United Airlines CEO Scott Kirby has called the war in Ukraine a “human tragedy” and explained how it is impacting his airline.
CEO Kirby Discusses War In Ukraine And Its Impact On United Airlines
In a video message to employees viewed by Live and Let’s Fly, Kirby lamented the tragedy unfolding in Ukraine, sending “our heartfelt sympathies and support to the people of Ukraine and for what is happening in that part of the world right now.” Later in his message, he pivoted back to Ukraine and its impact on United:
“Now, Ukraine is first and foremost a human tragedy what’s happening there, but that’s also affecting United Airlines on a financial basis. Easy to see the impact of our flights over Russia, and it’s had a pretty big impact on our ability to serve markets like India. And we’re going to wind up being smaller in places like that.
“I’m also worried that it might have a longer term knock on effects of the economy, whether it’s inflation or something escalating in Ukraine.
“But by far, the biggest known impact from the Ukrainian situation for us on our financial position is the impact of fuel prices. But we’ve been through much worse challenges than this in the past, and we’ve overcome them. COVID was a much bigger impact, and we’re going to overcome this one.”
Key takeaways:
- Kirby implies that service to India will be reduced on a long-term basis. Could this spell doom for the new San Francisco – Bangalore service set to begin later in 2022?
- Fuel prices and inflation are a central concern.
- Even so, the war in Ukraine, higher fuel prices, and inflation have not kept people from booking airfare.
Because of rising oil prices, United expects to breakeven in the second quarter rather than report profit:
“I said we would have been solid profitable in the second quarter. Now it could change based on oil prices going up or going down more, or perhaps there will be a revenue impact with people afraid to travel, although we haven’t seen that yet. So there’s more volatility and uncertainty than normal. But we expect to be essentially breakeven.”
Kirby believes the U.S. and world are moving from pandemic to endemic stage and that COVID-19 will no longer be a travel concern that keeps people from traveling. While rising fuel prices and the escalation of war could dampen demand, even those concerns have had no impact in recent weeks on future bookings.
CONCLUSION
It’s hardly a surprise that the war in Ukraine and rising oil prices have pinched margins. Even so, United sees healthy demand and blue skies ahead, with optimism that the pandemic is receding for the final time. However, with continued uncertainty over Russian airspace, it does appear United’s service to India will be scaled back indefinitely.
Airline stocks bouncing back the past 2 days based off dropping fuel prices but still oversold IMO. That said, the hits keep coming and I’d be shocked if people are still booking at the rates they were. Recent surveys show 61% of Americans are cutting back on spending due to higher fuel and food costs. What they are cutting remains to be seen but air travel has to be at least part of it.
I can only comment for my business, but we’ve seen a tremendous surge in premium bookings. I’m talking about people dropping tens of thousands of dollars on premium cabin seats because there is not adequate award space right now. Europe quickly filling up this summer.
Thank you for sharing this, Matthew. Great to see great leadership at United.
United’s nonstop LAX-LHR services resumes Saturday April 16th.
Now if only they had “great” meals!!
Russia is going to want that overflight revenue stream back ASAP and the airlines will be quick to oblige.
Status update (if anyone is reading this 3 day old article.
My Ukrainian relatives are fine for now and in communication.
Regarding this topic on the economic costs to Russia for the war:
“Interview with Mikhail Podolyak – adviser to the head of Zelensky’s office – on whether there is a shift in negotiations with Russia”
“Putin’s press secretary Dmitry Peskov said that the topic of sanctions appears at the talks. The head of the Russian delegation, Medinsky, also said that this is one of the key negotiating topics at every meeting. Moscow asks Kyiv for help with the lifting of Western sanctions?
“Moscow’s requesting position is obvious. Undoubtedly, the packages of sanctions imposed by European countries, the United States and the acceding states are extremely painful for Russia. I think that the sanctions policy works brilliantly and really makes you think.”
So the sanctions are being brought up at the bargaining table and will probably be addressed quickly after a resolution is found, we all pray, soon.
As glorious as it would be, for Poles and Ukrainians alike, to see Russia pounded back to the border like something out of Rocky IV, the loss of life to innocent people and conscripts on both sides would be too high a cost.