American Airlines CEO on Thursday vowed to be “diligent” in ensuring capability doesn’t outgrow demand after the carrier slashed its profit forecast for the 12 months after a backfired sales strategy and an industrywide glut of flights which have forced airlines to discount seats.
American said it expects to earn an adjusted 70 cents to $1.30 per share this 12 months, well below the $2.25 to $3.25 a share it forecast in April and in need of the $1.10 to $2.60 a share that Wall Street analysts were expecting, in keeping with LSEG.
The Fort Value-Texas based airline also estimated its unit revenue would drop as much as 4.5% for the third quarter as high travel demand didn’t make up for an excess of flights.
American’s profit fell 46% throughout the second quarter to $717 million, or $1.01 per share, though revenue rose 2% to $14.33 billion. Carriers have faced an oversupplied domestic market, and executives at American and other airlines are planning to reduce their capability growth within the second half of the 12 months.
American expects to grow capability within the second half of the 12 months by about 3.5%, down from roughly 8% growth in the primary half, and in step with an estimate it gave in May.
“As we have a look into the fourth quarter after which beyond, we will react to the marketplace and ensuring that we’re competitive, but at the identical time, doing what’s right for profitability,” CEO Robert Isom said on an earnings call on Thursday. “As we have a look out into 2025, we will be very diligent in assessing and ensuring that we’re definitely not outgrowing demand.”
American has also reversed policies of a direct-to-consumer sales strategy it adopted in 2023 that backfired. It said in an earnings release Thursday that it has “taken swift and aggressive motion to reorient its sales and distribution strategy” after complaints from travel agents and customers.
Isom said on the earnings call that the strategy, which sought to drive more bookings to American’s platforms but alienated some corporate customers that did not have access to all the airline’s fares, would cost the carrier about $1.5 billion in revenue this 12 months.
Here is how American performed within the second quarter compared with Wall Street estimates compiled by LSEG:
- Earnings per share: $1.09Â adjusted vs. $1.05 expected
- Revenue:Â $14.33 billion vs. $14.36 billion expected
Adjusting for one-time items, the airline reported earnings of $1.09 per share, above the $1.05 a share analysts expected.
American’s results come after Southwest Airlines also reported a 46% drop in its quarterly profit and said it’s taking “urgent” steps to extend revenue.
