(July 25): American Airlines Group Inc cut its earnings outlook as it works to bounce back from earlier blunders that will weigh on revenue and profits for the rest of 2024.
Adjusted full-year profit will be 70 cents a share to US$1.30 (RM6.07), less than its earlier outlook of as much as US$3.25 a share, the carrier said on Thursday in a statement. It also expects to break even in the third quarter, well short of the 49-cent per share profit expected by analysts.
While it beat earnings estimates for the second quarter (2Q), the lowered outlook — American’s second reduction this year — highlights the fallout from earlier expectations for domestic demand that proved too optimistic and a misguided sales strategy that alienated some lucrative corporate clients.
The now-abandoned shift and loss of corporate business will reduce American’s revenue by about US$1.5 billion this year, chief executive officer Robert Isom said on the carrier’s quarterly earnings call.
“I’ve talked to dozens of CEOs, asking them to give me the straight scoop on how you perceive us,” Isom said in an interview with CNBC. “I wasn’t pleased. They told us, ‘You didn’t support us, you moved too fast on technology, you left us behind.’”
American’s shares erased early declines as Isom detailed steps underway to turn the operations around, rising 1.8% at 9.55am.
Isom in May acknowledged that the carrier had misjudged domestic demand, forcing it to slash 2Q profit and revenue expectations. The company also fired its chief commercial officer, who had led the changes to American’s corporate sales strategy.
The carrier said it is now working “aggressively” to rebuild those ties to corporate customers and travel management companies. It’s making sure they have full access to American’s flight schedules and range of fares.
American has also created dedicated help desk for business customers and added new account managers, after decimating its corporate sales staff last year as part of the now-abandoned shift.
Isom said he expects to see benefits from new agreements with travel management companies in coming months. Restoring relationships with corporations “may take a bit longer,” he said on the earnings call.
“We’re addressing that as quickly as we can,” he said. “We’re going to try to get in a good spot to kick off 2025, but we’ll have work to do. I am confident that over time we’ll recapture our share.”
American and other carriers also face pressure from cut-rate ticket prices that have become the latest hurdle for US airlines already wrestling with delayed deliveries of new planes and rising labour costs.
Although discount carriers have been blamed for slashing fares after adding too much flying capacity, American’s own “aggressive” discounting risks eroding its second-half results, Thomas Fitzgerald, a TD Cowen analyst, said in a report earlier this month.
American’s 2Q adjusted profit was US$1.09 per share, topping the US$1.05 average of analyst estimates compiled by Bloomberg. Revenue of US$14.3 billion met expectations.
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