Flying is going to get more expensive if the price of fuel keeps rising:
American Airlines <AAL.O> warned airline passengers may eventually face higher ticket prices if oil prices remain high, prompting carriers to remove seats from the market.
Oil prices have risen around 50 percent compared to the levels seen last year and that is putting pressure on airline profits.
“If it becomes clear this is the new normal you would see over time less capacity and growth in the industry and therefore higher prices, but I don’t think that’s going to happen in the near term,” CEO Doug Parker told reporters on the sidelines of the annual IATA meeting of airline executives in Sydney.
IATA, which represents about 280 airlines comprising 83 percent of global air traffic, has said that on Monday it will revise down its forecast for industry profitability this year due to higher oil, infrastructure and labor costs.
It’s worth noting, however, that US oil production has hit record highs, so the sustainability of these high prices is in question. As Instapundit often likes to say, “Have you hugged a fracker today?”