The airlines’ pricing power has also improved as the industry cuts down excess capacity in the domestic market
American Airlines lifted its annual profit forecast on Thursday (Oct 24), recovering from the missteps in its sales strategy that had led to an exodus of corporate clients and on improved pricing power.
The airline’s move to cut perks and discounts tied to its contracts with corporate travel agencies and clients backfired, hurting its image and giving its peers an advantage. Since then, it has taken several steps to win back corporate clients.
The company said it renegotiated contracts with travel agencies in the third quarter, and many of its corporate customers have reintroduced the airline’s benefits programme to their business travellers.
“We have taken aggressive action to reset our sales and distribution strategy and re-engage the business travel community, which we’re confident will improve our revenue performance over time,” CEO Robert Isom said.
American’s pricing power has also improved as the airline industry cuts down excess capacity in the domestic market. It had led many carriers to offer seats at a discount to fill their planes during the summer season, denting their earnings.
Annual domestic seat growth has slowed to 1.5 per cent in October and November from 5.5 per cent in July, according to BofA analysts.
The company expects an adjusted earnings per share of US$1.35 to US$1.60, compared with its prior forecast of 70 US cents to US$1.30.
It reported an adjusted profit of 30 US cents per share, compared with expectations of 16 US cents, according to data compiled by LSEG.
Total operating revenue rose 1.2 per cent to US$13.65 billion, above estimates of US$13.49 billion. REUTERS
