American Airlines Flags $1 Billion Fuel Cost Rise as Fares Set to Climb

American Airlines says a sharp jump in jet fuel prices will add roughly $1 billion to its costs, and passengers should expect to feel it in ticket prices.

Speaking at the Morgan Stanley Laguna Conference on Wednesday, CFO Devon May said every one-cent-per-gallon increase in Jet A-1 fuel adds about $10 million in quarterly costs. Fuel for the third quarter came in near expectations, but fourth-quarter prices are now $1 per gallon above the guidance the airline gave in July — a gap that works out to that $1 billion figure.

The carrier is trying to trim its fuel use by cutting flights, focusing on cheap, off-peak domestic routes. United and Southwest have signalled similar cuts, though all three say demand has held up even as fares have risen since the start of the year.

American is also betting on its front cabin. CEO Robert Isom told the same conference that premium seats — about 30% of the fleet — will only grow as aircraft are reconfigured and new planes arrive.

The shift comes as the traditional low-cost model fades. Spirit Airlines ceased operations earlier this year after a second bankruptcy filing in a year, while Southwest plans to open airport lounges next year after adding bag fees and dropping open seating.