NEW YORK, NY, July 30, 2024 - PRISM MediaWire - PRISM MarketView, a leader within the financial markets and news community, announces the release of an article highlighting the traveling consumer as airlines began to announce financial results. Company reports have echoed larger themes related to higher fuel costs, robust travel demand and lower fare discounting driven by competition from low-cost carriers.
American Airlines faced a significant decline in profits due in part to an operational decision to make its corporate customers book directly from their website, bypassing travel agencies. The world’s second-largest carrier acknowledged that this booking policy posed a challenge to many corporate passengers and travel agencies. Despite citing record second-quarter revenue, profits were down nearly 50%. This decline is partly attributed to an imbalance of supply and demand, with the backfire from American's booking policy further contributing to the decrease in profits.
Travel agencies have spoken publicly regarding the difficulties created by the previous rule change. “To assume that all customers prefer to buy direct through AA.com is arrogant at best,” wrote the American Society of Travel Advisors (ASTA) in a statement. This policy impacted many travel agencies across the United States, leading American Airlines to retract the new policy, claiming, “they dug themselves into a hole.” PRISM MarketView spoke to Steven P. Taggart, Director of Business Development at the Charlotte-based travel agency, Corporate Travel Management (CTM). Taggart stated, “Despite the challenge presented by American, we continued to successfully execute our operations and provide best-in-class customer service to all clients. We agree with American’s decision to retract its former policy change which should allow travel agencies to satisfy customers and operate in a more efficient manner, as they had previously.”
Low-cost carriers have also reported financial results that included new travel policies and consumer demand trends. Southwest Airlines ended its 53-year open seating tradition and introduced red-eye flights in the announcement of its second quarter financial results that beat analyst consensus but reported a decline in profits. Management stated, "We are taking urgent and deliberate steps to mitigate near-term revenue challenges and implement longer-term transformational initiatives that are designed to drive meaningful top and bottom-line growth. As we announced this morning, our implementation of assigned and premium seating is part of an ongoing and comprehensive upgrade to the Customer Experience, one that research shows Customers overwhelmingly prefer.”
Spirit Airlines provided second quarter guidance as they lowered their outlook on weak non-ticket revenue. Spirit projected $1.28 billion of second quarter revenues versus previous revenue estimate range of $1.32 billion – $1.34 billion and missed consensus (FactSet $1.33 billion). However, the estimated ticket revenue per segment remains intact with previous expectations. The underperformance in non-ticket revenue is being attributed to incremental pressure on ancillary pricing as competition heats up and consumers no longer care to spend extra on baggage and food.
About Corporate Travel Management, Inc. (CTM): Founded in 1990, Corporate Travel Management, Inc., is a full-service travel management organization that combines first-class service with the industry’s most progressive technologies. Our goal is to create a truly exceptional experience for our client’s and their travelers. Visit us at www.goctm.com and follow us on LinkedIn.
About PRISM MarketView: Established in 2020, PRISM MarketView is dedicated to the monitoring and analysis of small cap stocks in burgeoning sectors. We deliver up-to-the-minute financial market news, provide comprehensive investor tools and foster a dynamic investor community. Central to our offerings are proprietary indexes that observe emerging sectors, including biotech, clean energy, next-generation tech, medical devices and beyond. Visit us at prismmarketview.com and follow us on Twitter.
PRISM MarketView does not provide investment advice.
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Source: PRISM MarketView