American Airlines CEO warns that higher fares are coming

FILE- In this April 13, 2018, file photo, an American Airlines plane taxis Friday, April 13, 2018, at the Seattle-Tacoma International Airport in Seattle. American Airlines reports earns on Thursday, April 26. (AP Photo/Ted S. Warren, File)

Costlier fuel sends profit plunging at American Airlines, and CEO warns that higher pump prices are likely to lead to fare increases

DALLAS — Rising fuel costs are eating into airline profits, dampening expectations for the rest of 2018, and setting the stage for higher fares.

Fuel is the airlines' second-biggest expense after labor, so when it rises — at American it was up 40 cents a gallon from a year ago — so does the cost of providing air travel, says American Airlines CEO Doug Parker.

"If indeed this is where fuel prices are going to stay, I would expect you would see higher fares to consumers over time," Parker said Thursday on a call with analysts and reporters.

American blamed higher fuel prices for a 45 percent drop in first-quarter profit, to $186 million.

The world's biggest airline cut its forecast of earnings for the year, and shares fell $2.69, or 6 percent, to $42.56 in trading shortly after the opening bell on Wall Street.

American has replaced many of its gas-guzzling older planes with new, more efficient jets over the last several years. Still, fuel spending jumped 26 percent.

The airline burned just over 1 billion gallons in the first quarter, and it paid an average of $2.10 a gallon, up from $1.70 a year earlier. American estimated that it would have saved $412 million — more than offsetting the profit slump — if fuel were still at early-2017 levels.

Fuel prices have crept up even since the first quarter ended March 31. Airlines typically raise fares when fuel gets costlier, although they are not always able to fully recover the higher pump prices.

Parker said he doesn't think fares will rise fast enough to have much effect on demand for travel, which has been strong. Passenger revenue per mile, which roughly tracks fares and fees, rose 3 percent over the same period last year.

The Fort Worth, Texas-based company said earnings fell from $340 million a year earlier.

Excluding non-repeating items, American Airlines Group Inc. said it would have earned 75 cents per share. That was a penny better than forecast by nine analysts surveyed by Zacks Investment Research.

Revenue rose nearly 6 percent to $10.4 billion.

American cut its forecast of 2018 profit to between $5 and $6 per share, down 50 cents from a January outlook.

Related News

Hawaii authorities urge awareness of raw food risk

Aug 17, 2016

Hawaii authorities are urging diners to be aware of the risks of eating raw and undercooked food after they traced a hepatitis A outbreak to frozen scallops served raw at a sushi restaurant chain

Are France's burkini bans sexist, or liberating?

Aug 17, 2016

Male officials are dictating what women can wear on French beaches _ and people across a wide swath of French society say that's a good thing

Target cuts outlook as it sees fewer customers in stores

Aug 17, 2016

Target cut its profit forecast and a key sales outlook amid stiffer competition and its own stumbles in areas like groceries

Broaden News

Travel Stylo is an independent online travel website started by a group of friends who love traveling together. With Travel Stylo, you can travel with style.

Contact us: sales[at]