JDiver

In an article written by Benjamin Zhang in yesterday’s (27 Apr) Business Insider, CEO Doug Parker warned of higher ticket pricing due to the recent 25% increase in Jet A (fuel) prices, increasing 2018 Q1 fuel expenditures to nearly $1.8 billion.

No idea conveyed of how, how much, when, but we’ve been warned. Guesses? Informed guesses? Reports?

jcatman

Surely it's time for Mr. Parker to compound the issue by providing unscheduled and unearned pay raises to AA employees.

3Cforme

Consumers might give Mr. Parker in price elasticity of demand. Competitors might give a class in product differentiation. With fuel prices still rising and no hedges by AA (unlike WN - again) Parker may quickly rue the day he said “I don’t think we’re ever going to lose money again.”

radiowell

He's probably salivating at the thought of implementing the "permanent fuel surcharge" or something like that, and hoping that it will stick even after the oil price drop (i.e., pure profit, something akin to hotel resort charges). But only after the ULCC's bite. He may be saying these things to pressure the ULCC's to act so that he can follow quickly.

I said before that he's pretty good at dealing with the LCC's (heck, even his US stock symbol was "LCC"), with ample experience fighting against WN at PHX and LAS, but the ULCC's are something that he didn't expect to deal with. I think he now wants AA known as a premium brand, which I always find funny given that he insisted on the LCC stock symbol less than a decade ago. Well, may be something like "we are a tad better than Spirit/Allegiant/Frontier! Premium!!"

Austin787

Mr Parker wants AA to be premium in its fares, and nothing else.

bitterproffit

I remember when ticket prices dropped due to the billion dollar savings American Airlines got from the tax reform act.

Oh wait, that's not how it works.

arlflyer

Buy AA stock as a hedge?

DCP2016

Hey, I wouldn't mind paying more if the product got better and every employee got a raise.

Now let me know when any of that becomes the truth, because I've been waiting for a while now.

tphuang

Is he telling the investors that AA hasn't been fully monetizing AA flights? Because if that's the case, someone shouldn't have his job anymore =)

seriously though, the market will dictate how much the airlines will make. We are coming off the most profitable times in airline history. DP should worry about the day when we have a recession and the corporate spending for those FC cabins go down.

bitterproffit

Whenever I read these type of statements, I start to think they are more about 'price signaling' to his competition than anything else. Thanks for the 'warning' Mr Parker, but I believe you were actually letting your competition know that if they want to raise prices due to fuel, he's down with it.

Fanjet

But on the upside, you will be getting more miles for the same trip since it is now revenue-based.

Airfares are market driven, the airlines can only raise airfares so much as the flying public is willing to pay. Yes, you can raise the RT fare between LA and NYC from $300 to $500. And you will still get passengers willing to pay $500 for that ticket. But if the loss of revenue from the people not willing to pay that higher fare is greater than the increased revenue from the people who are, airlines will be forced to lower fares. On the other hand, airlines can ease the cost of higher oil prices by speeding up the retiremnet of older aircraft.

lobo411

Air travel is an oligopoly now--there is no longer a "market" in the classical sense of the term. The air travel market these days is best described as one based on Hobson's Choice: Would you rather have your right ear chopped off or your left?

enviroian

Fanjet

No, it's not. The fact that the US3 all had to introduce Basic Economy fares as a means to compete with carriers like Spirit and Frontier prove that they cannot just charge whatever they want because they are immune from outside compettition. Yes, it's really sad that the airline industry has found a way not to bleed billions of dollars annually. But their profit margins are around 8-10%. So if they are just one big oligopoly, they aren't doing a good job of it.

golfingboy

This... And those allusive comments seem to come quite often on investor calls in the airline industry and when one makes the first step it is almost always rolled out across the industry rapidly (basic economy comes to mind). They are in some ways playing this game walking a fine line.

Behavior like this is akin to large investment banks alluding to potential/hypothetical increase in prime interest rate.