American Airlines Stock Plummets After Key Executive Departure and Disappointing Guidance Update
American Airlines (AAL) stock took a hit in midday trade after the company announced the departure of its chief commercial officer, Vasu Raja, and issued revised guidance that disappointed investors. The airline now expects adjusted EPS for the second quarter to be between $1.00 and $1.15, down from its previous forecast of $1.15-$1.45.
The revision also included a significant decrease in a key metric known as TRASM, or total revenue per available seat mile, which is a measure of revenue growth and efficiency. American now expects TRASM to be down approximately 5% to 6% in Q2, compared to its prior forecast of down 1% to 2%. Operating margin is also expected to be down 1%, in a range of approximately 8.5% to 9.5%.
Shares of American Airlines saw their worst day since June 2020, during the height of the pandemic. The airline’s struggles come as the busy summer travel season approaches, with leisure travelers returning in droves as pandemic conditions ease.
American Airlines’ rival, United Airlines, reiterated its profit guidance for the second quarter, projecting EPS in a range of $3.75 to $4.25. This signals optimism for a strong summer travel season ahead.
The departure of Vasu Raja, the airline’s chief commercial officer, also raised concerns. Raja’s initiatives, such as a focus on NDC (New Distribution Capability) and changes to the company’s sales force and booking process, may have contributed to American’s struggles compared to its competitors.
While American Airlines is working to address its operational challenges, investors remain cautious about the airline’s ability to capture both leisure and business travel. Despite the setbacks, analysts believe that CEO Robert Isom is capable of turning things around, but it will take time.
Overall, American Airlines’ recent struggles highlight the challenges facing the airline industry as it navigates a post-pandemic recovery. Investors will be closely watching how the company responds to these challenges in the coming months.
