An American Airlines Embraer E175LR (front), an American Airlines Boeing 737 (C), and an American Airlines Boeing 737 parked at LaGuardia Airport in Queens, New York, on May 24, 2024.
Charly Triballeau | AFP | fake images
american airlines It will cut its capacity growth in the second half of the year and consider a series of other changes, Chief Executive Robert Isom said on Wednesday, after the airline lowered its revenue and profit forecast and said it would part ways with its chief commercial officer, Vasu Raja.
American will increase its capacity by about 3.5% in the second half of the year compared to a year ago, against year-over-year growth of about 8% in the first six months of 2024.
The company's shares fell 15% on Wednesday as investors weighed the airline's mistakes as the peak travel season begins, and some analysts wonder how American can capitalize on what its rivals expect to be a record summer.
Isom said American is weighing changes to a plan led by Raja to boost direct bookings on the airline rather than through third-party sites and travel agencies, a strategy that included gutting the airline's sales department.
The changes angered some travel agencies who were unable to access some of the airline's fares as before, making it difficult for some agencies to sell tickets on U.S. flights. Raja said last month that the airline's corporate bookings growth was lagging behind major rivals. Delta and United.
Raja will leave the company next month.
“We've used a lot of sticks. We have to put out more carrots and make sure our product is available wherever customers want to buy it,” Isom said at the Bernstein Strategic Decisions conference on Wednesday.
American said in February it would limit the ability of some travel agency bookings to be eligible to earn AAdvantage frequent flyer miles. Isom said Wednesday that the airline would reverse that decision.
“That's wrong,” Isom said Wednesday. “We will not do so because it would create confusion and disruption for our end customer.”
Income shortfall
After the market closed on Tuesday, American said its unit revenue could fall as much as 6% in the second quarter from a year earlier, down from its forecast last month for a drop of no more than 3%. Airlines make most of their money during the second and third quarters, but some areas have fared better than others.
“A significant loss driven in part by booking closures puts AAL's ability to reap the full value of a strong summer flight season into further doubt,” Bernstein airline analyst David Vernon said in a note.
On an earnings call last month, Raja said American's corporate bookings rose by mid- to high-single-digit percentage points in the first quarter compared with increases of about 14% touted by Delta and United.
United, minutes after American's forecast adjustment on Tuesday, reiterated its second-quarter earnings estimates, although it did not provide a revenue outlook. Its CEO, Scott Kirby, an American Airlines alumnus, is also scheduled to speak at Bernstein's conference.
“American's lowered guidance speaks far more to its flawed initial forecast than any broad-based change in passenger demand,” JPMorgan airline analyst Jamie Baker said in a note on Wednesday, adding that United's restated forecast was a encouraging sign for Delta.
American has also prioritized Sun Belt cities and its large centers in Texas and North Carolina over coastal markets.
U.S. air travel hit a record over Memorial Day weekend, and executives at United and Delta have predicted a record summer, with strong transatlantic bookings. There have also been weak points as operators increased their capacity, such as Latin America.
