Why United Airlines' Airfare Often Falls Short of Expectations

Why Are Airfares Still Low?

United Airlines CEO Scott Kirby recently shared an intriguing reason for why airfares often fail to rise when they should. According to him, ticket prices only increase when airlines are 'forced' to act, which reflects the internal dynamics of the aviation industry.

The Mechanics of Airline Operations

During a discussion about United's Q1 2026 financial results, Kirby pointed out that the reluctance to adjust fares often stems from internal issues. Although revenue management teams are well aware that air travel demand is fairly stable and could support price increases, marketing and communications teams frequently oppose this idea, fearing that raising prices might send the wrong signal and trigger negative reactions.

The end result is that airlines often undervalue their products until an event compels them to change, such as the current fuel price crisis caused by the Iran conflict.

Industry Bottlenecks

Kirby addressed a question from Scott Group at Wolfe Research: "Why does the airline industry need a crisis to start raising prices?" He explained that airline CEOs often lack a deep understanding of revenue management, while marketing teams tend to communicate better with leadership. This creates internal pressure that makes it more difficult to implement price increases.

Kirby revealed that many airline CEOs have never worked in revenue management departments, which diminishes their ability to make timely pricing decisions. As a result, ticket prices remain low until a crisis arises.

The Current Crisis and Future Airfare Trends

According to Kirby, the ongoing fuel price crisis could enable airlines to raise fares, with United already implementing several price hikes and reporting revenues approximately 20% higher than the previous year. However, Kirby suggests that this time might be different, as ticket prices may not only rise temporarily but could stabilize at these new levels.

He emphasized that this price increase also reflects a shift in United's self-perception, where the airline is no longer solely competing on price but is also building a brand that fosters customer loyalty, allowing them to charge more for better products.

Conclusion

Ultimately, Kirby asserts that for many years, airlines have propagated a simple narrative that low fares are a result of fierce competition and price-sensitive demand. However, much of the reality is that fares are often kept low due to internal resistance to price increases. It is only in times of crisis that this resistance is overcome. If this lesson is heeded, the current fare increases may not just be temporary, regardless of how fuel prices fluctuate.

Article sourced and edited from: Live and Let's Fly