Go Back  FlyerTalk Forums > Miles&Points > Airlines and Mileage Programs > American Airlines | AAdvantage
Reload this Page >

American Airlines cuts 2Q revenue forecast on “lower domestic yields”

American Airlines cuts 2Q revenue forecast on “lower domestic yields”

Reply

Old Jul 11, 18, 8:50 am
  #1  
Original Poster
 
Join Date: May 2011
Location: NYC (LGA, JFK, EWR)
Programs: Delta Silver, AAdvantage Gold, SPG/Marriott/Hilton Gold, AMEX Membership Rewards
Posts: 905
American Airlines cuts 2Q revenue forecast on “lower domestic yields”

https://www.sec.gov/Archives/edgar/d...ex991q2-18.htm

“Revenue - The company now expects its second quarter total revenue per available seat mile (TRASM) to be up approximately 1.0 to 3.0 percent year-over-year, versus its previous guidance of up approximately 1.5 to 3.5 percent. This change from previous guidance is due to lower than anticipated domestic yields.”

Wonder if this is AA specific or industrywide
Adelphos is offline  
Reply With Quote
Old Jul 11, 18, 11:03 am
  #2  
 
Join Date: Dec 2016
Posts: 722
this is industry wide I think. The domestic fare index are down 3 months in a row and not small drops either.
tphuang is offline  
Reply With Quote
Old Jul 11, 18, 11:06 am
  #3  
 
Join Date: Jun 2001
Location: New York, NY
Posts: 3,194
Originally Posted by tphuang View Post
this is industry wide I think. The domestic fare index are down 3 months in a row and not small drops either.
But I thought rising fuel prices were going to cause the airlines to magically raise airfares regardless of market conditions?
jordyn is offline  
Reply With Quote
Old Jul 11, 18, 11:14 am
  #4  
 
Join Date: Feb 2003
Location: USA & UK -- AA EXP 3.5MM, Hyatt Diamond, SPG Plat, Avis President's Club
Posts: 6,336
Originally Posted by Adelphos View Post
https://www.sec.gov/Archives/edgar/d...ex991q2-18.htm

“Revenue - The company now expects its second quarter total revenue per available seat mile (TRASM) to be up approximately 1.0 to 3.0 percent year-over-year, versus its previous guidance of up approximately 1.5 to 3.5 percent. This change from previous guidance is due to lower than anticipated domestic yields.”

Wonder if this is AA specific or industrywide
AA probably _expected_ "we can charge any price we wish, and customers must pay it.".

But the reality is that there are other airlines out there. If AA's price is too high, some folks (including me) book on other airlines. Some revenue analyst at HQ must have forgotten to factor that in to the projections.
CloudCoder is offline  
Reply With Quote
Old Jul 11, 18, 2:16 pm
  #5  
abk
 
Join Date: Sep 2007
Location: stl
Programs: AA LT Plat/8.1mm. SPG LT Plat. UA 712,524 miles and no longer trying.
Posts: 2,760
At least we know they will never lose money.
Spiff, CPRich, deeruck and 3 others like this.
abk is offline  
Reply With Quote
Old Jul 11, 18, 2:40 pm
  #6  
Ambassador: Alaska Airlines
 
Join Date: Nov 2008
Location: PIT
Posts: 7,023
Wonder if basic economy played a role in depressing yields?
golfingboy is offline  
Reply With Quote
Old Jul 11, 18, 3:31 pm
  #7  
 
Join Date: Mar 2002
Location: YYJ
Posts: 3,557
Given that revenue is still growing - just not as fast - and it's a market-wide event: probably not.
cedric is offline  
Reply With Quote
Old Jul 11, 18, 3:36 pm
  #8  
 
Join Date: Feb 2005
Location: West Palm Beach
Programs: Free Agent
Posts: 723
I'm in no way an expert, but could be an industry-wide shift to lower-fare airlines? As the incentives for frequent fliers to fly legacy carriers have been stripped, some of us have turned to non-legacy airlines and discovered that the experience is now nearly identical, especially as some (Southwest and Jetblue for example) have expanded their route structures?
PBIGuy is offline  
Reply With Quote
Old Jul 11, 18, 3:41 pm
  #9  
 
Join Date: Aug 2012
Location: HOU
Programs: AA EXP | SPG Plat | Marriott Plat
Posts: 3,525
Maybe word got out that Project Oasis wasn't all that it was described to be.

oasis:
Antarius is offline  
Reply With Quote
Old Jul 11, 18, 3:50 pm
  #10  
FlyerTalk Evangelist
 
Join Date: Jun 2001
Programs: DL 1 million, AA 1 mil, UA Silver, HH lapsed Diamond, SPG Plat
Posts: 26,669
Announcing a 2Q revenue miss on July 11 -- these guys are right on top of it.
3Cforme is offline  
Reply With Quote
Old Jul 11, 18, 4:24 pm
  #11  
 
Join Date: Jul 2007
Location: E
Programs: MSC (Miles Slut Club); Cunard- Diamond 300+; Princess- Elite 200+; Royal Caribbean- Diamond; QF LTG
Posts: 3,838
Originally Posted by PBIGuy View Post
I'm in no way an expert, but could be an industry-wide shift to lower-fare airlines? As the incentives for frequent fliers to fly legacy carriers have been stripped, some of us have turned to non-legacy airlines and discovered that the experience is now nearly identical, especially as some (Southwest and Jetblue for example) have expanded their route structures?
No it is not that. NK has retreated several market where AA operates.

The real threat is not low fare carriers. The threat for legacy carrier is capacity discipline in a seemly hot market. To put it simple, you can not add 10-12 seats per airplane and expect both TRASM and Yield to be unaffected. Dougie and co. only looked at the way that by simply adding few seats (figuratively speaking, let us 10%) the cost per seat could go down by 10% (again figuratively speaking). But equally you need to either raise your total revenue by 10%, or sell 10% more tickets in order to offset the added capacity through expanding capacity of your plane.

In last few quarters we see Dougie and co. adding seats to B738MAX and A321 on the argument that the cost per seat would go down. It is half true. What Dougie and co. did not tell us is how they are going to sell these added seats and how they are going to raise the fare.

If you compromise load factor because you can not sell more seats because people are not buying, then you face the dilemma of either lowering the fares to attract more people, or raise the fares on the existing customer base. Both in the long run is dangerous. It only takes one market disruptor (either one low cost carrier or a legacy carrier) to take it to a full blown fare war. (red flag for investors). Or it takes one public remarks by Dougie to say that AA is to keep capacity discipline or plan to raise fare to ignite a anti-trust investigation.

Airline investors know full well how game can be played and that is why AAL price dropped. And the debt issue with AAL will forever hanging over AAL every time there is a market unrest.

So, I only hope AA's decision to add seats in its domestic fleet would not come back to bite Dougie and co.
chongcao is offline  
Reply With Quote
Old Jul 11, 18, 6:34 pm
  #12  
 
Join Date: Mar 2002
Location: YYJ
Posts: 3,557
They certainly sold the additional seats, as revenue per seat mile is up. The guidance is that revenue per seat mile will be up 1 to 3 percent over last year. They have been able to sell the extra seats, and still see additional growth network-wide.
cedric is offline  
Reply With Quote
Old Jul 11, 18, 6:57 pm
  #13  
 
Join Date: May 2008
Location: Escondido, CA
Programs: US Chairman no more. AA EXP
Posts: 619
Spirit and Frontier and cut into the monopolistic plans of the Big 4. Hope they continue to fly SAN-ORD for example - this was had for $103 one way last week on a booking a few days out. Compare that to SAN-MKE that was five bills one way.
jfinsocal is offline  
Reply With Quote
Old Jul 11, 18, 8:49 pm
  #14  
Suspended
 
Join Date: Aug 2017
Programs: Rapid Rewards, AAdvantage, SkyMiles
Posts: 1,342
Originally Posted by chongcao View Post

So, I only hope AA's decision to add seats in its domestic fleet would not come back to bite Dougie and co.
I hope it does come back to bite them. His two rational options would either be start offering ULCC fares across the network or start taking out rows of seats. They are doing OK right now because even though fuel is going up many are still traveling. As soon as the economy takes a hit again and fuel costs go sky high, AA is going to be in a world of hurt especially with the amount of debt they are in. Someone like Delta on the other hand would get out virtually unscathed.
chongcao likes this.
DCP2016 is offline  
Reply With Quote
Old Jul 12, 18, 7:28 am
  #15  
 
Join Date: Dec 2016
Posts: 722
interesting enough, DL earnings came out today and they are up 4.65% YoY, which is a really good performance. Considering that AA came out with a guidance of 1 to 3% this late, my guess is that it's probably going to be closer to 1%. Otherwise, why would they need to readjust guidance. Would be interesting to see UA numbers since they've reported higher LF.

NK is down 6.8% this quarter
B6 is down 1.2%
WN is down probably 3%

Domestic air fares are down more than 6% every month this quarter YoY. Legacy airlines are probably doing a little better since they have more TATL flights, which are doing well. But all the domestic heavy airlines like WN/AS/F9 are going to get crushed.
tphuang is offline  
Reply With Quote

Thread Tools
Search this Thread
 
  • Ask a Question
    Get answers from community experts
Question Title:
Description:
Your question will be posted in: