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American Airlines Stock Sinks as Sales Strategy Backfires

American Airlines Group’s shares plunged on Wednesday after the carrier’s ineffective sales strategy led to capacity growth guidance cuts.

The Texas-headquartered airline’s stock tumbled 13.54% to $11.62 per share on May 28, extending the 2.89% slide the day before. It was unchanged after hours, but analysts predicted a 1.42% decline to $11.45 apiece in the coming trading day.

American Airlines CEO Robert Isom said they anticipate unit revenues decreasing by 6.00% year-over-year (YoY) in the second quarter. That is double the previous forecast of a 3.00% contraction the firm posted at the start of 2024.

Similarly, the carrier reduced its adjusted earnings per share (EPS) for the second quarter to $1.00 -$1.15 from an earlier projection of $1.15-$1.45. The new guidance is significantly lower than the market consensus of $1.27 per share and $1.92 posted in the same period last year.

Capacity also grew 3.50% YoY in the second half of 2024, down from the 8.00% YoY rise in the first half. Investors are worried that the decelerating growth may prevent the world’s largest airline company from capitalizing on an expected record summer.

Isom stressed that CCO Vasu Raja, who overhauled American Airlines’ sales strategy earlier this year, took responsibility. As a result, it was announced that Raja would depart the firm next month.

American Airlines’ Sales Strategy Disappoints Partners

American Airlines revealed that Raja deployed a sales strategy encouraging customers to book tickets directly through the carrier’s app and website.

However, the approach curbed the information shared with third-party sites and apps and eliminated the corporate sales team.

Contrary to expectations, the tactic pushed travel agencies toward the carrier’s rivals Delta and United, leading to plummeting corporate ticket sales. Travel agencies were not pleased with the more arduous process of accessing fare details, which made it harder to sell tickets on American Airlines flights.

Adding to the issue, the company announced in February that it plans to make some travel agency bookings ineligible for earning AAdvantage frequent flyer miles. Isom clarified that after a thorough review, the company has decided against executing the idea.

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