(Bloomberg) -- American Airlines Group Inc. boosted its full-year profit guidance, highlighting progress rebuilding from a failed sales strategy while it grapples with persistently high costs.
The carrier now expects adjusted earnings of as much as $1.60 per share, the company said a statement as it reported third-quarter results. That’s better than the $1.23 average of analyst estimates compiled by Bloomberg. American previously forecast a profit of no more than $1.30 a share in 2024.
Adjusted earnings in the third quarter were 30 cents a share, also beating Wall Street’s expectations for 14 cents.
American’s shares reversed premarket losses to rise as much as 6.2% as of 9:32 a.m. in New York on Thursday.
The rosier outlook marks a sharp turnaround from July, when American cut its earnings projections for a second time this year. It also indicates the carrier is starting to win back some of the lucrative corporate business it lost after embracing a misguided strategy to lure corporate travelers that it abandoned after losing major clients.
“We did some damage to ourselves with our sales and distribution strategy,” Chief Executive Officer Robert Isom said on the company’s earnings call. “I’m really pleased with what I see in terms of recovery of that.”
Still, the carrier continues to face high costs, saying its non-fuel expenses are trending toward the top end of its prior guidance. Unit revenue, an indicator of travel demand and fares, should also decline by as much as 3% in the current quarter, worse than the 1.4% decline estimated by TD Cowen.
Corporate Travel
American has been challenged this year by an oversupply of airplane seats in the US market, its failed business-travel strategy and disruptions such as the technology outage that affected several US airlines
Isom earlier estimated the loss of business travel accounts would reduce revenue by $1.5 billion and weigh on earnings through the rest of 2024. He said the carrier should fully recover those lost sales by the end of next year.
The carrier rolled back many of the changes to make sure corporate customers and their travel managers have full access to American’s flight schedules and range of fares and to restore loyalty program benefits.
American has taken “aggressive action” to revamp its sales and distribution strategy, renegotiating contracts with a majority of major travel agencies “and many of its top corporate customers,” the carrier said in the statement. It’s also added sales account managers and support staff, but is still working to regain some lost customers.
Revenue from corporate accounts using travel managers rose 6% in the third quarter from the second, Isom said. The airline’s share of corporate business fell as much as 11% as a result of its errant policy changes and is now down 7% based on forward bookings, he said.
It created a dedicated help desk for business customers and added new account managers, after decimating its corporate sales staff last year as part of the now-abandoned strategy shift that also cost long-time executive Vasu Raja his job as chief commercial officer.
(Updates with opening shares, adds CEO comment, additional detail from fourth paragraph.)
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