American Airlines warned customers to brace for higher airfares this year as the airline’s jet fuel bill could surge by $2.3 billion in 2018.
In an earnings call American said fuel costs are up by more than a quarter so far this year.
CEO Doug Parker says fuel is up by 60% since last summer, and was the main driver of a 45% drop in first-quarter profit.
"The way to deal with this is primarily on the revenue side," he said, although there are no immediate plans to hike airfares.
"It takes time to adapt. I view that as a near-term problem not a long-term problem. It doesn’t happen immediately."
"Oil is our second largest expense. As the cost of production goes up, the cost of product generally follows. If indeed this is where fuel prices are going to stay, I would expect you would see higher fares to consumers over time," Parker added.
Analysts predict capacity cuts are on the way to support prices, although it would likely take effect in the fall.
American’s share prices closed more than 6% lower on Thursday.
Still, Parker told investors he is still ‘excited about the future.’
