American Airlines is getting more flyers — but had to lower ticket prices to do it
Lots of people are flying American Airlines, but that isn’t translating into profits. Still, American Airlines stock was up about 5% in Thursday morning trading. The company said in its latest earnings report that it brought in a record $14.3 last quarter, with net income hitting $717 million — but it’s still slashing its guidance. Last quarter, American said that full-year earnings per share would be as much as $3.25, but now it’s forecasting as little as 70 cents.
“I want to first acknowledge that our current revenue performance is not where we want it to be,” CEO Robert Isom said on the company’s earnings call. “In May, we made a sizable adjustment to our revenue and earnings expectations for the second quarter, driven by an imbalance in domestic supply and demand and our prior sales and distribution strategy. We know we can do better, and we will rise to meet this challenge.”
On the one hand, Americans and the rest of the industry are dealing with softening demand. With passenger volumes rising, it might not look that way. American said that it operated its busiest-ever schedule over the Fourth of July weekend. But those seats are getting filled with lower fares. Isom told analysts and investors that “excess capacity” had led to “a higher level of discounting activity than we had expected.”
On the other hand, the company is still trying to repair its relationship with business-class frequent flyers. Their distaste for former chief commercial officer Vasu Raja’s emphasis on direct sales over tickets purchased through travel agents led to his ouster last month. Isom said on the call that he’s met with 30 c-suite executives at American’s business clients and that they’ve told him he needs to fix his company’s relationship with third-party brokers.
“The feedback we’ve heard demonstrates that changes we have made are focused on the right areas and that agencies and corporate customers want to work with us as we continue to adjust our strategy,” he said.
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Though America will presumably start having to pay its flight attendants more money after avoiding a strike and reaching a tentative agreement with their union, the company did not lay out what the specific financial impact might be. The terms of the deal have not yet been made public.
“Upon ratification,” Isom said, “this contract will provide immediate financial quality of life improvement for American flight attendants, one that we’re proud of and one our flight attendants have earned.”
Lots of people are flying American Airlines, but that isn’t translating into profits. Still, American Airlines stock was up about 5% in Thursday morning trading. The company said in its latest earnings report that it brought in a record $14.3 last quarter, with net income hitting $717 million — but it’s still slashing its guidance. Last quarter, American said that full-year earnings per share would be as much as $3.25, but now it’s forecasting as little as 70 cents.
“I want to first acknowledge that our current revenue performance is not where we want it to be,” CEO Robert Isom said on the company’s earnings call. “In May, we made a sizable adjustment to our revenue and earnings expectations for the second quarter, driven by an imbalance in domestic supply and demand and our prior sales and distribution strategy. We know we can do better, and we will rise to meet this challenge.”
On the one hand, Americans and the rest of the industry are dealing with softening demand. With passenger volumes rising, it might not look that way. American said that it operated its busiest-ever schedule over the Fourth of July weekend. But those seats are getting filled with lower fares. Isom told analysts and investors that “excess capacity” had led to “a higher level of discounting activity than we had expected.”
On the other hand, the company is still trying to repair its relationship with business-class frequent flyers. Their distaste for former chief commercial officer Vasu Raja’s emphasis on direct sales over tickets purchased through travel agents led to his ouster last month. Isom said on the call that he’s met with 30 c-suite executives at American’s business clients and that they’ve told him he needs to fix his company’s relationship with third-party brokers.
“The feedback we’ve heard demonstrates that changes we have made are focused on the right areas and that agencies and corporate customers want to work with us as we continue to adjust our strategy,” he said.
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Though America will presumably start having to pay its flight attendants more money after avoiding a strike and reaching a tentative agreement with their union, the company did not lay out what the specific financial impact might be. The terms of the deal have not yet been made public.
“Upon ratification,” Isom said, “this contract will provide immediate financial quality of life improvement for American flight attendants, one that we’re proud of and one our flight attendants have earned.”
Lots of people are flying American Airlines, but that isn’t translating into profits. Still, American Airlines stock was up about 5% in Thursday morning trading. The company said in its latest earnings report that it brought in a record $14.3 last quarter, with net income hitting $717 million — but it’s still slashing its guidance. Last quarter, American said that full-year earnings per share would be as much as $3.25, but now it’s forecasting as little as 70 cents.
“I want to first acknowledge that our current revenue performance is not where we want it to be,” CEO Robert Isom said on the company’s earnings call. “In May, we made a sizable adjustment to our revenue and earnings expectations for the second quarter, driven by an imbalance in domestic supply and demand and our prior sales and distribution strategy. We know we can do better, and we will rise to meet this challenge.”
On the one hand, Americans and the rest of the industry are dealing with softening demand. With passenger volumes rising, it might not look that way. American said that it operated its busiest-ever schedule over the Fourth of July weekend. But those seats are getting filled with lower fares. Isom told analysts and investors that “excess capacity” had led to “a higher level of discounting activity than we had expected.”
On the other hand, the company is still trying to repair its relationship with business-class frequent flyers. Their distaste for former chief commercial officer Vasu Raja’s emphasis on direct sales over tickets purchased through travel agents led to his ouster last month. Isom said on the call that he’s met with 30 c-suite executives at American’s business clients and that they’ve told him he needs to fix his company’s relationship with third-party brokers.
“The feedback we’ve heard demonstrates that changes we have made are focused on the right areas and that agencies and corporate customers want to work with us as we continue to adjust our strategy,” he said.
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Though America will presumably start having to pay its flight attendants more money after avoiding a strike and reaching a tentative agreement with their union, the company did not lay out what the specific financial impact might be. The terms of the deal have not yet been made public.
“Upon ratification,” Isom said, “this contract will provide immediate financial quality of life improvement for American flight attendants, one that we’re proud of and one our flight attendants have earned.”
