American Airlines' fourth-quarter managed business revenue increased by 8 percent year over year as the carrier continues to focus on the segment following its distribution strategy pivot in May 2024. American CEO Robert Isom during a Thursday morning earnings call reiterated the carrier's aim announced on its third-quarter call to fully recapture its corporate share by the end of 2025.
"We remain on track to fully restore our revenue share from indirect channels as we exit this year. I feel really good about the progress we've made in a short six-month period," Isom said, adding the Q4 increase in business revenue represented "a sequential improvement of two points versus last quarter, and we continue to see yield strength as we look ahead into the new year. … As we take a look at forward bookings, it really suggests that we've got traction in the marketplace."
American vice chair and chief strategy officer Steve Johnson, who was tapped to oversee the carrier's corporate recovery, suggested American's share of that segment could be made full even sooner than year-end but added "it's not a linear process."
Johnson noted that the abandonment of the prior strategy along with the restoration of content into the traditional EDIFACT channel and Isom's engagement with American's "partners in the third quarter" had an impact on share. The fourth quarter was "a little bit different," he said.
During Q4, American focused on negotiating new deals with its "partners in the indirect community," Johnson said. "It's an arduous task, kind of counterparty by counterparty. While it was going on, understandably, we were negotiating, so you didn't see a lot of share shift during that period of time. Indeed, some of our partners sent us even stronger messages during those negotiations. But it was ultimately successful, and we now have new agreements with 30 of the most important [travel management companies] and agencies."
Johnson added that those agreements "create real incentives to move business to American. I expect those agreements are going to be big drivers of share shift in the first and second quarter," he said. "So, you'll see continued progress."
Isom said that the carrier also reviewed and reworked agreements with its corporate customers most affected by the previous strategy "and largely restored share of those travelers in our hub markets," he said. "I spent a considerable amount of my time making sure that I was up to speed and talking to our corporate customers and agencies as well. That work is paying off."
As part of the abandoned strategy, Johnson acknowledged that American "had created a kind of one-size-fits-all discounting system for corporations that across the board … that reduced discounts to an uncompetitive level. That impacted about 24 percent of our corporate customers. Those were the ones that over the course of the strategy, their contracts came up, and we were able to change them. … [We've] established economics that are more consistent with the past and more competitive. The revenue from those agreements, even with a little bit better discounting, is going to be very accretive."
American Q4, FY2024 Metrics
American reported fourth-quarter passenger revenue of $12.4 billion, up 3.3 percent year over year, on total revenue that increased 4.6 percent from Q4 2023 to nearly $13.7 billion. Total 2024 passenger revenue was nearly $49.6 billion, with total revenue above $54.2 billion, for year-over-year increases of 2.2 percent and 2.7 percent, respectively.
Q4 net income was $590 million, up from the $19 million reported a year earlier. Total net income for 2024 was $846 million, up 2.9 percent year over year. Capacity for the quarter was up 2.5 percent from Q4 2023, while full-year capacity increased 5.5 percent. The average price of fuel was $2.34 per gallon for the quarter and $2.60 for full-year 2024.
American projects first-quarter revenue to be up 3 percent to 5 percent year over year and full-year 2025 revenue to increase 4.5 percent to 7.5 percent. "This is driven by continued indirect revenue recapture, strong demand for our product and a constructive industry backdrop with supply in line with expected demand," American CFO Devon May said.
Capacity for the first quarter is expected to be flat to down 2 percent versus Q1 2024, "driven by lower capacity in the off-peak months of January and February, which combined are down approximately 3 percent, followed by growth of 3 percent to 4 percent in the peak travel period in March," May said. "We continue to expect full-year capacity to be up low-single-digits."
RELATED: American Q3 performance