American Airlines CFO Says Lower Fuel Costs May Not Cut Fares

Fuel costs are setting the direction of fares

Airlines may keep fares near current levels even if jet fuel gets cheaper, while higher fuel costs could prompt another round of increases. That’s the pricing outlook American Airlines CFO Devon May gave the Financial Times in an interview published Thursday. His comments point to an important distinction for travelers: a drop in an airline’s costs doesn’t automatically mean a matching drop in ticket prices.

“If fuel comes down, I think air fares probably stay largely where they’re at right now,” May said. “If fuel prices go up, we need to generate higher yield, we need to generate higher fares to offset that higher fuel price.” That’s a clear description of the pressure airlines face when a major operating cost changes, though it also signals that fare increases and decreases may not move at the same speed. Here’s the thing: airlines set prices in response to more than fuel, including demand and how much capacity they put into the market.

Fuel costs are weighing on airline earnings

Jet fuel prices have roughly doubled since the U.S.-Iran war began in February. U.S. fares have also climbed, though Airlines For America says carriers are absorbing most of the cost shock. Those two facts describe a difficult balance for airlines: they’re paying more to operate while trying to decide how much of that increase customers will accept.

Fuel is a significant expense for airlines, so a sharp rise can pressure earnings even when planes are selling well. Passing the full increase to passengers can be difficult if higher fares weaken demand or put an airline at a disadvantage against competitors. Absorbing more of the increase, in turn, leaves less room for profit. The industry’s pricing choices therefore depend on both costs and customers’ willingness to keep buying tickets.

Several airlines cut their full-year financial guidance this week as fuel bills ate into profits. Demand remains resilient and revenues are reaching records, but American, United and Southwest now expect higher fourth-quarter fuel spending than they projected in mid-October. Revenue records don’t settle the question of profitability: strong sales can coexist with weaker earnings when the cost of delivering the service rises faster.

American expects to pay about $4.70 per gallon for fuel in the fourth quarter, nearly twice what it paid in the same period of 2025. At that price, its fuel expense would rise by about $2.8 billion year over year. The airline forecasts an adjusted loss of $1 to $1.60 per diluted share for 2026. Those figures make fuel more than a background concern; they show why the company is discussing fare levels and network growth at the same time.

Why lower fuel may not mean lower fares

May’s comments describe an asymmetry: if fuel gets more expensive, American may seek higher fares, while cheaper fuel could leave fares near their current level. That doesn’t establish that every airline will follow the same approach or that ticket prices will remain unchanged on every route. It does, however, make clear that passengers shouldn’t treat fuel prices as a direct, immediate guide to what they’ll pay.

Airfares are shaped by the balance between seats available and people who want to buy them. When demand is strong relative to capacity, airlines may have more room to hold prices; when competition for passengers intensifies, they may have less. Fuel is one part of that calculation. A decline in fuel costs could ease pressure on airline finances without creating a strong commercial reason to cut fares, especially if other conditions still support current prices.

That said, this is the part most people overlook: a lower cost gives an airline more flexibility, but it doesn’t dictate how the company uses that flexibility. It might help earnings, support investment, or cushion other expenses. A fare reduction would depend on the airline’s pricing decisions and market conditions, neither of which May’s remarks say will automatically change when fuel does.

American sees fares as a longer-term reset

May also described recent fare increases as a delayed correction after the COVID-19 pandemic drove down global demand. He said the industry had been oversupplied, postponing a recovery in ticket yields. In this account, today’s higher fares aren’t only a response to fuel; they also reflect an effort to restore pricing after a period when excess capacity held yields back.

“This ideally should have happened back in 2024, but the industry found itself in an oversupply environment,” May said. He added that this year was the first time conditions allowed yields to return to their level from seven years ago in real terms. The reference to inflation-adjusted yields matters: it frames the recovery as a return to an earlier level of purchasing power, rather than simply a comparison of ticket prices in dollars.

The explanation is American’s view of the market, not proof that fares have become comfortable for passengers. If you’re working in this space, the tension is familiar: airlines need prices that cover their costs, while customers respond to the total price and the alternatives available. A fare increase can help an airline absorb fuel costs, but it can also test how much demand will hold up.

Capacity decisions could shape what travelers pay

American plans to slow network growth in 2027 in response to fuel cost pressures. Slower growth can limit how quickly an airline adds seats, which may matter for pricing if demand stays firm. But the source doesn’t establish what that decision will mean for any particular route, so its effect on travelers will depend on how the airline’s capacity and demand develop.

May’s outlook is a reminder that the link between fuel and fares runs through management decisions, competition and capacity. If fuel gets cheaper, travelers may see little immediate relief; if it gets more expensive, airlines may try to pass some of the added cost along. And yet, fares aren’t set by fuel alone. For passengers, the practical signal is to watch the price of the ticket itself, rather than assume changes at the pump will quickly show up in the booking process.