"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 during a Q1 2018 earnings call. Jet fuel is the airline's second-biggest expense after labor, so when costs go up, so do ticket prices; for American Airlines, costs had risen 40 cents a gallon from a year ago, leading to adjusted earning expectations for 2018 after a 45%, or $186 million, drop in first-quarter profit.
Shares fell $2.69, or 6%, to $42.56 in trading shortly after the opening bell on Wall Street following Parker's announcement. While American – the world's largest airline – has heavily invested in replacing older gas-guzzling aircraft in favor of new, more efficient planes, fuel expenses have jumped 26%. Over the first quarter of 2018, American Airlines burned just more than 1 billion gallons at an average cost of $2.10 per gallon, up from $1.70 a year earlier, and Parker estimated that the carrier could have saved $412 million if per-gallon fuel costs were still fixed at early 2017 prices.
Not all numbers were on the decline for American Airlines: Passenger revenue per mile has risen by 3% compared to Q1 2017, while revenue rose by almost 6%, to $10.4 billion. Still, American cut its 2018 profit forecast to between $5 and $6 per share – a $0.50 drop from its January 2018 predictions.
