Mercedes Mullins
Jet fuel is one of the biggest expenses for airlines, with carriers worldwide spending a total of $291 billion on jet fuel in 2024. United Airlines spent $8.9 billion on fuel in 2019, accounting for 23% of its total expenses that year. In 2024, United Airlines emerged as the top buyer of sustainable aviation fuel (SAF), securing 2.9 billion gallons of SAF through offtake agreements and investments. United has also invested in Alder Renewables, which plans to produce SAF from biomass-like agricultural byproducts and wood residues. The airline has committed to net-zero greenhouse gas emissions by 2050 and is taking steps to reduce its emissions from flying.
| Characteristics | Values |
|---|---|
| Jet fuel cost in 2019 | $190 billion |
| Jet fuel cost in 2022 | $215 billion |
| Jet fuel cost in 2023 | $271 billion |
| Jet fuel cost in 2024 | $291 billion |
| United Airlines' jet fuel cost in 2019 | $8.9 billion |
| United Airlines' jet fuel cost in Q4 2023 | $3.32 billion |
| United Airlines' jet fuel cost in 2023 | $12.651 billion |
| United Airlines' jet fuel cost in Q1 2024 | $2.9 billion |
| United Airlines' average aircraft fuel price per gallon in Q1 2024 | $2.86 |
| United Airlines' SAF usage at O'Hare by the end of 2024 | 3% of total fuel usage |
| United Airlines' SAF usage in 2023 | 10 million gallons |
| United Airlines' SAF purchase from Neste over three years | $52.2 million |
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What You'll Learn
United Airlines' expenditure on jet fuel
Jet fuel is one of the biggest expenses for airlines, often totalling billions of dollars per year. In 2019, United Airlines spent $8.9 billion on aircraft fuel, which was approximately 23% of its total expenses that year. This was only exceeded by salaries for its 96,000 employees, which cost the airline $12 billion.
In 2023, United Airlines' full-year expense on fuel was $12.651 billion, a decrease of over 3.5% from 2022. In the first quarter of 2024, the airline's fuel bill was $2.9 billion, a 6.9% reduction year-on-year.
The price of jet fuel is dependent on the price of crude oil, which has been volatile in recent years. Fuel hedging is a technique used by airlines to overcome fluctuations in the market price of jet fuel. This involves locking in a fixed price for fuel purchases over a given timeframe. However, it is complex and airlines can lose a lot of money if things do not go according to plan.
United Airlines has emerged as the top buyer of sustainable aviation fuel (SAF), also known as green jet fuel. SAF is priced two to three times higher than conventional fuel, but United has committed to a net-zero greenhouse gas emissions target by 2050. The airline has secured 2.9 billion gallons of SAF through offtake agreements and investments. United has also invested in Alder Renewables, which plans to produce SAF from biomass-like agriculture by-products and wood residues.
In 2024, United Airlines' average aircraft fuel price per gallon was $2.86 in the first quarter, which was two cents higher than Delta Air Lines' average of $2.79 and three cents lower than Southwest Airlines' average of $2.92.
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Jet fuel's impact on United Airlines' finances
Jet fuel has a significant impact on United Airlines' finances, representing one of the company's largest expenses. In 2019, the airline spent $8.9 billion on aircraft fuel, accounting for approximately 23% of its total expenses. This substantial fuel cost is second only to salaries, which amounted to $12 billion for United Airlines' 96,000-strong workforce.
The volatile nature of fuel prices, influenced by factors such as crude oil prices and market demand, poses a challenge for airlines. Fluctuations in fuel prices can greatly impact an airline's financial performance, and United Airlines is no exception. Fuel hedging is a strategy employed by airlines to mitigate price fluctuations, where they lock in a fixed price for fuel purchases over a specific period. However, this approach carries the risk of financial loss if market prices drop below the agreed-upon rate.
In recent years, United Airlines has demonstrated a commitment to reducing its environmental impact by investing in sustainable aviation fuel (SAF). SAF is priced significantly higher than conventional fuel, but it offers a path towards decarbonization. United has secured 2.9 billion gallons of SAF through offtake agreements and investments, positioning itself as the top buyer of clean fuel. This move aligns with the airline's goal of achieving net-zero greenhouse gas emissions by 2050.
The adoption of SAF is expected to have a noticeable impact on United Airlines' finances. Despite the higher cost of SAF, it has the potential to reduce flight emissions by up to 80%. United Airlines is also exploring other avenues to secure SAF, such as state and federal subsidies, and by combining Illinois' SAF tax credits with federal incentives from the Inflation Reduction Act. The increasing demand for SAF may also drive up prices, affecting United Airlines' fuel expenses.
While United Airlines has made significant strides in adopting SAF, it continues to rely predominantly on conventional jet fuel. The airline's fuel bill for the first quarter of 2024 was $2.9 billion, indicating a slight reduction in fuel costs compared to the previous year. However, the full financial impact of United Airlines' transition to SAF remains to be seen, particularly as the airline expands its use of SAF to more airports.
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Jet fuel prices
Fuel hedging is a strategy employed by airlines to manage market price volatility. By locking in a fixed price for jet fuel purchases over a specific period, airlines can protect themselves from price increases. However, this approach is complex and carries the risk of financial loss if market prices decline. For example, if an airline agrees to purchase jet fuel at $500 per ton and prices subsequently rise to $700 per ton, they benefit from their hedging deal. But if prices drop to $300 per ton, the airline may face financial challenges.
According to the Department of Transportation's Bureau of Transportation Statistics, US airlines consumed 1.55 billion gallons of fuel per month in December 2019, the last "normal" year before the pandemic. By December 2024, fuel usage had risen slightly to 1.59 billion gallons per month. The increase in fuel prices and usage has impacted the financial performance of major carriers. In 2024, carriers worldwide spent a total of $291 billion on jet fuel, a significant increase from the previous years: $271 billion in 2023 and $215 billion in 2022.
While traditional jet fuel remains the primary source of aircraft energy, the aviation industry is witnessing a shift towards sustainable aviation fuel (SAF), also known as green jet fuel. SAF is priced two to three times higher than conventional fuel, but airlines like United are investing in it to reduce their carbon footprint. United Airlines has secured 2.9 billion gallons of SAF through offtake agreements and investments, demonstrating its commitment to net-zero greenhouse gas emissions by 2050. The challenge of high SAF costs is being addressed through feedstock innovation and production advancements, with global SAF production capacity projected to increase tenfold by the end of the decade.
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United Airlines' use of SAF
Jet fuel is one of the biggest expenses for airlines, often totalling billions of dollars per year. In 2024, carriers worldwide spent $291 billion on jet fuel, up from $271 billion in 2023 and $215 billion in 2022. The cost of jet fuel can greatly impact airlines' operational and financial performance.
United Airlines has emerged as the top buyer of green jet fuel, also known as sustainable aviation fuel (SAF). United has secured 2.9 billion gallons of SAF through offtake agreements and investments, far ahead of any other airline. The airline is committed to net-zero greenhouse gas emissions by 2050 and is helping suppliers develop new feedstock supplies and production pathways through its investment arm, United Airline Ventures.
United has invested in the future production of over five billion gallons of SAF, more than any other airline. The airline has used SAF blends at Los Angeles International Airport since 2016 and Schiphol Airport in Amsterdam since 2022. In 2023, United announced plans to triple its SAF use, adding SAF on flights at San Francisco Airport. The airline also became the first to purchase SAF for use at O'Hare International Airport, receiving up to one million gallons of Neste MY Sustainable Aviation Fuel through the end of 2024.
United's use of SAF is expected to help reduce greenhouse gas emissions by up to 85% on a lifecycle basis, as SAF is made from renewable materials rather than drilled fossil oil. SAF is among aviation's best options to push the industry towards net-zero emissions as it can be used with existing infrastructure without changes to fuel systems or aircraft engines. United has also invested in companies like Alder Renewables (formerly Alder Fuels), which plans to produce SAF from biomass-like agriculture by-products and wood residues using pyrolysis technology.
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SAF's impact on jet fuel prices
Jet fuel is one of the most significant expenses for an airline, often costing billions of dollars annually. The cost of jet fuel can significantly impact an airline's operational and financial performance. The price of jet fuel is heavily influenced by the price of crude oil, which can fluctuate considerably. For instance, during the COVID-19 pandemic, jet fuel prices dropped to $200 per metric ton due to decreased demand, but they surged again as travel restrictions eased, peaking in June 2022 at over $180 per barrel.
Sustainable Aviation Fuel (SAF), also known as green jet fuel, is priced significantly higher than conventional jet fuel. As of 2022, SAF cost approximately $2400 per tonne, around 2.5 times the price of traditional jet fuel. This price difference is largely due to the small production volumes of SAF. The cost of waste-based SAF sources is about double that of regular jet fuel, while synthetic fuels created through carbon capture can be up to ten times more expensive.
Despite the higher cost of SAF, airlines are procuring it to reduce their carbon emissions. United Airlines, in particular, has emerged as the top buyer of SAF, securing 2.9 billion gallons through offtake agreements and investments. However, the high prices of SAF pose challenges to its widespread adoption. Airlines have expressed reluctance to pay more for SAF than for conventional jet fuel due to tight margins and concerns about losing market share.
To address the cost disparity, a substantial increase in SAF production is necessary. Scaling up production requires careful management to secure sustainable feedstock resources and minimise environmental impacts. While governments have introduced incentives to encourage SAF production, the industry faces challenges in meeting sustainability goals while increasing production.
As the SAF market matures, the cost differential between SAF and conventional jet fuel is expected to decrease. The introduction of policies and mandates, such as the Inflation Reduction Act, is crucial in incentivising production and attracting investors. Additionally, mechanisms like SAF certificates (SAFc) allow companies to support emissions reduction efforts without directly purchasing SAF, demonstrating the complexities of the economic landscape surrounding SAF.
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Frequently asked questions
United Airlines spent $8.9 billion on jet fuel in 2019, which was approximately 23% of its total expenses that year. In 2023, the airline spent $12.651 billion on jet fuel, a 3.5% decrease from 2022. In the first quarter of 2024, the airline's fuel bill was $2.9 billion, a 6.9% reduction year-on-year.
Jet fuel is one of the biggest expenses for airlines, often totaling billions of dollars per year. Fluctuations in fuel prices can significantly impact an airline's operational and financial performance. United Airlines has also been investing in Sustainable Aviation Fuel (SAF), which is priced two to three times higher than conventional jet fuel.
In Q1 of 2024, United Airlines' average aircraft fuel price per gallon was $2.86, which was two cents higher than Delta Air Lines' average of $2.79 and three cents lower than Southwest Airlines' average of $2.92.
Airlines use a technique called fuel hedging to manage fuel price volatility. Fuel hedging involves locking in a fixed price for jet fuel purchases over a given timeframe. While this can provide a financial advantage when fuel prices increase, it can also put the airline at a significant disadvantage if prices decrease.
