‘Sales plan’ pushes American Airlines to slash earnings forecast

American Airlines has slashed its profit forecast for the year due to a backfired sales plan and an industry-wide glut of flights. The carrier’s profit fell 46% during the second quarter, even though revenues rose.

The company expects to earn an adjusted 70 cents to $1.30 per share this year, well below the $2.25 to $3.25 a share it forecast in April and short of the $1.10 to $2.60 a share that Wall Street analysts were expecting.

American Airlines also estimated its unit revenue would drop as much as 4.5% for the third quarter as high travel demand failed to make up for an excess of flights. The company is expected to grow capacity in the second half of the year by about 3.5%, down from roughly 8% growth in H1.

CEO Robert Isom said on earnings call that as they look into the fourth quarter and beyond, they will be very diligent in assessing and making sure that they are certainly not outgrowing demand.

American has reversed policies of a direct-to-consumer sales strategy adopted in 2023 that backfired. It said in an earnings release Thursday that it has “taken swift and aggressive action to reorient its sales and distribution strategy” after complaints from travel agents and customers.

CEO said on the earnings call that the strategy, which sought to drive more bookings to American’s platforms but alienated some corporate customers that didn’t have access to all of the airline’s fares, would cost the carrier about $1.5 billion in revenue this year.
American performed in the second quarter compared with Wall Street estimates compiled by LSEG: earnings per share: $1.09 adjusted vs. $1.05 expected. Revenue: $14.33 billion vs. $14.36 billion expected.