American Airlines cuts growth after sales strategy backfires

American Airlines aircraft parked at the gate at Los Angeles International Airport (LAX) in Los Angeles, California, on July 26, 2023.

Daniel Slim | AFP | beautiful images

American Airlines will cut capacity growth in the second half of the year and consider a series of other changes, Chief Executive Robert Isom said Wednesday, a day after the carrier cut revenue and profit forecasts and said they are parting ways with Chief Commercial Officer, Vasu Raja.

Raja has spearheaded a push for direct bookings at the airline in lieu of third-party websites and travel agencies, a strategy that includes cutting the airline’s sales department. Raja will leave the company next month.

“We are going to make some changes very quickly,” CEO Isom said at the Bernstein Strategic Decisions conference on Wednesday.

American will increase capacity about 3.5% in the second half of the year compared to last year, down from about 8% year-over-year growth in the first six months of 2024.

American Airlines shares fell about 15% in early trading Wednesday.

Pressure is mounting on American’s leadership team following more upbeat results and comments from rivals Delta And Flower in corporate, international and luxury travel – trends that Isom said his airline needs to take better advantage of.

After markets closed on Tuesday, American said its unit revenue could fall as much as 6% in the second quarter from a year earlier, down from last month’s forecast of a decline of no more than 3%. Airlines made most of their money in the second and third quarters, but some sectors performed better than others.

“A significant miss partly due to the end of bookings hampers AAL’s ability to capitalize on the full value of a strong summer flying season,” Bernstein airline analyst David Vernon said in a note. greater suspicion”.

The carrier said business bookings increased in the mid-to-high single-digit percentage points in the first quarter compared with the roughly 14% increase touted by Delta and United.

United, minutes after American revised its forecast Tuesday, reiterated its second-quarter earnings estimate, though it did not provide an outlook on revenue. Its CEO, Scott Kirby, an American Airlines alum, is also scheduled to speak at Bernstein’s conference.

“American’s tapered guidance says more about its flawed initial forecast than any widespread change,” JPMorgan airlines analyst Jamie Baker said in a note Wednesday. about passenger needs”.

American is also prioritizing Sun Belt cities and major hubs in Texas and North Carolina over coastal markets.

US air travel hit a record over Memorial Day weekend and United and Delta executives predicted a record summer, with strong transatlantic bookings. There are also weaknesses as carriers increase capacity, such as Latin America.


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