American Airlines Group Inc (NASDAQ:AAL, ETR:A1G) has slashed its profit forecast for the year, attributing the revision to its recent pricing strategy which involved selling tickets at lower rates to fill planes.
In an effort to boost summer travel, American Airlines sold cheaper tickets and targeted customers from smaller cities rather than high-paying business travelers. However, this approach led to diminished revenue per seat and lower-than-expected profits.
The airline now anticipates adjusted earnings per share (EPS) of $0.70 to $1.30 for the year, a steep drop from its prior forecast of $2.25 to $3.25 per share.
For Q2, the airline reported revenue of $14.3 billion, a 2% increase from the previous year, with adjusted EPS of $1.09, slightly ahead of Street estimates.
This represents a 46% decrease in profit compared to the same quarter last year.
CEO Robert Isom admitted that the company did not meet its expectations due to a flawed sales and distribution strategy.
Looking ahead, American Airlines projects a near break-even EPS for Q3, significantly below analysts' expectations of $0.44.
The carrier is taking "swift and aggressive action" to realign its strategy and improve profitability, aiming to reduce its total debt by $15 billion by the end of 2025.
Shares of American Airlines initially fell by 8% premarket but rebounded at the open to trade around 1.7% higher.