Oscar Munoz, the former chairman and chief executive of United Airlines (NASDAQ:UAL | UAL Price Prediction), told CNBC that airlines have run out of internal solutions for the current fuel shock: “There is nothing anyone can do technologically or with any kind of process or efficiency that can offset those sorts of costs.”
Carriers compete constantly on cost per seat mile and spend heavily on fleet renewal for fuel-efficient jets. They adjust taxi procedures and flight planning to burn less fuel. Munoz is saying this toolkit falls short against a move of this size.
How Fast Fuel Moved, by the Numbers
In the CNBC interview, Munoz said fuel prices “have come up very quickly” and that carriers “will do everything they can.” Even so, Oscar Munoz said, “they’re forced to raise prices to just cover the basic economics.”
Jet fuel in the U.S. Gulf of Mexico region nearly doubled to $4.34 on Thursday from $2.19 a year earlier, driven by the start of the Iran war in February, according to CNBC.
Schedule Cuts Hit Smaller Markets First
Oscar Munoz pointed to a second option: “The airlines start cutting services to areas where the economics just don’t work. Where you have lesser performing routes, we take that aircraft and work it somewhere else.”, according to United Airlines
For travelers, that matters as much as fares do. Higher fares show up right away at checkout. Capacity cuts happen quietly, and they hit smaller markets hardest, where a route was barely profitable before fuel rose. For someone in a small city, the bigger problem may be that the flight has been removed from the schedule entirely. Munoz also said customers still want access, price and service, and their priorities have held steady even as the economics have shifted.
Why Premium Carriers Have More Room
Munoz said that carriers with premium positioning have more room to absorb the hit than those without it. Delta Air Lines (NYSE:DAL) has a refinery in Trainer, Pennsylvania, turning crude oil into jet fuel and giving it an advantage, according to CNBC. United’s advantage comes from premium focus. American Airlines (NASDAQ:AAL) and Southwest Airlines (NYSE:LUV) make up the rest of the big four.
Airline Stocks Are Already Splitting Along His Lines
| Carrier | Today | Year to Date | 12 Months |
|---|---|---|---|
| Delta | -1.58% | 17.38% | 43.06% |
| United | -1.4% | -5.26% | 8% |
| American | -1.13% | -17.42% | 7.2% |
| Southwest | -0.34% | 1.07% | 29.29% |
All four are lower today. Year to date, Delta leads at 17.38% and American trails at -17.42%. Over twelve months, Delta leads at 43.06% and American trails at 7.2%. The carrier marked as best protected is the strongest stock over the past year.
Over five years, the order changes. United leads at 115.5%, followed by Delta at 93.05%, while Southwest stands at -16.73% and American at -36.92%. The twelve-month leader trails over five years, and two of the four trade below where they were five years ago. One year of data does not decide which business model wins.
These figures measure share price performance only and say nothing about operating results.
Delta’s Quarter Through an Industry Lens
Munoz framed Delta’s result as evidence of an industry-wide squeeze. CNBC called it Delta’s first miss in two years. Adjusted earnings per share were $1.76, according to CNBC. Investors can review primary documents in Delta’s SEC filing.
Fares and Schedules Are the Only Levers Left
Munoz has run one of these companies, and his view is that no smart operational fix can offset a fuel move this large. That leaves airlines with two option, fares and schedules, and passengers feel both.