American Airlines Expecting To Pay Extra $1 Billion For Fuel Thanks To Iran War
The rising fuel prices caused by the U.S.-Israeli war against Iran aren't just impacting you at the pump — they're also impacting how much you'll pay for your next flight. American Airlines claims the latest spike added $1 billion in jet fuel costs in the fourth quarter of this financial year. While the carrier is attempting to cut its fuel use by preemptively canceling flights, the added cost will ultimately be reflected in higher ticket prices. Remember when this war was supposed to last only a few weeks? How the time flies.
While speaking at the Morgan Stanley Laguna Conference on Wednesday, American Airlines CFO Devon May explained precisely how price fluctuations impact the company's bottom line. According to Reuters, he said that every one-cent-per-gallon increase for Jet A-1 adds roughly $10 million in costs per quarter. The fuel costs matched expectations for Q3, but Q4's prices are now $1 per gallon higher than guidance from July. The dollar spike will correlate to a $1 billion increase in fuel costs.
Airlines are planning to cut flights, but aiming to add premium seats long-term
American Airlines, as well as United Airlines and Southwest Airlines, indicated that they will be reducing the number of flights to reduce fuel use. Mainly cheap, off-peak domestic flights will be on the chopping block. Despite airfare rising since the year's start, all three airlines say demand has remained resilient. American hopes to capitalize on the current landscape by increasing the number of premium seats on its flights. According to CNBC, American Airlines CEO Robert Isom said at the same conference, "Those 30% of seats, they're only going to grow in our fleet as the reconfigurations come on board as the new aircraft deliveries come on."
The true low-cost airline is effectively dead. Spirit Airlines finally ceased operations earlier this year after filing for bankruptcy for the second time in a year. Southwest announced earlier this month that it will be launching an airport lounge network next year. It's the final step in the carrier ditching its low-cost roots for mainline status after adding bag fees and abandoning open seating. Airlines are ready and willing to abandon common flyers in favor of those who can pay extra to sit up front.