American Airlines cuts growth after sales strategy backfires

American Airlines will slash its capacity growth in the second half of the year and consider a host of other changes, CEO Robert Isom said Wednesday, a day after the carrier cut its revenue and profit forecast and said it is parting ways with its Chief Commercial Officer, Vasu Raja.

Raja led a plan 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. Raja will leave the company next month.

“We’re going to make some changes very quick,” CEO Isom said at the Bernstein Strategic Decision conference on Wednesday.

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.

Shares of American Airlines were down about 15% in early trading Wednesday.

Pressure has been mounting on American’s leadership team after more upbeat results and comments from rivals Delta and United about corporate, international and premium travel — trends Isom said his airline needs to better capitalize on.

After the market closed on Tuesday, American said its unit revenues could fall as much as 6% in the second quarter from a year earlier, down from a forecast last month of no more than a 3% decline. Airlines make the bulk of their money during the second and third quarters, but some areas have fared better than others.

“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.

The carrier said 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 United.

United, minutes after American’s forecast adjustment Tuesday, reiterated its second-quarter earnings estimates, though it didn’t provide a revenue outlook. Its chief executive, Scott Kirby, an American Airlines alumnus, is also scheduled to speak at Bernstein’s conference.

“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 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.

U.S. air travel hit a record over Memorial Day weekend and executives from United and Delta have predicted a record summer, with very strong trans-Atlantic bookings. There have also been weak spots as carriers increased capacity, such as Latin America.