AMERICAN Airlines disclosed the departure of its chief commercial officer and cut its profit guidance heading into the crucial summer travel season, dragging shares down across the US airline industry.
Adjusted earnings will be US$1 to US$1.15 a share in the second quarter, down from a previous expectation of as much as US$1.45, according to a regulatory filing on Tuesday (May 28). The carrier also reduced its expectations for operating margin, costs and a key revenue gauge.
American separately announced that Vasu Raja, a 20-year veteran of the airline who was appointed commercial chief about two years ago, would step down next month. Raja was a leading proponent of the carrier’s domestic-focused network strategy and a driver of a controversial change in dealing with corporate travel customers.
The revised outlook and management upheaval spooked investors, sending American Air shares tumbling 8 per cent in extended trading as at 5.16 pm in New York. It also pulled down shares of other large US airlines by more than 1 per cent in postmarket trading.
The updates hint at diminished prospects for the carrier heading into summer months that are expected to be among the busiest ever for US carriers. Airlines have been trying to capitalise on strong demand coming out of the pandemic, even as persistently high costs weigh on profitability.
“American revenue has been underperforming the other full-service carriers and it feels like they cater to more budget flyers and don’t pull as much revenue out of the cabin,” said George Ferguson, a Bloomberg Intelligence analyst. “Vasu was the revenue officer, so that may be why he’s leaving.”
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The carrier did not say why Raja was stepping down. Stephen Johnson, American’s vice chair and chief strategy officer, will assume leadership of the commercial organisation in addition to his current responsibilities, according to a statement. He will also help lead the search for a new chief commercial officer.
‘Modern retailing’
Raja led American’s move to “modern retailing”, or a push for companies and individual customers to purchase directly from the carrier instead of going through a corporate travel manager or online travel agency. The airline’s sales department was cut back as part of the switch.
Three top global corporate sales executives left the airline in September 2023 as the carrier finished a dismantling of the team that had begun earlier that year. American previously cut much of its sales team as it moved to direct dealings with corporate customers, shed the cost of working with travel agencies and managers and ditched perks such as discounts in exchange for specified volumes of business.
The shift in strategy angered some companies and travel management firms, and set off debates throughout the industry because the carrier withheld a full slate of fares from those that did not use its new system.
Raja, 47, joined American in 2004 and had held jobs in sales, planning and revenue management. Prior to becoming chief commercial officer, he was chief revenue officer and senior vice-president of network strategy. BLOOMBERG
