Isom highlighted the loyalty program's revenue as a "bright spot," noting an 8% year-over-year growth.
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American AirlinesOn Thursday, July 25, American Airlines reported a record second-quarter (Q2) revenue of $14.3 billion, despite a 46% drop in net income to $717 million. A highlight, however, was its thriving loyalty program.
During the earnings call, American Airlines CEO Robert Isom admitted the company’s poor performance, attributing it to a flawed sales and distribution strategy and challenges in domestic demand. He stressed a proactive plan to address these issues, aiming to boost revenue and profitability while improving customer convenience.
“Our current revenue performance is not where we want it to be,” Isom said. “We know we can do better, and we will rise to meet this challenge,” adding that the reset “will take some time.”
The airline’s profits fell sharply in Q2 as it works to recover from a controversial distribution strategy that led to the recent departure of chief commercial officer Vasu Raja. This strategy, which encouraged corporate customers to book directly on the airline’s website rather than through travel agencies, did not succeed.
“The biggest issue we had is our misstep in our sales and distribution strategy,” Isom explained. “We have not met our expectations this year,” and the airline is urgently working to get back on track.
In response, American Airlines revised its sales and distribution approach. This included reinstating competitive fares through traditional travel agency channels, scrapping plans to differentiate mileage earned by booking channel, and expanding benefits under its AAdvantage Business program. The airline also intensified outreach efforts to corporate and agency partners, renegotiating contracts and enhancing support structures.
AAdvantage Program Growth
Isom highlighted the loyalty program’s revenue as a “bright spot,” noting an 8% year-over-year growth.
“We think we can do a lot better than that. Our partners want to get involved more, and there’s an opportunity for that. It will be a better deal in the long run and will produce very positive results,” Isom said.
“American has a fleet, network, and product built to deliver results, but 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,” he added.
American Airlines has expanded its AAdvantage Business incentive program to reward miles and loyalty points for bookings made through travel agencies, reversing a previous policy that limited rewards to direct bookings.
Launched on July 16, this change is part of American’s efforts to enhance flexibility and attract more business travelers. The program, available to companies with at least five active travelers and those using the Citi AAdvantage Business World Elite Mastercard, allows businesses to earn points redeemable for flights, hotels, car rentals, and more. Additional enhancements, including simplified mile management and customizable travel policies, are planned by the end of the year.
Premium (including business class) revenue rose 9%, a figure projected to reach 20% by 2026, Isom noted.
American Airlines remains committed to strengthening its balance sheet. In Q2, the company reduced total debt by approximately $680 million and is now over $13 billion, or roughly 87%, toward its goal of reducing total debt by $15 billion by the end of 2025.
Source: American Airlines
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