U.S. carriers sank after American Airlines Group Inc. trimmed its profit forecast and Southwest Airlines Co. said ticket sales had slowed after its first passenger fatality.

A jump in fuel prices over the last two weeks prompted American to cut its expected earnings for this year because “it takes time to adapt,” Chief Executive Officer Doug Parker said Thursday. Southwest predicted weaker pricing power this quarter, citing a drop in bookings after last week’s deadly accident.

The sober outlooks cast a pall on airlines, which have slipped on the stock market this year amid investor fears that United Continental Holdings Inc.’s expansion plan will spark fare wars and drag down profits. American’s report underscored the threat of rising costs. Jet fuel has climbed 21 per cent since hitting its 2018 low on Feb. 13, as benchmark oil prices have advanced.

“Pricing is weak but fuel costs are rising,” Logan Purk, an analyst at Edward Jones, said in an interview. “You can’t really offset those costs in this pricing environment.”

American tumbled 4.3 per cent to US$43.30 at 10:11 a.m. in New York after sinking as much as 10 per cent for the biggest intraday decline since June 2016. The carrier fell the most on a Standard & Poor’s index of major U.S. carriers, which dropped 2.6 per cent. Southwest fell 3 per cent.

In a statement, American said adjusted earnings would be US$5 to US$6 a share this year because of the drag from fuel. That was 50 cents lower than the previous forecast.

‘NEAR-TERM PROBLEM'

“Fuel prices have risen very quickly,” Parker said on a conference call with analysts after the Fort Worth, Texas-based company reported earnings Thursday. “I view that as a near-term problem. It’s one the industry can handle over time, but it doesn’t happen immediately.”

If fuel prices remain at current levels or increase more, fares will probably trend up over time, Parker said. American estimated it will pay US$2 billion more for fuel this year from the higher prices alone.

American’s first-quarter adjusted earnings fell to 75 cents US a share. Analysts had expected 72 cents US, according to the average of estimates compiled by Bloomberg. Revenue climbed 5.9 per cent to US$10.4 billion, in line with Wall Street expectations.

SOUTHWEST ACCIDENT

At Southwest, first-quarter profit climbed to 75 cents US a share, a penny more than the average of analysts’ estimates compiled by Bloomberg. Revenue increased 1.9 per cent to US$4.9 billion, while analysts expected US$5 billion. A reduction in its federal income tax rate “significantly” increased first-quarter net income, Southwest said.

Revenue for each seat flown a mile, a proxy for pricing power, will drop as much as 3 per cent this quarter, Southwest said. The Dallas-based carrier blamed as much as two percentage points of the decline on weak sales after an accident in which an engine exploded in flight last week, piercing the plane and killing a passenger.

Other airlines expect gains in the pricing-power gauge. Delta Air Lines Inc. predicted an increase of as much as 5 per cent. American said its gain would be as high as 3.5 per cent.