Loyalty Programs and Premium Tickets Drive Revenue
By Business Today
American Airlines announced on Monday that the majority of its revenue this year will come from loyalty program members and passengers who purchase more expensive tickets. This represents a significant increase from the 70% share in 2017. The airline, along with other carriers, has invested billions of dollars in cabin upgrades and onboard amenities to cater to high-spending travelers.
Premium Revenue Growth Outpaces Ticket Sales
American Airlines’ major competitor, Delta Air Lines, has also experienced a surge in premium revenue. This category includes tickets for extra legroom seats and higher-end cabins. Delta considers premium revenue as a larger share of its overall sales, growing faster than ticket sales in the coach cabin.
Fleet Revamp and First-Class Cabin Expansion
As part of its fleet modernization efforts, American Airlines has placed orders for 260 new planes from Boeing, Airbus, and Embraer. Additionally, the company plans to retrofit older Airbus planes to increase the size of their first-class cabins.
Investor Day and Revenue Forecast
American Airlines recently held its first investor day in more than six years, where it unveiled its revenue forecast. The airline expects to improve its pretax margins in the coming years while reducing its debt load. The company aims to achieve this by renegotiating its credit card agreements with partners Citi and Barclays.
Strategic Changes in Loyalty Programs
To align with changing market demands, American Airlines and other carriers have revamped their loyalty programs. Instead of solely rewarding customers based on the distance flown, they now prioritize customer spending. Elite status now requires higher spending thresholds. American’s chief commercial officer, Vasu Raja, anticipates increased revenue from the renegotiation of credit card contracts.
Future Outlook
American Airlines did not provide specific profit or revenue projections for the first quarter or full year. Analysts’ estimates suggest earnings per share of $2.56 and revenue of $54.97 billion for 2024. However, the announcement caused American’s shares to fall by over 5% on Monday.
Image Source: Charly Triballeau | Afp | Getty Images
