Key insights
- United Airlines CEO expresses optimism about the current economy based on strong booking data. However, the airline lowered its profit outlook due to rising fuel costs and anticipates a potential demand decrease in the latter half of the year if airfares increase by 15-20%. This suggests a possible slowdown in consumer discretionary spending, but current booking strength provides a positive signal.
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The economy is flying high, according to the head of the one of the world's largest airlines.
"I personally think we're a really good real-time indicator of the economy. The economy remains much stronger than I think a lot of people think that I read in some of the financial press," United Airlines (UAL) CEO Scott Kirby said Wednesday in an interview on CNBC. "The economy is good and we see it in bookings every day."
Kirby's comments came a day after United reported first-quarter results that topped Wall Street expectations but lowered its profit outlook for the year as fuel costs have soared since the start of the Iran war in late February. The company now forecasts earnings per share of between $7 and $11 in 2026, down from guidance of $12-$14 issued in January.
The strong booking numbers for airlines underscore the resilience of the American consumer. Higher airfares are likely to hit demand eventually, which would weigh on the financial performance of airlines.
United needs to raise airfares about 15% to 20% to pass through the fuel costs, Kirby said, adding that "this is probably the new normal for airfares." (Cost-conscious travelers need to watch rising bag fees as well as airfares, Investopedia recently noted.) With the higher fares, United expects that demand to fly will decline in the back half of the year, and that as a result the airline will have to reduce capacity.
"If there's a 15% to 20% increase in fares, that is going to at some point drive less demand," Kirby said. "We frankly haven't seen it in our bookings yet. Bookings are really strong. People are flying around the country and around the globe—international is actually stronger than domestic."
United has already adjusted its schedules for the remainder of the year to deal with the fuel price shock. The company said in its earnings release Tuesday that it expects a "5-point capacity reduction versus its original plan," putting capacity in the third and fourth quarters at flat to up 2% from the year-earlier periods.
United shares closed 5.6% lower on Wednesday as investors digested the weak guidance that accompanied the strong first-quarter results. Still, the stock has gained 37% over the past year.
UPDATE: This article has been updated with recent stock price information.
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