The rising cost of fuel is likely to send U.S. airfares up
in the coming months while stunting the pace at which airlines grow capacity,
American CEO Doug Parker said.
Parker's comments came as American reported that a year-over-year
jump of $362 million in fuel costs cut sharply into profits during the first
quarter.
"As our cost of production goes up, the cost of travel
should go up in some way," Parker said during American's earnings call
Thursday.
Doug Parker
Crude oil was trading Thursday at approximately $68 dollars
per barrel, less than $2 off the 52-week high and up 37% from a year ago. Crude
oil dipped to as low as $42 early last summer.
Despite the jump in oil prices, U.S. airfares were down 5.7%
year over year at the end of March, according to the Bureau of Labor
statistics, though fares did rise 0.6% between January and February and another
0.6% between February and March.
American recorded net income in the first quarter of $186
million, down 45.2% from the previous year.
The carrier's revenue of $10.4 billion for the quarter was
up 5.9%, but expenses climbed by 9.8%. A key factor in that imbalance was fuel,
which cost American 25.8% more this quarter while the airline saw just a 1.5%
increase in the average fare paid per passenger, per mile.
Parker explained that the higher fuel prices are beginning
to feel like the new normal. "So we need to adjust our business plan
accordingly," he said.
Industrywide, Parker said, capacity growth is likely to slow
due to fuel prices.
"I don't think there will be less capacity. I think
there will be less capacity than there would have been otherwise," he
said.
Despite those comments, American has yet to adjust its own
capacity guidance. The carrier plans to fly 3% more seat miles this year than
it did last year.