US airline stocks tumbled on Thursday after two carriers warned of higher fuel costs that could feed through to fare increases.
Shares of American Airlines fell 6.3 per cent after the company lowered its 2018 profit forecast due to an expected $2.3bn rise in fuel costs this year.
Chief executive Doug Parker warned that sharply higher fuel prices were "feeling somewhat more like the "˜new normal"™"Š" and were likely to impact on the profits of other US carriers too.
Mr Parker said the carrier had decided to cut its full-year guidance after fuel prices rose 12 per cent in the past two weeks. "This is the kind of increase that is going to have an impact on airline financials," he said on an earnings call, predicting that low cost carriers would suffer even more than legacy carriers like American.
Southwest Airlines also warned on fuel costs, predicting a fuel bill in the second quarter of $2.20 per gallon, up 10.5 per cent from the year earlier figure. Its shares closed down 1.0 per cent, additionally hit by news that second quarter bookings had dropped following an inflight engine accident last week in which a Southwest passenger died.
Shares of Delta Air Lines and United Continental were also down on Thursday, each by 2.8 per cent.
US airline stocks had already been under pressure for months as investors worry about an increase in capacity that they fear could lead to a fare war. The NYSE Arca Airline Index was already in technical correction territory, having dropped more than 10 per cent since its March peak…
