Spending Grows Despite Airfare Weakness
American Express reported solid second-quarter results, with total card spending rising 7%, in line with the first quarter and ahead of last year’s 6% growth. The credit card giant continues to benefit from its affluent customer base, which values premium travel and dining perks. However, travel spending showed signs of strain, particularly in the airline sector.
The company revealed that airline spending was flat compared to the previous year, largely due to a decline in economy class domestic airfare. CFO Christophe Le Caillec explained that while premium cabin bookings rose 10% and high-end hotel stays over $5,000 climbed 9%, broader travel demand remained mixed. Lower airfare prices have also contributed to the softness, with average ticket costs down 3.5% year-over-year in June.
Luxury Travel Resilient, Economy Segment Slows
American Express emphasized the resilience of luxury travel, driven by high-net-worth clients. However, the stall in economy-class airfare spending poses a challenge for Amex’s airline partnerships and its network of exclusive airport lounges. The trend raises questions about whether broader economic pressures are beginning to influence even higher-income consumer behavior.
According to analysts, the weak spot in airline spending is notable given Amex’s heavy focus on travel incentives and premium benefits. Truist analyst Brian Foran highlighted that while elite travel categories remain strong, the company must monitor any continued stagnation in airline spending closely.
Stock Dips Despite Earnings Beat and Guidance
Amex beat analyst expectations for both profit and revenue in Q2 and reaffirmed its full-year 2025 guidance. Nonetheless, shares fell 2.5% in midday trading as investors reacted to concerns about rising costs related to rewards programs and increased competition. Year to date, the stock has gained less than 4%, lagging behind peers like JPMorgan Chase and Citigroup.
Investor sentiment has been tempered by fears that Amex will need to spend more aggressively to drive growth. With a refreshed Platinum card launching, the company faces stiff competition from JPMorgan, Capital One, and Citigroup in the premium credit card market. As Foran noted, “The bear narrative is they have to push harder and harder to get growth, spending more to get more.”
