American Airlines lowered its profit outlook for the second quarter of 2024 and announced the departure of its chief commercial officer on Tuesday.
Speaking at an event Wednesday, CEO Robert Isom said the lower profit forecast could be attributed to a weaker-than-expected market and the airline’s weaker-than-expected performance.
A key factor behind the decline in bookings is the airline’s recent changes to its ticket sales strategy, Isom said.
It’s a not-so-tacit admission that the airline’s recent shake-up of its corporate and third-party ticket sales strategy, backed by outgoing CCO Vasu Raja, hasn’t worked.
“We are adapting our distribution strategy,” Isom said at the event hosted by Bernstein. “We moved faster than we should have and we didn’t execute well.”
In February, American Airlines announced changes to its ticket distribution strategy, including new rules limiting the accumulation of loyalty points required for elite status to tickets purchased through the airline and from certain travel agencies approved.
The strategy encouraged customers to purchase directly from the carrier rather than from third-party websites and travel agencies.
Last year, American gutted its sales team, which was responsible for managing the corporate travel needs of its major corporate clients.
Isom said American is re-evaluating its distribution strategy to make it easier for travel agencies, corporate clients and general customers to interact with the airline. This includes suspending some of the policy changes announced in February.
“Our approach has alienated U.S. customers and we are unequivocally committed to getting those customers back,” Isom added.
In a regulatory filing, the airline said it now expects profit margins for the current quarter to be 1% lower than those forecast in April. Additionally, American expects second-quarter revenue to be up to 6% lower than the same period in 2023.
Raja, who joined the company in 2004 and took over as CEO of CCO in 2022, will officially leave the company in June.
Shares of American Airlines fell more than 13% on Wednesday.
businessinsider
