High fuel costs may reshape American Airlines plans
American Airlines could reconsider its future capacity plans if elevated fuel prices persist, CEO Robert Isom said, even as strong passenger demand and higher fares help the carrier absorb much of the added expense.
Speaking at a Morgan Stanley conference on Sept. 16, Isom said American continues to see encouraging revenue trends despite higher fuel costs.
The airline expects third-quarter revenue to rise 16% to 19%, a forecast Isom said he felt “really good” about.
American has recovered much of its higher fuel expenses through stronger demand and higher fares. Isom also said he expects most of the airline’s recent revenue gains to remain durable.
Still, persistently expensive fuel could influence how aggressively American expands its flight capacity in the future. Adjustments to capacity would allow the airline to respond to higher operating expenses while balancing available seats with passenger demand.
Fuel is one of the airline industry’s most significant operating expenses, meaning sustained price increases can place additional pressure on carriers even when ticket demand remains strong.
For American Airlines, the combination of higher fares and continued demand has so far helped limit the impact. But Isom’s comments indicate the carrier is prepared to reconsider its future capacity strategy if elevated fuel costs continue.
