United Airlines is having its “Concorde” moment, speculating that even if fuel prices retreat, it can raise fares and keep them higher.
United Thinks Higher Airfares May Be Here To Stay, Even If Fuel Prices Retreat
United CEO Scott Kirby is making two arguments that deserve to be considered together, though I want to focus on one in particular.
United just reported strong premium and international demand even as it lowered its full-year outlook because of fuel, but believes that the fuel shock may be a blessing disguise and will allow it to permanently raise fares, even if oil retreats.
- Late in the first quarter, United pushed through five separate fare increases and raised baggage fees, and it’s already seeing traction. Yields were up 4% year-over-year in January and February, jumped to 12% in the first half of March, and then climbed to 18% in the second half of the month.
- United thinks it can claw back 40–50% of higher fuel costs in the second quarter through pricing alone, rising to 70–80% in the third quarter and potentially as much as 85–100% by the fourth quarter. That’s a very explicit bet that the market will absorb higher fares and not immediately push back.
Yesterday during United’s Q1 2026 earnings call Kirby explained:
“Certainly, the longer this lasts, the higher the probability goes that the pricing increases hold. And we probably won’t hold 100% if we normalize as I told the team earlier today, and it’s just my guess that if things went back to mid-February normal, I think we get to keep 20% of the price increase next year. I think that’s going to move towards 80%. And every day, it’s ticking up longer as this goes on.”
Kirby thinks United won’t have to lower fares even if fuel prices, which have doubled this year, retreat.
Second, Kirby is again framing the U.S. airline industry as structurally disadvantaged versus foreign competitors, arguing that carriers in the Middle East and Asia benefit from conditions U.S. airlines do not enjoy. He used that broader point while downplaying merger talk and defending United’s long-term strategy.
We’ll delve into that contention in a separate post, but I wanted to mention it here because those two arguments are connected.
If United can persuade investors and regulators that margins should be structurally higher because the industry is more “rational” and under pressure from “unfair” foreign competition, then a temporary fuel spike becomes a useful test of how much pricing power the market will tolerate. Kirby is suggesting (“we have a big trade deficit with international carriers”) that further restrictions on foreign carriers may also increase margins for United.
This Is Not Quite Concorde, But The Logic Is Similar
I sense Concorde-like logic here.
British Airways and Air France eventually discovered that Concorde had been underpriced. They raised fares, demand held, and the market effectively validated a new, much higher price for a product with a very specific customer base.
The analogy only partially applies. Concorde was a genuinely unique product with almost no substitute. A transatlantic economy or domestic first class seat on United is not. Even a Polaris seat is not. There are substitutes everywhere: Delta, American, Alaska, Southwest, JetBlue, foreign carriers, and in many cases simply not traveling at all.
So could airlines pull off a permanent ratchet higher in fares? In theory, yes, but only in certain parts of the market.
United probably can hold onto higher fares in markets where competition is weaker than people assume, including:
- Fortress hubs like Newark, Denver, Houston, and to some extent San Francisco
- Corporate-heavy routes where schedule and loyalty matter more than price
- Premium cabins, where customers are already showing a willingness to keep paying up
- Longhaul international markets where capacity is limited and aircraft are constrained
If customers keep buying through a 15% or 20% fare hike, the lesson management will take is not that fuel is painful, but that they were pricing their product too low. And I think United is somewhat genuinely surprised, with United’s EVP and COO Andrew Nocella telling investors on the same call:
“Demand is hanging in there. We’ve made the appropriate capacity adjustments for United to make sure that we can get to full recovery by the end of the year, and we’re well on our way already between 40% and 50%. And — but the most optimistic thing is the fact that within a matter of seven or eight weeks, we went from yields being up 2% to 3% to yields being up 18% to 20%. It’s pretty darn remarkable.”
“Pretty darn remarkable” sounds about right….it’s what the Concorde folks said too when they raised prices.
If Spirit goes under, that will certainly help. Southwest is also already retreating from United’s hubs in Chicago, Houston, and Washington, DC.
Why This Is Harder Than Kirby Wants It To Sound
Still, there is a big difference between recovering a cost spike and tripling margins.
Airlines are capital-intensive, cyclical businesses that are usually one oil shock, recession, labor dispute, or ATC meltdown away from flipping from black to red. Margins have always been thin and I cannot imagine that changing in 2026.
If United really believes it can sustainably earn much higher margins, that strongly invites competition.
I’m even willing to stipulate that the barriers to competition are higher than they used to be:
- Aircraft delivery delays are limiting growth
- Pilot and labor costs remain elevated
- Gate and slot constraints protect incumbents at key airports
- Loyalty programs make customers stickier than they were 20 years ago
That may give United an advantage for awhile, but it will help American Airlines catch-up faster if it offers cheaper flights as it invests in its route map, fleet, and onboard product. It will also invite new entrants to the market or more innovation, like Southwest Airlines introducing widebody airplanes and intercontinental service if the margins hold.
CONCLUSION
Could United and the rest of the industry pull off sustained higher fares even if fuel retreats? To a point, yes.
In premium cabins, fortress hubs, and constrained longhaul markets, probably more than we’d like.
But this is not Concorde. United does not have a universally unique product, and there are limits to how much pain travelers will absorb before demand softens or competitors find an opening. United will also not be able to keep out foreign competition, especially with joint venture agreements that encourage foreign carriers to fly to the USA.
So I would not wholly dismiss Kirby’s thesis, but I’m also not buying it. What United is really testing right now is whether a temporary fuel shock can be turned into a permanent fare reset. If it can, then I think we have proof positive that airline consolidation has hurt consumers…but I don’t think it can.
This is 2nd semester MBA stuff and not complicated. They are correct based on all historical data and metrics. Flying is not a right it is a privilege and one people and businesses are willing to pay for.
Making a pizza so cheap now one will it has been tried in the air biz. How is that working for NK?
This is not shocking, clikcbait notwithstanding.
“He’s in shock, get him out of here…” — Also, Dyatlov in HBO’s Chernobyl
Meanwhile…
“ American Airlines says soaring price of jet fuel will cost it $4bn this year”
https://www.theguardian.com/business/2026/apr/23/american-airlines–jet-fuel-cost-4bn-this-year
Kirby has always been a soulless bean counter. He’s clearly shown himself to be completely untrustworthy so this shouldn’t be a big surprise to anyone. I don’t begrudge United a profit by any means but being willing to do pretty much anything to achieve that profit is just wrong. What an oaf.
This situation (fuel costs rising abruptly) has happened before. At least once in a decade something occurs that raise fuel prices tremendously. Covid, 911, gulf war etc. Prices eventually drop a good deal.
In a K shaped economy the money is now and will increasingly be in the FRONT of the plane.
In a K shaped economy, the money is and will continue to be in the front of the plane. The economy section will continue to shrink as the lower half of the K has less discretionary income.
The ME3 Emirates, Qatar, Etihad are effectively out of the competitive market – that contributes to the acceleration in yield that ‘surprised’ them. Remember how much DL/UA/AA grouse about how advantaged the ME3 are. Well, for now, they got their wish on the competitiveness front.
“Take him to the infirmary… He’s delusional.” — Dyatlov in HBO’s Chernobyl
Kirby believes that his customers are sticky, but there’s a world of difference between being sticky and getting stuck. A man of confidence he is indeed
I don’t get why he has an incentive to say this, even if he believes it. The airline industry can’t avoid normal economic pressures. However, since it operates within an oligopoly of sorts, there are some interesting pricing pressures. Prices can be sticky, in that, it is difficult to increase them. Airfares lagged inflation this century. Firms wanted to increase them, but competition prevented this. Once you can get past the sticking point, there is zero reason competitively to reduce prices even with lower oil costs.
In the commercial aviation industry, one should never take anything for granted!