United Airlines CEO voices concern over jet fuel costs

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The International Air Transport Association holds its Annual General Meeting in Boston

– United Airlines Holdings Inc Chief Executive Officer Scott Kirby on Wednesday warned about jet fuel costs in the short term, as surging oil prices threaten the pace of recovery for the airline industry.

“Ultimately higher jet fuel prices lead to higher ticket prices,” Kirby told CNBC.

Despite robust travel demand, a recent surge in fuel prices has proved painful for the aviation industry with Delta Air Lines Inc warning of a fourth quarter pre-tax loss and suggesting it might have to pass on higher costs to consumers.

Higher fuel costs leads to less flown capacity and higher fares. JP Morgan analyst Jamie Baker views higher fuel costs as a short-term negative, but a positive in the medium- to long-term.

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A global energy crunch is expected to boost oil demand and could stoke inflation and slow the world’s recovery from the pandemic, according to the International Energy Agency.

The brent crude benchmark has risen 62.7% so far this year.

Kirby’s comments come a day after United Airlines reported a smaller third-quarter loss, but was hurt by a resurgence in coronavirus cases, which slowed bookings and drove up cancellations.

United Airlines expects to spend about $2.39 per gallon in the fourth quarter on jet fuel. The carrier spent on average $2.14 per gallon in the third quarter, about 6% higher than in the same period in 2019.

(Reporting by Sanjana Shivdas in Bengaluru)