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American Airlines shares tumbled on Wednesday after the company cut its earnings forecast due to weak demand and problems upgrading its reservation system.
Shares of the major U.S. airline fell nearly 15% after American Airlines Chief Executive Robert Isom appeared at a Wall Street conference and outlined the problems.
While long-haul international travel remains strong, Isom noted a “weaker domestic revenue environment” and said the company’s domestic travel outlook had “deteriorated materially” compared with its April forecast.
American Airlines cut its second-quarter profit outlook and now expects earnings per share to be between $1.00 and $1.15.
In April, American expected earnings per share between $1.15 and $1.45.
Isom said the airline now expects capacity to increase by 8% in the first half of 2024 and by 3.5% in the second half.
American Airlines issued a weak outlook after announcing Tuesday that Chief Commercial Officer Vasu Raja will leave the company in June.
Isom praised Raja’s creative thinking and love for innovation.
“But sometimes we need to recalibrate, and in this case, we did that,” Isom said, adding that the company needed to focus on execution and be “much more detail-oriented.”
Raja has been working to get customers to book directly with airlines and their apps, rather than through corporate travel managers or online platforms.
But Isom said the implementation of those changes has driven away some customers.
“We have to make sure we can respond in the short term and that it’s never difficult to do business with us,” Isom said.
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