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‘Fares are too low for oil prices this high’

 

A sharp increase in fuel prices may show up in your airline ticket soon.

 

American Airlines CEO Doug Parker said Thursday that airlines are still adjusting to a surge in fuel prices over the last five months.

“Fares are too low for oil prices this high,” Parker said on an earnings call. “Over time you’ll see it adjust.”

Brent crude prices hit more than three-year highs on Thursday, and airlines are slowly digesting higher costs for one of its biggest expenses.

Pricier fuel is a headwind for airlines that are expanding — some aggressively — to take advantage of a strong economy and demand from business and leisure travelers alike.

“Now again, you should rightfully say, … ‘Why don’t you pass it on?'” Parker said. There “definitely is a lag on things like this.”

American shares were last down 3 percent in mid-morning trading as investors continued to digest airlines’ plans to grow their main hubs while costs rise. Competitor United Airlines was down close to 3 percent, wiping out its gain so far this year. Delta was down 2.8 percent.

American on Thursday posted better-than-expected fourth-quarter earnings and higher revenue, thanks to strong global demand and last-minute bookings.

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