American Airlines profits sink

American’s profits declined 46% in the second quarter as it reels from a controversial direct selling strategy and an imbalance in domestic seats

CEO Robert Isom attributed the profit decline to the company's distribution strategy and an imbalance of domestic seats. While rivals United Airlines and Delta Air Lines also face a glut of domestic seats, they reported significantly higher profits and revenues in the second quarter.

Key takeaways

• American Airlines had adopted a direct-to-consumer approach to ticket sales, bypassing traditional travel agents. This move was strongly opposed by many travel agents, who filed complaints with the Department of Transportation and lobbied to reverse the changes;
• The airline planned to make a major change to its loyalty program, allowing customers to earn frequent flyer miles only when booking through certain agencies. This proposal met with significant resistance from travel agents;
• As a result of the backlash, American Airlines decided not to proceed with the change. The distribution strategy and proposed loyalty program changes contributed to the departure of Chief Commercial Officer Vasu Raja.

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