American Airlines recently reported its yearly earnings and plans for the upcoming year. Similar to United and Southwest Airlines, American Airlines reported final figures that beat Wall Street expectations and announced plans for expansion.
Investors did not react kindly to the announcement of expansion, though. They believe that if the airlines continue to offer more flights, fare-wars could begin and that will ultimately drive ticket prices, and profits, down. Investors already complained about the cost of operating expenses last year due to rising fuel costs.
American Airlines already hinted that fares may have to rise this year due to the increase in fuel costs. The airline's fuel costs have increased more than 20 percent over the last year, and it is anticipated to see costs rise again this year. To compensate, the airline will have no choice but to increase fares.
American further stated that they do not believe that they will cause fare wars to ensue by adding additional flights. Many of the new flights that they are looking to offer are ones that not many, if any, carriers are offering. For example, the airline is considering a new flight between Oklahoma City and Philadelphia.
One of the biggest concerns of the airlines is their ability to increase passenger numbers. There has been a significant decline in international travelers to the United States on the major carriers for a few years in a row. This may be due to many factors, including the rapid expansion of many European-based low cost or ultra-low cost international carriers offering air fares the major airlines in the United States simply cannot match.