the refinery, DL is uniquely in a position in the US airline industry to offset some of the gain; WN became the last airline to hedge fuel and ended that last year.
UA is now faced with spending massively more than any other US airline on new airplanes while being unable to successfully deploy them to generate new revenue – which will drive up debt and shrink cash. The only airlines that could be in worse position is the Gulf carriers that are also taking delivery of large numbers of aircraft even as even more of their market is sidelined. UA has maintained such high cash reserves because of its huge capex. Airbus and Boeing aren’t allowing any airlines to defer aircraft that are due for delivery in the next year to 18 months. Those airplanes are in production.
Scott Kirby has led UA into a high risk growth strategy that was certain to unravel when the least thing went wrong and that is now happening on multiple levels.
and, further, Patton was competing w/ no other western power to win the war. UA is competing with other much better run companies that were far less committed to strategies that may not have worked out even in the best of conditions (such as thinking that you could push AA out of ORD).
there will be alot of people – perhaps even Matthew – that will have to concede that UA will be weaker coming out of this crisis than they expected and weaker than other carriers including DL.
I dearly wish it wasn’t true but Kirby is an inveterate weasel. When you shake his hand you check your wallet and count your fingers.
That said, The Kirby is a cunning weasel and while insane statements routinely come out of its’ mouth it’s not remotely stupid and is a miser of truly memorable proportions so if there actually IS an opportunity for United I expect that to be taken forthwith.
Kirby loves to prey on those that are weaker.
This crisis will not leave anybody unharmed.
Sure, there will be some carriers that will be harder hit than UA but to somehow think that UA will have the financial capability to trash competitors is beyond rational.
UA MIGHT benefit from the failure of some weaker carriers but so will other carriers and there just might be carriers that prey on UA, esp. DL and WN both of which have investment grade balance sheets and far less ambitious growth plans.
Let’s see where it all shakes out in a couple years – this isn’t a three or even six month event – but I strongly doubt that UA and Kirby will lose a lot of their bluster to reality in the next few years.
I’d say that Kirby taking any viable chance to enrich himself, hurt American, or help United (in that order but there can be obvious confluences) is absolutely rational. Just because the man is absolutely untrustworthy doesn’t mean he’s going to make counterproductive moves. He’s like Andrew Carnegie but even less honest and except without the philanthropic leanings.