Why airfares may stay high even if fuel prices decline, according to an airline
American Airlines. (Photo by Nicolas Economou/NurPhoto via Getty Images)
American Airlines warned that airfares could remain elevated even if oil prices decline, following losses earlier this year driven by rising fuel costs.
What they're saying:
American Airlines CFO Devon May told the Financial Times that "if fuel comes down, I think airfares probably stay largely where they're at right now."
"If fuel prices go up, we need to generate higher yield, we need to generate higher fares to offset that higher fuel price," May said.
The airline reported deeper losses for 2026 in its third-quarter earnings released Thursday. American also updated its full-year forecast, projecting an adjusted loss of $1 to $1.60 per share. Its previous forecast, issued in July, ranged from a loss of 65 cents per share to a profit of 65 cents.
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May told the Financial Times that airline ticket prices had not fully recovered in real terms since the disruptions caused by the COVID-19 pandemic. He said the price increases "ideally should have happened back in 2024, but the industry found itself in an oversupply environment."
"This was the first year that everything came together in a way that we were able to push yields back up to where they were seven years ago in real terms," May told the outlet.
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By the numbers:
American reported a 19% increase in third-quarter revenue from the same period last year, surpassing the high end of its previous guidance. It was the company’s strongest performance outside the years immediately following the pandemic.
However, the airline’s fuel expenses jumped 67.5% from the same period last year. The increase resulted in $1.9 billion in additional fuel costs, based on an average price of $3.85 per gallon.
American expects fuel prices to remain elevated in the fourth quarter. The airline projected an average price of about $4.70 per gallon, which would nearly double the price from the fourth quarter of 2025 and increase fuel expenses by $2.8 billion from a year earlier.
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Because of higher fuel costs, American said its network growth is expected to slow in 2027 compared with 2026.
Big picture view:
Airfares have also risen amid higher fuel prices. The latest Bureau of Labor Statistics data showed airline fares were up 22.4% from a year earlier in September.
United Airlines warned earlier this year that airfares could rise as the war with Iran drives up oil and jet fuel prices, adding new cost pressure on carriers already bracing for higher summer travel demand. CEO Scott Kirby warned that persistently high jet fuel costs could drive fares up by as much as 20% if expenses don’t ease soon.
Why you should care:
Airlines can add or increase fuel surcharges, an extra fee common among carriers outside of the U.S. that’s added on top of the base ticket price.
Major U.S. carriers, however, don’t charge a separate fuel surcharge. Instead, they build fuel costs into the overall ticket price, meaning any increase is more likely to show up as a higher base fare for travelers, according to Tyler Hosford, security director at global risk management firm International SOS.
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Airlines also may adjust what they charge for premium add-ons — such as seat upgrades, extra legroom seats, checked bags or priority boarding — as another way to offset higher operating costs. For consumers, that means even if the base fare doesn’t rise immediately, the total cost of a trip could still increase once additional fees and upgrades are factored in.
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What can travelers do to keep costs down?
What you can do:
Experts say travelers planning trips may be able to limit the impact of rising airfares by booking earlier rather than waiting for last-minute deals.
Locking in ticket prices sooner — especially with flexible booking options that allow changes — can help secure lower prices before airlines adjust rates further.
The Source: The Associated Press contributed to this report. The information in this story came from American Airlines’ third-quarter earnings report, comments from CFO Devon May to the Financial Times, and airfare data from the Bureau of Labor Statistics. Additional context about rising fuel costs, potential fare increases and ways travelers can limit expenses came from United Airlines CEO Scott Kirby and Tyler Hosford of International SOS.This story was reported from Los Angeles.