American Airlines CEO Robert Isom announced changes to the company’s growth plans and leadership team following a revenue and profit forecast cut. The airline will decrease capacity growth in the second half of the year and is parting ways with Chief Commercial Officer Vasu Raja, who led a strategy to drive direct bookings by eliminating the sales department. American’s shares dropped 13% following the news, putting pressure on the leadership team to capitalize on trends in corporate, international, and premium travel highlighted by rivals Delta and United.
American Airlines will reduce its capacity growth to 3.5% in the second half of the year, down from 8% growth in the first half of 2024. The revised forecast comes after the carrier warned of a potential 6% decline in unit revenues in the second quarter, compared to an initial estimate of no more than a 3% drop. Despite the challenges, corporate bookings at American were up mid-to-high single-digit percentage points in the first quarter, falling short of the 14% increases reported by Delta and United. American has been focusing on Sun Belt cities and its hubs in Texas and North Carolina, while some areas like Latin America have seen weaker demand.
As American adjusts its growth plans and leadership team, industry analysts are closely watching the impact of these changes on the airline’s performance. JPMorgan analyst Jamie Baker noted that American’s forecast adjustment reflected flaws in the initial predictions rather than a broad shift in passenger demand. United Airlines, led by former American Airlines executive Scott Kirby, affirmed its second-quarter earnings estimates in response to American’s forecast cut, indicating a relatively stable outlook for the industry. United and Delta have reported strong corporate and international bookings, suggesting a record summer for air travel.
Despite the challenges facing American Airlines, industry executives are optimistic about the overall outlook for summer travel. U.S. air travel hit record levels over Memorial Day weekend, with robust demand for trans-Atlantic flights anticipated for the coming months. Delta and United have projected a record summer, citing strong booking trends and a rebound in travel following the pandemic. While some regions like Latin America have shown weaker demand as capacity increases, overall industry sentiment remains positive. American Airlines will need to navigate these trends and capitalize on opportunities in corporate and premium travel to enhance its performance in the second half of the year.
