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.
The carrier reported a net income of $717 million, a 46% decline compared to the same time last year. American also had record revenues for the quarter at $14.3 billion.
American’s results mirror that of its fellow Texas-based carrier, Southwest Airlines, which also saw the same decline in profits yet record revenues for the second quarter.
CEO Robert Isom said the distribution strategy and an imbalance of domestic seats were the cause of the decline in profits. Its competitors, United Airlines and Delta Air Lines, are also struggling with a glut of domestic seats, but reported much higher profits and revenues for the second quarter.
American previously championed a distribution approach that involved selling tickets directly. Many travel agencies were against the changes, filing complaints with the Department of Transportation and trying to lobby American to walk back the changes.
The carrier was about to roll out a major change to its loyalty program that would let customers earn frequent flyer miles only when they booked tickets with certain agencies. The proposed changes received significant backlash from travel agencies.
Isom said the carrier is no longer moving forward with the changes.
The distribution strategy was one of the reasons that ultimately led to the departure of chief commercial officer Vasu Raja. American has been dealing with a decline in revenues and hasn’t been able to fully benefit from the rebound in business travel.
At the 2023 Skift Aviation Forum, Isom defended the approach, saying that customers “shouldn’t need a lot of intermediaries to tell them what’s available.”
American said it has now restored competitive fares in the distribution channel traditionally used by travel agencies and corporate booking platforms. Executives will host a call to discuss second-quarter earnings with analysts at 8:30 a.m. ET.