Discounted airfares eat into American Airlines’ outlook for rest of the year

American Airlines reported a cut to its profit forecast for the year, citing the company’s sales strategy.

The Fort Worth-based airline said it expects to earn an adjusted 70 cents to $1.30 per share this year, a decrease from $2.25 to $3.25 a share previously forecasted in April. Unit revenue is also expected to drop as much as 4.5% for the third quarter, the company reported, as airlines experience an overabundance of flights in a high-demand travel environment.

“We know we can do better and we will rise to meet this challenge,” said Robert Isom, CEO of American to investors during the carrier’s second-quarter financial results call.

Isom emphasized two key areas impacting American’s results: the “softness” in the domestic marketplace and American’s sales and distribution strategy.

Regions of the country where American has larger operations, the excess in capacity led to more discounts on pricing during the quarter than anticipated, he said. The airline has pulled back on its planned capacity growth in the back half of the year to combat this.

In May, the airline had lowered its financial expectations for the second quarter, citing a failing sales and distribution strategy. American also announced the departure of chief commercial officer Vasu Raja.

“A reset will take some time and we will continue to feel the impact of our prior sales and distribution strategy on revenue and earnings through the remainder of this year which is reflected in our updated full-year guidance,” Isom told investors.

American reported on Thursday revenue of $14.3 billion in the second quarter, an increase of 2% from the same quarter in the previous year.

The carrier also acknowledged it was one of the major airlines disrupted by the global IT outage caused by CrowdStrike, a Texas-based firm. On July 19, the disruption grounded flights with carriers like American, United Airlines and Delta Air Lines.

Delta, one of the country’s top-performing airlines, took until Thursday to fully recover.

However, American quickly recovered by Friday evening and ran a nearly 99% completion factor the following Saturday, July 20, Isom said. He said the airline has built technology to take early precautions.

“We assembled the right operating teams and IT experts to execute a plan to get our systems back online and the aircraft moving again, and that allowed us to return to normal operations,” said David Seymour, chief operating officer at American.

Devon May, chief financial officer at American told The Dallas Morning News that American didn’t have a dollar amount to how much the outage cost the airline.

Isom told investors the airline has “taken immediate action” to continue to address the supply and demand imbalance as the carrier looks ahead to the rest of the year.

“We’re taking the steps to get back on track,” Isom said.