William Simpson
American Airlines is scaling back its financial outlook, with CEO Robert Isom acknowledging the airline misjudged travel demand ahead of the peak summer season.
The carrier’s total revenue per available seat mile is expected to decline about 5% to 6%, compared with the previous forecast of a decline of about 1% to 3%.
“The guidance cut appears to be a combination of increased domestic competition (competitor fare sales and increased capacity) as well as a loss of corporate participation due to deemphasis post-pandemic,” said BofA Global analysts Andrew Didora and Samuel Clough, in a statement. research note.
In a regulatory filing, American said it now forecasts second-quarter adjusted earnings in the range of $1 to $1.15 per share, up from its previous forecast of $1.15 to $1.45 per share. . Analysts surveyed by FactSet forecast earnings per share in the second quarter of US$1.20, on average.
Shares of the airline fell nearly 14% on Wednesday, closing at $11.62. The free fall came a day after American announced that Vasu Raja, its chief commercial officer, would leave in June. Raja oversaw an apparently abortive effort to force customers to book American travel directly through its app and website rather than third-party sites.
The strategy included eliminating American’s corporate sales team, which helped save on distribution costs. But “American is now losing share as corporate travel recovers,” Didora and Clough noted.
Isom presented a similarly bleak view at an industry conference on Wednesday.
“Our expectation for domestic performance has worsened materially since we provided guidance in April for a few reasons,” Isom said. “We are seeing weakness in customer bookings relative to our expectations, which we believe is in part due to changes we have made to our sales and distribution strategy.”
After praising Raja as an “innovator, a disruptor” and a good friend, Isom added “sometimes we need to reset.”
In February, American announced that starting May 1, customers would have to buy tickets directly from the airline, its airline partners or preferred online travel agencies if they wanted to earn points in its AAdvantage loyalty program.
When the changes were announced, Raja said in a prepared statement that American was looking to make travel more convenient for customers and that by booking directly with the airline, customers would get the best fares and it would be more rewarding for American members. your loyalty program.
But the changes were met with criticism from some, who expressed discontent with restrictions placed on how they could earn points for the loyalty program.
Isom said at the conference that American no longer plans to differentiate between who earns AAdvantage miles and who doesn’t based on where they booked.
“We’re not doing that because it would create confusion and disruption for our end customer, and we’re going to make sure we take care of that,” he said. “We are listening to feedback. We are learning and adapting.”
—The Associated Press contributed to this report.
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