In the midst of macroeconomic challenges and softening of main cabin demand, American Airlines in the first quarter continued to see recovery in its indirect channel share of revenue, according to executives on a Thursday morning earnings call.
"Despite the headwinds in the economy and lower capacity, managed business revenue was up 8 percent year over year in the first quarter," American president and CEO Robert Isom said on the call.
Isom added that the financial and professional services sectors showed specific strength during the quarter.
Though business revenue was up, it was offset by "significant weakness in our main cabin demand, significant weakness among our most discretionary travelers," American vice chair Steve Johnson said.
Isom added that government business has "fallen off considerably as well."
Johnson reiterated, though, that American is "not seeing any real pullback in business travel at this point across the board. That may come later if the economy continues to deteriorate. But right now, it all looks pretty vibrant."
In the second quarter of 2024, when American pivoted from its prior New Distribution Capability-focused distribution strategy, the share of the carrier's revenue from indirect-channels was down by 11 percent from historical levels. The carrier has continued to increase that share each quarter since. It was down 7 percent at the end of the first quarter; it is expected to be down by about 5 percent by the end of the second quarter, according to an earnings presentation.
Johnson noted that the normalization of that segment was captured in share, "so it's not absolute numbers."
Still, "we remain on track to restore our revenue share from indirect channels to historical levels as we exit this year, despite the current macroeconomic uncertainty," Isom said.
American Q1 Metrics
American reported first-quarter passenger revenue of nearly $11.4 billion, down 0.6 percent year over year. Total revenue was $12.55 billion, down from $12.57 billion a year prior. The carrier's net loss was $473 million for the quarter compared with a loss of $312 million in Q1 2024. The Jan. 29 fatal collision of American Flight 5342 with a military helicopter in Washington, D.C., had a $200 million negative affect on revenue, according to the carrier.
First-quarter capacity declined 0.9 percent year over year. Load factor also declined to 80.6 percent from 81.5 percent a year prior. The average fuel price for the quarter was $2.48 per gallon.
American pulled its full-year guidance, but the carrier's second-quarter outlook includes capacity growth of 2 percent to 4 percent year over year. Total revenue is expected to be down 2 percent to up 1 percent compared with Q2 2024, due to "a lot of uncertainty," Isom said.
"Our view as we go forward is we're going to be nimble and quick to react, size demand, size capacity to demand," he said. "But I'll tell you right now, we have a negative bias to all capacity as we go forward. We’ll know more as time develops in the next several weeks, month, and we'll have more to talk about on that on future earnings calls."
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