American Airlines The airline’s CEO vowed Thursday to be “diligent” in ensuring capacity does not exceed demand after the airline cut its full-year profit forecast following a back-channel sales strategy and an industry-wide glut of flights that forced airlines to cut seat prices.
American said it expects adjusted earnings of 70 cents to $1.30 a share this year, well below the $2.25 to $3.25 a share it forecast in April and below the $1.10 to $2.60 a share expected by Wall Street analysts, according to LSEG.
The Fort Worth, Texas-based airline also estimated its unit revenue would fall as much as 4.5% for the third quarter as strong travel demand failed to offset a surplus of flights.
American Airlines’ profit fell 46 percent in the second quarter to $717 million, or $1.01 a share, even as revenue rose 2 percent to $14.33 billion. Carriers have struggled with oversupply in the domestic market, and executives at American Airlines and other airlines plan to cut capacity growth in the second half of the year.
American plans to increase its production capacity by about 3.5% in the second half of the year, down from about 8% in the first half, and in line with an estimate given in May.
“As we look to the fourth quarter and beyond, we’re going to react to the market and make sure we’re competitive, but at the same time, we’re going to do what’s right for profitability,” CEO Robert Isom said on an earnings call Thursday. “As we look to 2025, we’re going to be very diligent in assessing and making sure that we certainly don’t exceed demand.”
American also reversed its direct-to-consumer strategy adopted in 2023, which backfired. It said in a press release Thursday that it had “taken swift and aggressive steps to realign its sales and distribution strategy” after complaints from travel agents and customers.
Isom said on the earnings call that the strategy, which was aimed at generating more bookings on American’s platforms but alienated some corporate customers who didn’t have access to all of the airline’s fares, would cost the carrier about $1.5 billion in revenue this year.
Here’s how American performed in the second quarter compared to Wall Street estimates compiled by LSEG:
- Earnings per share: $1.09 adjusted vs. $1.05 expected
- Income: $14.33 billion versus $14.36 billion expected
Including one-time items, the airline reported profit of $1.09 per share, above the $1.05 per share analysts had expected.
US results come after Southwest Airlines The group also reported a 46% drop in quarterly profit and said it was taking “urgent” steps to boost revenue.
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