United Airlines is maintaining its financial targets through 2020, despite a run up in the price of fuel since the beginning of the year.
Scott Kirby, president of the Chicago-based carrier, says United is "confident" that it can pass on the increase in fuel prices to consumers without negatively impacting demand, speaking at the Bernstein Strategic Decisions conference today.
United maintains its financial targets, including earnings per share of $7-$8.50 this year and $11-$13 annually by 2020, he adds.
The price of Brent crude stood at $77.48 per barrel late on 30 May, Bloomberg data shows. This is up more than 16% since the beginning of the year, and up nearly 53% since 30 May 2017, US Energy Information Administration data shows.
United forecasts a roughly 25% increase in average fuel prices to $2.18-2.23 per gallon in the second quarter.
Kirby told Wolfe Research analysts last week that the airline is able to pass on roughly 75% of the rise in fuel prices to passengers due to a strong demand environment.
"We feel like the demand environment is quite good, and quite strong right now," he says today.
Analysts and investors continue to question the strength of United's forecasts in a high fuel price environment. However, Kirby argues that the carrier's revenue initiatives, which include a new revenue management system, more connecting traffic across its network and increased segmentation, will outweigh the higher fuel expenses in 2018.
Delta Air Lines chief executive Ed Bastian, also speaking at the Bernstein conference, agrees that the demand environment is robust, adding that it is "as strong as we've seen in five years or more".
He adds that the Atlanta-based carrier has seen a "pretty significant uptick in ticket prices" related to demand, but adds that it can take six to nine months to price for the higher oil prices.
Bastian, too, is confident that Delta will meet its financial targets in 2018, though he warns that some capacity growth may come out in the fourth quarter.
Source: Cirium Dashboard