American Airlines cuts growth after sales strategy backfires

[Pelican Press 0]

********* Airlines cuts growth after sales strategy backfires

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

Charly Triballeau | AFP | Getty Images

********* 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 *****.

********* 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 ********* 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.

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

Isom said ********* is weighing changes to a plan ***** 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 ******* for them to sell tickets on ********* flights.

The chief commercial officer will leave the company next month.

An ********* 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.

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

Corporate travel troubles

***** said last month *********’s corporate booking growth was coming in behind big rivals Delta and *******.

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 ********* 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, ***** said *********’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 *******.

“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.

Revenue shortfalls

After the market closed Tuesday, ********* 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.

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

This is the hidden content, please

• Sign In
• or
• Sign Up

, though it didn’t provide a revenue

This is the hidden content, please

• Sign In
• or
• Sign Up

.

“*********’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 *******’s reiterated forecast was an encouraging sign for Delta.

********* 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 ******* and Delta have predicted a record summer, with very strong trans-Atlantic bookings.

Don’t miss these exclusives from CNBC PRO

This is the hidden content, please

• Sign In
• or
• Sign Up

Breaking News: Markets,********* Airlines Group Inc,Breaking News: Business,Life,Business,Aerospace and defense industry,Transportation,Travel,Airlines,Markets,Delta Air Lines Inc,******* Airlines Holdings Inc,Robert Isom,Earnings,Manchester ******* PLC,business news
#********* #Airlines #cuts #growth #sales #strategy #backfires

This is the hidden content, please

• Sign In
• or
• Sign Up

For verified travel tips and real support, visit: https://hopzone.eu/