American shares tumble 13% after sales strategy backfires; carrier cuts growth

American
Airlines
will
slash
its
capacity
growth
in
the
second
half
of
the
year
and
consider
a
host
of
other
changes
to
a
sales
strategy
that
backfired,
CEO
Robert
Isom
said
Wednesday.
The
comments
come
a
day
after
the
carrier

cut
its
revenue
and
profit
forecast
and
said
it
is
parting
ways
with
its
chief
commercial
officer,
Vasu
Raja.

American
will
grow
capacity
about
3.5%
in
the
second
half
of
the
year
compared
with
the
year
earlier,
down
from
roughly
8%
year-over-year
growth
in
the
first
six
months
of
2024.

The
company’s
shares
tumbled
more
than
13%
on
Wednesday
as
investors
weighed
the
airline’s
missteps
as
the
peak
travel
season
gets
underway,
with
some
analysts
questioning
how
American
can
capitalize
on
what
rivals
expect
to
be
a
record
summer.
It
was
the
stock’s
biggest
percentage
drop
in
nearly
four
years,
during
the
travel
plunge
early
in
the
Covid-19
pandemic.

United Airlines shares
rose
more
than
2%
and
Delta’s
fell
less
than
1%.

Isom
said
American
is
weighing
changes
to
a
plan
Raja
led
to
drive
direct
bookings
at
the
airline
in
lieu
of
third-party
sites
and
travel
agencies,
a
strategy
that
included
gutting
the
airline’s
sales
department.

The
changes
angered
travel
agencies
who
weren’t
able
to
access
some
of
the
carrier’s
fares
as
before,
making
it
harder
for
them
to
sell
tickets
on
American
flights.

The
chief
commercial
officer
will
leave
the
company
next
month.

“We’ve
used
a
lot
of
sticks.
We’ve
got
to
put
some
more
carrots
in
place
and
make
sure
that
our
product
is
available
wherever
customers
want
to
buy
it,”
Isom
said
at
the
Bernstein
Strategic
Decisions
conference
on
Wednesday.

American
in
February
said
it
would
limit
some
travel
agency
bookings
from
being
eligible
to
earn
AAdvantage
frequent
flyer
miles.
Isom
said
Wednesday
that
the
airline
would
reverse
that
decision.

“That’s
off,”
Isom
said.
“We’re
not
doing
that
because
it
would
create
confusion
and
disruption
for
our
end
customer.”

Isom
called
Raja,
who
has
been
at
American
for
20
years
“an
innovator,
a
disruptor,”
adding
that
“sometimes
we
need
a
reset.”
Raja
didn’t
immediately
comment.

Raja
said
last
month
American’s
corporate
booking
growth
was
coming
in
behind
big
rivals


Delta
and


United.

Corporate
bookings
are
particularly
lucrative
for
airlines
especially
when
those
travelers
book
at
the
last
minute
when
fares
are
at
their
highest
—
so
called
close-in
bookings.
Airlines
had
struggled
during
the
pandemic
and
shortly
afterward
when
business
travel
was
slow
to
return,
but
carriers
have
seen
improvement
lately.

“The
weakness
that
you’ve
seen
in
American
is,
I
do
believe,
something
that
speaks
to
close-in
bookings,
the
highest
premium
customers
that,
unfortunately, we
haven’t
made
ourselves
as
available
and
easy
to
work
with
as
we
can,”
Isom
said.

On
an
earnings
call
last
month,
Raja
said
American’s
corporate
bookings
were
up
mid-to-high
single-digit
percentage
points
in
the
first
quarter
compared
with
increases
of
around
14%
touted
by
Delta
and
United.

“A
significant
miss
driven
in
part
by
close
in
bookings
puts
AAL’s
ability
to
reap
the
full
value
of
a
robust
summer
flying
season
in
greater
doubt,”
Bernstein
airline
analyst
David
Vernon
said
in
a
note.

After
the
market
closed
Tuesday,
American
said
its
unit
revenues
could
fall
as
much
as
6%
in
the
second
quarter
from
a
year
earlier,
down
from
its
forecast
last
month
of
a
no-more-than-3%
decline.
Airlines
make
the
bulk
of
their
money
during
the
second
and
third
quarters,
but
some
areas
have
fared
better
than
others.

Isom
admitted
Wednesday
that
the
company
has
logged
softer
bookings
than
it
expected
and
noted
a
supply
and
demand
“imbalance”
that
has
prompted
carriers
to

discount
tickets.
He
said
industry
capacity
should
come
down
in
the
second
half
of
the
year,
while
it
slows
its
own
growth.

United,
minutes
after
American’s
forecast
adjustment
Tuesday,
reiterated
its
second-quarter
earnings

estimates,
though
it
didn’t
provide
a
revenue
outlook.

“American’s
diminished
guide
speaks
far
more
to
its
flawed
initial
forecast
than
any
broad-based
shift
in
passenger
demand,”
JPMorgan
airline
analyst
Jamie
Baker
said
in
a
note
Wednesday,
adding
that
United’s
reiterated
forecast
was
an
encouraging
sign
for
Delta.

American
has
also
been
prioritizing
Sun
Belt
cities
and
its
large
hubs
in
Texas
and
North
Carolina
over
coastal
markets.

The
Transportation
Security
Administration
screened
the
most
people
ever
over
Memorial
Day
weekend,
and
executives
from
United
and
Delta
have
predicted
a
record
summer,
with
very
strong
trans-Atlantic
bookings.