American Airlines Earnings Trail Competitors as It Resets Distribution Strategy
Skift Take
Key Points
- American Airlines reported a Q3 loss of $149 million, trailing competitors Delta and United.
- The carrier faced backlash for its direct booking strategy and is now renegotiating agency contracts.
- American Airlines is resetting its sales strategy to re-engage business travel and improve revenues.
Summary
American Airlines reported a third-quarter loss of $149 million, lagging behind competitors Delta and United, who posted profits. The airline's previous direct booking strategy led to backlash from travel agencies and a decline in revenue, prompting a shift back to traditional distribution methods. To recover, American Airlines is renegotiating contracts with major travel agencies and corporate customers, reintroducing traveler benefits, and hiring more sales staff to boost its presence in the business travel sector.
American Airlines reported a loss of $149 million for the third quarter as it continues to deal with the fall out of its distribution strategy.
The figure is an improvement from the year before, when American had a $545 million loss. However, the carrier is trailing Delta Air Lines and United Airlines as both reported third-quarter profits of $971 million and $965 million, respectively. American had revenues of $13.6 billion.
The carrier said that it was able to quickly bounce back from the CrowdStrike outage and Hurricanes Debby and Helene.
American Looks to Restore Relationships With Travel Agencies
American CEO Robert Isom said the company is working to reset its sales and distribution strategy after its previous approach received significant backlash from travel agencies and caused a decline in revenues.
“We know full restoration of our revenue will take some time. But with the progress we’re seeing and the actions underway, we aim to fully restore our revenue from indirect channels as we exit 2025,” Isom said during the earnings call. “We will continue our relentless focus on reestablishing relationships with our business customers, re-embracing the agency channel, and making it easier to do business with American.”
For the third quarter, American said it renegotiated contracts with a majority of the largest travel agencies and many of its top corporate customers. It is also reintroducing traveler benefits for corporate customers, along with adding more sales account managers and support staff.
American previously championed a distribution strategy that involved selling tickets directly. Travel agencies filed complaints with the Department of Transportation over the changes, arguing that it was an anti-competitive practice.
The carrier received more backlash when it said it would let customers earn frequent flyer miles only if they booked tickets with certain travel agencies.
The botched approach ultimately led to the departure of chief commercial officer Vasu Raja. Now, American has been trying to return to a more traditional distribution strategy as it seeks to benefit from the same business travel boom that has boosted Delta’s and United’s profits.
The Transatlantic Market Remains Strong
Among the three major U.S. carriers, the transatlantic market has been a source of strength due to sustained demand for international travel.
Isom said that long-haul routes continued to do well during the third quarter. The carrier saw an 8% increase in premium revenues during the period, with 72% of premium cabin revenues coming from AAdvantage members. Loyalty revenues were also up 5% compared to last year.
And while American hasn’t seen the same surge in corporate bookings like Delta or United, Isom said managed business revenue was up 6%.
Robert Isom, the American Airlines CEO, is due to appear at the Skift Aviation Forum on November 12. Click here for more information and to book your ticket.
Airlines Sector Stock Index Performance Year-to-Date
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Photo Credit: The tail of an American Airlines aircraft. Airbus Airbus / Airbus
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