American Airlines CEO warns higher fares are coming

Rising fuel costs are eating into airline profits, dampening expectations for the rest of 2018, and setting the stage for higher fares. Fuel is the airlines' second-biggest expense after labor, so when it rises — at American it was up 40c a gallon from a year ago — so does the cost of providing air travel, says American Airlines CEO Doug Parker. "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. American blamed higher fuel prices for a 45% drop in Q1 profit, to $186m. American has replaced many of its gas-guzzling older planes with new, more efficient jets over the last several years. Still, fuel spending jumped 26%. The airline burned just over 1b gallons in Q1, and it paid an average of $2.10 a gallon, up from $1.70 a year earlier. American estimated that it would have saved $412m — more than offsetting the profit slump — if fuel were still at early-2017 levels Fuel prices have crept up even since the first quarter ended March 31. Parker said he doesn't think fares will rise fast enough to have much effect on demand for travel, which has been strong. <br/>