American Airlines may look at cutting flights if jet fuel prices remain as high as they are right now, the carrier’s CEO said this week.
Speaking at the Morgan Stanley Laguna Conference in California on Wednesday, Robert Isom said American is doing a good job of “recapturing” much of the extra expense tied to fuel but may have to reevaluate its capacity planning in the coming months.
“If fuel prices remain as high as they are right now, I think that that’s going to require some adjustments in terms of our capacity planning as we take a look into the future,” he said.
But Isom was quick to stress that demand remains strong, unit revenue is up, and premium is continuing its outstanding run, placing American on solid financial ground.
Jet fuel prices doubled earlier this year during the war in Iran and the closure of the Strait of Hormuz. The global price of crude oil, from which jet fuel is refined, has climbed even higher in recent weeks as Iran clamps down on traffic in the strait and fighting intensifies in Yemen. Militants in Iraq recently bombed the East-West Crude Oil Pipeline in Saudi Arabia, a critical bypass for the strait, forcing Saudi Aramco to temporarily shut it down.
‘Race to the Top’
Isom also spoke at length about ongoing and planned efforts to improve the customer experience. He referenced investments in Flagship suites, the expansion of Starlink wireless internet, the return of seatback entertainment screens, and new airport lounges.
In the coming years, American will debut new lounges at a rate not seen in decades, Isom said. He did not give any hints about where those lounges will be.
The CEO also touched on American embrace of premium products, noting that 30% of the airline’s seats are now generating 50% of its revenue. The share of premium seats will only grow as the airline takes delivery of new airplanes, such as the Airbus A321XLR, and works out new configurations, he said.
When asked how American will fare in a “race to the top” environment where almost all carriers, even budget airlines, are adding and expanding premium offerings, Isom said the company’s advantages, including the scale of its North American network and the size of its fleet, give him confidence.
“I kind of like the set-up for the industry,” he said. “I think we have a head start and we’ve got the most growth, we have the most opportunity ahead of us.”
American trails behind competitors United and Delta in profitability, and that gap has become a source of friction between the airline’s leadership and certain work groups. Isom and other executives maintain that critical investments – some years in the making – are starting to bear fruit, though they acknowledge that fuel costs have slowed progress.
