American Express has reported a robust 7% increase in total spending on its cards for the second quarter of 2023, matching the growth seen in the first quarter. This growth underscores the company’s strategy of catering to wealthier customers who value its extensive travel and dining benefits. However, a notable weakness has emerged in airline spending, which has stalled, presenting challenges for the company.
In a recent statement, American Express Chief Financial Officer Christophe Le Caillec pointed out that domestic economy class airfare has been a significant factor in this decline. The airline spending for the quarter remained flat compared to the same period last year, indicating a potential area of concern for the company, especially given its partnerships with airlines and its extensive network of airport lounges.
According to the Bureau of Labor Statistics, airfare prices experienced a decline of 3.5% in June 2023, coinciding with a rise in overall inflation. This drop in airfare prices suggests that consumers are spending less on airline tickets, which may affect American Express’s profitability in the travel segment.
Despite exceeding profit and revenue expectations for the second quarter and reaffirming its guidance for 2025, shares of American Express fell by 2.7% during midday trading. Year-to-date, the company’s shares have increased by less than 4%, underperforming against other financial giants such as JPMorgan Chase and Citigroup.
Analyst Brian Foran from Truist highlighted that investor concerns primarily revolve around American Express’s rewards program expenditures. As the company prepares to launch a revamped Platinum card, it faces intensified competition in the premium card market from rivals including Capital One and Citigroup. Foran noted, “The bear narrative is they have to push harder and harder to get growth, spending more to get more.”
This competitive landscape, particularly in the premium credit card sector, presents challenges for American Express as it strives to maintain its market position while continuing to attract high-spending customers. As the company navigates these dynamics, the focus remains on how effectively it can adapt to changing consumer behaviors and market pressures.
