American Airlines paid out nearly $1 billion in bonuses to pilots, causing its profits to take a tumble in the third quarter.
Despite record revenue, American Airlines posted a $545 million loss in the third quarter of 2023, according to investor data released by the airline Thursday.
The financial data comes months after the airline ratified a new contract with its 15,000 pilots. The airline provided $1.1 billion in immediate, one-time payments and ratification bonuses.
In the same quarter of 2022, the airline posted a $483 million profit.
American Airlines CEO Robert Isom noted the higher costs while adding that the new contract gives the airline flexibility. He said the new contract should allow the airline to continue growing despite shortages in trained airline pilots.
“It is a deal that although comes with increased compensation and benefits and expense, it also puts us in a position to train our pilots in a much more efficient manner,” Isom said.
American Airlines said that despite posting softer numbers than its two top competitors, United and Delta, it retains a network advantage in 200 markets in the U.S. American Airlines leaders say that quarter-to-quarter numbers are mostly a result of the industry’s recovery from COVID-19.
American Airlines Chief Financial Officer Devon May said the airline still has to work on contract agreements with flight attendants and customer service agents. The company said it expects labor costs to remain high, but hopes to offer “industry-leading” salaries and benefits.
May added that the recent contract with pilots would continue to apply pressure to profits through the first quarter of 2024.
Isom said that holiday bookings are expected to remain steady this year. Generally when flights are offered during the peak of holiday season, they’re booked, meaning there is little opportunity for year-over-year growth during peak holiday season.
But American Airlines said it expects travel on the days just outside of peak holiday travel days could be higher than in previous years.