On Friday, United Airlines (NASDAQ:UAL) said it will reduce scheduled capacity by about 5% in the second and third quarters.

Fuel Shock Forces Capacity Cuts

The Chicago-based carrier will be targeting weaker, off-peak routes such as midweek and overnight flights. The airline is also trimming flying at Chicago O'Hare and keeping service to Tel Aviv and Dubai suspended.

CEO Scott Kirby said in a staff memo, “Our plans assume oil goes to $175/barrel and doesn’t get back down to $100/barrel until the end of 2027.”

“Honestly, I think there’s a good chance it won’t be that bad, but as you’ll read below, there isn’t much downside for us to preparing for that outcome,” he continued.

At those levels, United Airlines could see its annual fuel expenses surge by roughly $11 billion—more than double the profit it generated in its best year, Kirby added.

Rising Fuel Costs Threaten Profitability

Jet fuel prices have nearly doubled since late February, creating what industry executives describe as a new phase of fuel shock.

Airlines are also facing operational challenges, including rerouted flights and restricted airspace tied to the conflict.

Meanwhile, the Donald Trump administration temporarily eased sanctions on Iranian oil stranded at sea on Friday as the ongoing conflict with Iran continued to drive up global energy prices.

At Friday's closing, WTI crude futures climbed 2.66% to $98.09 a barrel. RBOB gasoline futures jumped 5.82% to $3.3092 per gallon, while ULSD heating oil rose 7.59% to $4.6715 per gallon.

In contrast, natural gas futures declined 2.21% to $3.096 per MMBtu (million British thermal units).

Strong Demand Helps Offset Pressure

Despite higher costs, travel demand remains robust. United noted its 10 strongest weeks for booked revenue have all occurred recently, Reuters reported.

Rivals, including American Airlines Group Inc. (NASDAQ:AAL) and Delta Air Lines Inc. (NYSE:DAL), have also pointed to strong demand, which has allowed carriers to raise fares and partially offset rising fuel expenses.

Price Action: Shares of United Airlines Holdings Inc closed at $89.95, down 4.46% on Friday, and rose 1.49% to $91.29 in after-hours trading, according to Benzinga Pro.

According to Benzinga Edge Stock Rankings, UAL may face short to mid-term pressure but demonstrates strong long-term upside, supported by a Growth score in the 96th percentile.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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