Weak profit forecast and industry oversupply cause American shares to decline 7%.

• The third quarter may see a decrease in unit revenue for American Airlines, with a potential drop of up to 4.5%.
• Despite a 46% increase in revenues during the second quarter, the carrier's profit decreased.
• The airline industry is facing an oversupply of flights, and the direct-to-consumer sales strategy adopted by the carrier has resulted in a backfire.

The third quarter is expected to see a decrease in unit revenue of up to 4.5% due to the failure of high demand to offset the industry-wide surplus of flights, resulting in reduced fares.

The airline, based in Fort Worth, Texas, predicted full-year adjusted earnings of between 70 cents and $1.30 per share, which is significantly lower than the $1.10 to $2.60 per share that Wall Street analysts had forecast, according to LSEG.

The airline has been facing an industry-wide issue of too many flights and a direct-to-consumer sales strategy that did not work out. In response to feedback from travel agents and customers, the airline has taken quick and decisive action to adjust its sales and distribution strategy.

Shares of American were down more than 7% in premarket trading.

Wall Street estimates compiled by LSEG show how American performed in the second quarter compared to the second quarter.

• Earnings per share: $1.09 adjusted vs. $1.05 expected
• Revenue: $14.33 billion vs. $14.36 billion expected

Despite a 2% increase in revenues to $14.33 billion, Southwest's profit decreased by 46% to $717 million, or $1.01 per share, during the second quarter.

The airline reported earnings of $1.09 per share, adjusted for one-time items.

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