AA predicts rising fares as oil goes up

American Airlines CEO Doug Parker thinks that airfares may take off soon, just like the plane in the picture—moving up, but not at a sharp angle.

In a conference call for stock analysts and the press, Parker revealed a 45% drop in profits, to 'only' $186 million for the first-quarter. He pointed to a 40c per gallon rise in aviation fuel prices, and said "If indeed this is where fuel prices are going to stay, I would expect you would see higher fares to consumers over time."

Fuel costs, the second-biggest item in airline budgets after wages, had been at historic lows for the past couple of years, giving the airlines a break from bad years with high costs, and most of them managed record profits. It's a hard habit to break, and rising fares would be a way to maintain it.

But Parker doesn't expect the prices to rise enough to dampen customers' enthusiasm for flying. One hedge against that: American, like a number of other airlines, has been replacing older, thirstier planes with newer jets that burn less, so the 26% rise in fuel costs isn't likely to push fares up that much.