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American Looks to Raise Airfare to Pay for Fuel and Staff

After American Airlines reported an 11 percent drop in year-over-year quarterly profits last week, the carrier is considering increasing prices to offset costs. The airline blames the prices on a contract that guarantees in-air staff raises and the rising cost of jet fuel to fly passengers around the world.

To offset flight crew raises and rising jet fuel prices, American Airlines might pass those costs over to the passengers in the form of higher airfare. The Los Angeles Times reports that the carrier is considering increasing prices directly in line with their higher operating line.

In their Fourth Quarter 2017 report, executives for the carrier noted the $31 million drop in year-over-year operating revenue was directly attributed to two causes: increases in labor costs and fuel prices. Last year, American offered flight crews $350 million in raises in 2018 and 2019, while fuel costs jumped over 20 percent in the last quarter alone. As a result, the leadership says that prices are too low and a natural adjustment will be coming.

“Fares are too low for oil prices this high,” Doug Parker, chief executive for American, told investors according to the Los Angeles Times. “Over time, you’ll see adjustments. It takes time.”

The move comes as American follows fellow legacy competitor United Airlines on a strategy of increasing capacity to please flyers. While both are making the move to combat ultra-low cost carriers and avoid a fare war, the combination of increasing costs and reduced inbound traffic to the United States makes for a difficult combination for the Dallas-based airline.

Despite reassurances that American is not interested in competing with other carriers for impacted routes, Wall Street is still showing signs of skepticism over the airline’s direction. At Wednesday’s close, the stock price had risen to 54.32, but was down from their one-month high of over $58.

Comments are Closed.
fivenue February 9, 2018

and this is after that massive tax cut? we need to make donald's ear full with this crap

chrisboote February 8, 2018

? Oil prices are still at historic lows - over $50/barrel (60%) down on predictions six months ago when airlines set their prices So who is peddling this lie?

Cleared2land February 2, 2018

Oil Is Cheap — So Why Aren’t Airfares? https://www.smartertravel.com/2017/06/19/oil-cheap-arent-airfares/

RobertClouse February 1, 2018

If you look at Parkers track record, he's never been that interested in the customer experience, just the bottom line. Period.

bortain February 1, 2018

Why don't they use some of that windfall from the corporate tax cuts to keep the fares down for their passengers? I calculate that they could save around $314 million with the corporate tax rate dropping from 35% to 21%. That is a lot more than the $11 million drop in income they have suffered. They could even score some points with the public by announcing such a move.