American issues weak profit forecast after backfired sales plan, industry oversupply

American Airlines CEO on Thursday vowed to be "diligent" in making sure capacity doesn't outgrow demand after the carrier slashed its profit forecast for the year after a backfired sales strategy and an industrywide glut of flights that have forced airlines to discount seats.

American said it 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, according to LSEG.

The Fort Worth-Texas based airline 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.

American's profit fell 46% during the second quarter to $717 million, or $1.01 per share, even though revenues rose 2% to $14.33 billion. Carriers have faced an oversupplied domestic market, and executives at American and other airlines are planning to scale back their capacity growth in the second half of the year.

American expects to grow in the second half of the year by about 3.5%, down from roughly 8% growth in the first half, and in line with an estimate it gave in May.

"As we take a look at into the fourth quarter and then beyond, we're going to react to the marketplace and making sure that we're competitive, but at the same time, doing what's right for profitability," CEO Robert Isom said on an earnings call on Thursday. "As we take a look out into 2025, we're going to be very diligent in assessing and making sure that we're certainly not outgrowing demand."

American has also reversed policies of a direct-to-consumer sales strategy it 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.

Isom said on an 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 airline about $1.5 billion in revenue this year.

Here is how American performed in the second quarter compared with Wall Street estimates compiled by LSEG:

Adjusting for one-time items, the airline reported earnings of $1.09 per share, above the $1.05 a share analysts expected.

American's results come after Southwest Airlines also reported a 46% drop in its quarterly profit and said it is taking "urgent" steps to increase revenue.