On Thursday (July 25), American Airlines announced a record second-quarter (Q2) revenue of $14.3 billion. However, net income plunged 46%, to $717 million, while a “bright spot” was its loyalty program.
During the company’s earnings call, American Airlines CEO Robert Isom acknowledged the poor performance, pointing to a failed sales and distribution strategy and domestic demand challenges. Isom emphasized a proactive approach to rectify these issues, focusing on maximizing revenue and profitability while enhancing customer convenience.
“Our current revenue performance is not where we want it to be,” Isom said. “We know we can do better, and we will rise to meet this challenge,” adding the reset “will take some time.”
American Airlines’ profits dipped significantly in the second quarter as it seeks to recover from a controversial distribution strategy that led to the departure of its chief commercial officer Vasu Raja last month. That strategy steered corporate customers toward booking directly on the airline’s site, rather than through travel agencies, which proved unsuccessful.
“The biggest issue we had is our misstep in our sales and distribution strategy,” Isom said. “We have not met our expectations this year,” and the airline is working with “urgency to get us back on track.”
In response, American Airlines pivoted its sales and distribution strategy. This involved reinstating competitive fares through traditional travel agency channels, removing plans to differentiate mileage earned by booking channel and expanding benefits under its AAdvantage Business program. The airline also engaged in extensive outreach efforts to corporate and agency partners, renegotiating contracts and bolstering support structures.
Loyalty program revenue, Isom said, has been “one of the bright spots,” pointing to its 8% year-over-year growth.
“We think we can do a lot better than that. What I see from our partners is they want to get involved in more ways, and there’s an opportunity for that. It will be a better deal in the long run that will produce results that will be very positive,” Isom said.
“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,” he added.
As mentioned earlier, American Airlines has expanded its AAdvantage Business incentive program to reward miles and loyalty points for bookings made through travel agencies, reversing a previous policy that limited rewards to direct bookings.
Launched on July 16, this reversal is part of American’s efforts to enhance flexibility and attract more business travelers. The program, available to companies with a minimum of five active travelers and those using the Citi AAdvantage Business World Elite Mastercard, allows businesses to earn points redeemable for flights, hotels, car rentals and more. American Airlines plans more enhancements, including simplified mile management and customizable travel policies, by the end of the year.
Premium (which includes business class) revenue rose 9%, a figure projected to reach 20% in 2026, Isom noted.
American Airlines said it remains committed to strengthening its balance sheet. In the second quarter, the company reduced total debt by approximately $680 million and is now more than $13 billion, or approximately 87%, toward its goal of reducing total debt by $15 billion by the end of 2025.
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