AMERICAN Airlines cut its annual profit forecast on Thursday (Jul 25) as uneven demand trends and overcapacity in certain markets dampened the carrier’s pricing power, sending its shares down 8 per cent in premarket trading.
A rush among airlines to cash in on strong summer travel demand has forced them to offer tickets at a discount to fill their planes.
Analysts have flagged concerns with American’s aggressive discounting this summer, while the carrier has also distanced itself from high-margin corporate travel customers in an attempt to grow its share in smaller markets.
“During the second quarter, we did not perform to our initial expectations due to our prior sales and distribution strategy and an imbalance of domestic supply and demand,” CEO Robert Isom said on Thursday.
The Fort Worth, Texas-based carrier had trimmed its second-quarter profit forecast in May, citing pressure on its pricing power.
The company now expects an adjusted profit between US$0.70 per share and US$1.30 per share, compared with its previous forecast of US$2.25 to US$3.25 per share.
“American’s network leaves it more exposed to the markets currently most oversupplied and less able to offset the higher cost environment,” TD Cowen analyst Thomas Fitzgerald said in a note earlier this month.
American Airlines reported a profit of US$717 million, or US$1.01 per share for quarter ended Jun 30, compared with US$1.34 billion, or US$1.88 per share, a year earlier.
Its total operating revenue rose 2 per cent, to US$14.33 billion, from last year. REUTERS
