American Airlines has cut its annual profit forecast, citing issues with its previous sales and distribution strategy that impacted corporate travel revenue.
The airline reported its highest-ever quarterly revenue of $14.3 billion for Q2 2024, but a net income of $717 million (against $1,338 billion in 2023) and an adjusted net income of $774 million. The company pointed out that excess domestic market capacity has undermined pricing power across the industry.
CEO Robert Isom admitted that the previous strategy, which included reworking contracts with corporate travel agencies, cutting perks, and pushing direct bookings, did not meet expectations and drove away corporate travelers.
“American has a fleet, network and product built to deliver results, but during the second quarter, we did not perform to our initial expectations due to our prior sales and distribution strategy and an imbalance of domestic supply and demand,” said American’s CEO Robert Isom. “We are taking this challenge head-on, with clear and decisive actions to deliver on a strategy that maximizes our revenue and profitability, and importantly, one that makes it easy for customers to do business with American.”
Despite these efforts, the fallout from the previous strategy is expected to impact revenue and earnings through the remainder of the year. American has adjusted its full-year profit forecast to between $0.70 and $1.30 per share, down from the previous $2.25 to $3.25 per share. The company expects to break even in the current quarter.
American Airlines also scaled down its planned seat capacity growth for the second half of the year to address supply-demand imbalances. The airline continues to strengthen its balance sheet, reducing total debt by approximately $680 million in Q2, and remains committed to reducing total debt by $15 billion by the end of 2025.
