Using AMR's own estimates, the company's 2006 fuel bill is set to rise about 10% to $6.19 billion, up from $5.62 billion in 2005.
AMR Corp. said it expects the price of jet fuel to average $1.97 a gallon this year, with an average price of $1.91 in the first quarter of 2006. In 2005, the company's average jet fuel price was about $1.74 a gallon.
The airline, in a filing with the Securities and Exchange Commission, predicted it will burn 3.14 billion gallons of jet fuel in 2006, down from 3.24 million last year.
Spokesman Tim Smith pinned the drop on more efficient operations, including route changes and efforts to cut the amount of time engines are run while a plane is on the ground.
AMR said in January it plans to pare back its domestic American Airlines capacity by 4% this year while international routes, with higher fares, become increasingly important. See full story.
About 32% of the company's fuel consumption has been hedged in the first quarter at $63 a barrel for West Texas Intermediate crude oil, according to the update. See Futures Movers.
For the year, the company is 18% hedged at $60 a barrel.
American Airlines, like other carriers, has gone to great lengths to reduce fuel consumption because of the steep rise in jet fuel prices over the past few years. Fuel is typically an airline's second biggest operating cost after labor. See full story.
Also in the SEC filing, the company said expects its first-quarter consolidated unit revenue will rise between 9.9% and 10.9% from last year while it sees its mainline unit revenue increasing from 9.2% to 10.2%.
The AMR consolidated first-quarter cost per available seat mile is expected at 11.36 cents, or 8.13 cents excluding fuel. For the year, the figure is 11.25 cents, or 7.95 cents excluding fuel.
Cash and short-term equivalents should top $4.5 billion at the end of the first quarter, the company said.
Investor's Business Daily
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So what does this mean for the business traveller and the average joe traveling. Well it means that ticket prices will be going up. Do no expect to see as many deals as you saw last year. Prices will be VERY competitive this up coming year. If AMR's prediction of aviation jet fuel averaging near 2 dollars a gallon is fairly close, it could mean that the airline will try and find more ways to cut back on services. They already experimented with making passengers pay for non-alcoholic beverages. Look for American to start applying more fees, and maybe even fees for checked luggage. But these cost cutting measures will not be fixed on just American, when one airline raises prices, it is usually matched by the other big ones.
It may be a tough summer for the airlines if jet fuel prices continue to rise and remain high.
If American started charging for checked bags, where would you stand on the issue? Would you fly another carrier? Would you pay to check your luggage?
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