United Airlines bets bigger on premium travel as Iran war drives up fuel costs

CHICAGO, March 24 (Reuters) – United Airlines on Tuesday unveiled a broad aircraft and cabin overhaul centered on higher-end seating, pressing ahead with its long-term growth plan days after warning that oil could stay above $100 a barrel through 2027 and outlining plans to trim some flights in response.

The Chicago-based carrier said it expects to receive more than 250 aircraft by April 2028, including 68 Airbus A321neo Coastliner and A321XLR jets with lie-flat Polaris business-class seats and larger premium cabins.

The move comes after Chief Executive Scott Kirby said last week that United would trim about five percentage points of planned capacity this year as it prepares for oil to remain above $100 a barrel through 2027 and rise as high as $175.

At those levels, United’s annual fuel bill would rise by about $11 billion, more than twice the profit it earned in its best year, he said.

Still, Kirby said United was better positioned than in past cycles to absorb shocks, protect margins by cutting less profitable flying and keep investing for the long term.

“We’ve positioned ourselves to get through these storms that are inevitable, stay focused on the long term and keep investing for the long term,” he said on a media call.

PREMIUM PUSH

At the center of the announcement are two new Airbus models that will feature lie-flat Polaris seats and Premium Plus cabins.

One, called the Coastliner, will fly exclusively between Los Angeles and San Francisco and Newark/New York. The other, the A321XLR, will replace Boeing 757s on some existing international routes starting this summer and later open new destinations in Europe and South America.

United said the 757s now flying many of those routes typically have about 16 business-class seats. The A321XLR will have 32 premium seats. The Coastliner will have 20 Polaris seats and 12 Premium Plus seats.

INDUSTRY BET

Big U.S. carriers have increasingly built their business around premium travelers, corporate accounts and loyalty-program members since the pandemic, betting those customers are slower to pull back when fares rise.

Andrew Nocella, United’s chief commercial officer, said the U.S. economy and air travel demand remained strong, allowing United to raise fares without materially hurting bookings. 

“I can tell you that the environment is strong,” Nocella said. “We’ve been able to pass through many of the price increases necessary to cover what is a significantly quick and rapid increase in the price of oil and jet fuel.”

(Reporting by Rajesh Kumar Singh; Editing by Lincoln Feast.)