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


An American Airlines’ Embraer E175LR (front), an American Airlines’ Boeing 737 (C) and an American Airlines’ Boeing 737 are seen parked at LaGuardia Airport in Queens, New York on May 24, 2024. 

Charly Triballeau | AFP | Getty Images

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.

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An American Airlines stock chart shows how the company’s shares have tumbled in the past year.

“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.

American Airlines shares plunge after sales strategy backfires

Corporate travel troubles

Revenue shortfalls

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.

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