iStock

American Airlines (AAL - Get Report) shares surged to the top of the S&P 500 Thursday, boosting shares of rival carriers, following a report from JPMorgan that suggests airlines have been raising domestic ticket prices.

JPMorgan sector analyst Jamie Baker noted that American had increased some fares by around $5 each way, noting that others such as Southwest Airlines Co.  (LUV - Get Report) joined the industry trend, which followed a similar price hike just five weeks ago.

"To our surprise, domestic fares are rising again, after successfully doing so just five
weeks ago, with increasing Southwest participation coming overnight,"  Baker wrote. "Granted, airline stocks are already off to a reasonable start this morning, but given the crescendo of inquiries as to why, and nary a question on fares, we are confident that knowledge of increased domestic fare resilience is not yet priced into the market."

American Airlines shares were marked 5.4% higher in the opening hours of trading Thursday and changing hands at $32.77 each. United Continental Holdings (UAL - Get Report) , the parent of United Airlines, jumped 3.3% to $86.55 while Delta Airlines  (DAL - Get Report) was last seen 2.5% higher at $56.82 per share. Southwest gained 2.9% to trade at $52.29 each. 

The fare increases come as global jet fuel prices, alongside crude oil costs, have continued to decline over the past three months. The International Air Transport Association, a business lobby, indicated that jet fuel prices have fallen more than 11.4% from a month ago, and are down 14.6% from the same period last year.

"The industry's last broad-based, plain-vanilla increase occurred in the second week of May," Baker said. "Accordingly, and with spot fuel prices having declined ~$0.25/gallon since that time, we were obsessing over domestic fares much less than usual given what we viewed as a low probability of further increases."

However, the U.S. Energy Information Administration said earlier this week that it expects jet fuel costs to rise by around 10 cents per gallon next year, while International Maritime Organization rules, which require air carriers -- as well as maritime vessels -- to use fuels with a lower sulfur content, are expected to add upward pressure on the airlines sector's key cost base. 

"Our current estimate for 2019 fuel expense is approximately $650 million higher than it was when we spoke on this call just three months ago," American Airlines CEO Dough Parker told investors on the company's first quarter earnings conference call.

"But despite these challenges, we're still - anticipate our 2019 EPS to increase approximately 10% versus 2018," he added. "And as we look to 2020 and beyond we anticipate our free cash flow for production will increase significantly, as our historic fleet replacement program winds down."