The head of United Airlines is warning travelers that jet fuel prices are set to skyrocket ahead of the holiday season to pre-pandemic levels, costs that will be passed on to customers via higher ticket prices.
Already, jet fuel has soared more than 100 percent compared to a year ago, according to CNBC, with the price hovering around $2.33 on Tuesday.
United CEO Scott Kirby warned that prices are very likely to increase even further, suggesting an average of about $239 per gallon in the fourth quarter of this year as the airline anticipates rising bookings for holiday season flights.
“You know I think in the longer term, it’s always been the case at an airline that jet fuel prices go up, usually because demand is strong – and that’s going to be true again,” he said during an interview with CNBC’s Squawk on the Street hosts Wednesday.
“‘Higher jet fuel prices lead to higher ticket prices. Ultimately, we’ll pass that through,” he added.
Meanwhile, competitor Delta Air Lines officials warned last week that higher fuel costs would negatively impact the company’s bottom line by year’s end, the Daily Mail reported.
Kirby also noted in his interview that President Joe Biden’s vaccine mandate for federal employees and federal contractors, which includes airlines, could also force some air carriers to cancel flights over worker and pilot shortages.
Two carriers — American Airlines, the country’s largest, and Jet Blue — have established Nov. 24 deadlines for their workers to be fully vaccinated or risk being fired, which is Thanksgiving Eve. Those hard dates are causing concerns that should a large number of workers refuse the vaccine, perhaps thousands of flights would need to be canceled over the holiday travel season.
More than 96 percent of United’s staff has been vaccinated already, Kirby said, after the company imposed a vaccine deadline in August set for this month. Employees were threatened with loss of employment if they failed to comply.
In his September executive order, Biden mandated that federal workers and contractors be vaccinated by Dec. 8.
“Customers can book with confidence on United,” Kirby told CNBC. “But if you’re booking on an airline that doesn’t have a vaccine requirement, they’ve got government rules they have to follow.”
Earlier this week both American Airlines and Southwest Airlines announced they would not place workers on paid leave if they had not gotten the vaccine and had applied for a medical or religious exemption to the mandate.
United, however, said its staffers who applied for or received exemptions would nevertheless be put on unpaid leave, though at present, the carrier cannot enforce the rule due to a lawsuit filed by some of the company’s employees.
Jet fuel prices have continued to rise as has the cost of other fuels, which is now the primary driver of inflation, according to some experts.
“Rising oil prices have been one of the biggest drivers of inflation,” PVM Oil Associates senior analyst Stephen Brennock told CNBC in September. “And a worsening inflationary situation will act as a drag on the fragile economic recovery and oil consumption. This brings us neatly onto the issue of demand destruction.”
Oil prices are continuing to rise amid rising global demand, with Brent crude hitting $86 a barrel on Thursday, according to OilPrice.com, adding: “The U.S. benchmark, WTI Crude, settled at a fresh seven-year high on Wednesday and was up early on Thursday before pulling back later in the morning.”
According to Gas Buddy, which tracks gasoline prices, per-gallon costs averages about $1.47 in April 2020 but have risen to around $3.37 a gallon this week.
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