American Air sinks most in two years on surprise fare weakness

American Airlines tumbled the most in two years after lower-than-expected US fares dented a closely watched measure of pricing power. Revenue for each seat flown a mile probably only rose 1 to 3% in Q2, the world’s largest carrier said Wednesday in an investor update, cutting its earlier forecast by half a percentage point on both ends. Fare weakness is adding to the pressure on US airlines, which already are contending with a more than 50% jump in fuel prices over the last year. While summer travel demand is strong, American CEO Doug Parker has warned of the need for higher fares because of rising fuel costs. There is typically a six- to 12-month lag before carriers can raise ticket prices enough to compensate for the extra spending. “Increasing costs and competitive pressures have stifled American’s earnings potential,” Helane Becker, a Cowen & Co. analyst, said in a report. “In a rising jet-fuel environment, airlines should be raising prices, and investors expect yields to show improvement to offset higher labor and fuel costs.”<br/>