American Airlines' defunct corporate distribution strategy led its corporate- and agency-flown revenue share in the second quarter to bottom out "11 percent below our historical share," American CEO Robert Isom said Thursday during the company's third quarter earnings call. Those indirect bookings, however, have "started to recover, and we estimate we are currently at 7 percent below historical levels, and we expect to see continued improvement in the months ahead. … The booking trajectory through the quarter [was] encouraging."
In echoing its second-quarter earnings call, American executives spent a fair amount of time Thursday addressing its since-repealed corporate distribution strategy, admitting once again that it cost the company $1.5 billion in revenue this year as well as corporate share and those previous moves "angered" customers.
For the quarter, American's managed business revenue was up 6 percent year over year, and "we continue to see yield strength in the segment," Isom said, adding that the carrier is tracking its recovery process by "measuring our agency and corporate booking performance, tracking the growth of our AAdvantage Business program, and listening to the feedback from our agency partners and corporate customers."
American aims to fully restore its revenue from indirect channels by the end of 2025, according to Isom.
Chief strategy officer Steve Johnson pointed to six company objectives around its reversed distribution strategy. The first was "to stabilize the ship and refocus the team," he said. The carrier also needed to rebuild its foundation and infrastructure to participate in traditional sales and distribution channels since that had "largely been dismantled," and it needed to be rebuilt in a lasting way "that our partners would trust."
Third, "and most importantly, we needed to reestablish and start redeveloping our relationships" by listening, Johnson said, "and ultimately getting past a stage that was really anger and reacquainting ourselves with these people and regaining their trust in a way that was really important."
The final three objectives were to shift share, outperform guidance, and achieve the latter "in a way that we didn't lose additional ground to our principal competitors," Johnson said. He noted that American had made progress on all fronts during the quarter.
Isom added that in the third quarter, the carrier continued negotiations for new incentive-based agreements with the largest travel management companies. "We now have new competitive agreements in place with more than half of those and are in advanced negotiations with the rest," he said. In addition, American has amended agreements with "many of our top corporate customers."
American Q3 Metrics
American reported third-quarter passenger revenue of more than $12.5 billion, up 0.8 percent year over year, with total revenue up 1.2 percent for the period to more than $13.6 billion, a third-quarter record. The carrier also reported a net loss of $149 million, down from the $545 million reported in Q3 2023. Capacity increased 3.2 percent compared with a year prior, while the average fuel price was $2.50 per gallon.
The carrier in its guidance projected fourth-quarter capacity to be up 1 percent to 3 percent year over year, with full-year 2023 capacity to increase 5 percent to 6 percent. The average fuel price is projected to be $2.20 to $2.40 per gallon. American also expects 2025 capacity to grow in the low single digits year over year, with a focus on "markets that are still not restored to historical levels," American CFO Devon May said.
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