American Airlines CEO Robert Isom said the Fort Worth-based airline is not performing as it previously thought and needs to reevaluate its growth plans.
During the Bernstein 40th Annual Strategic Decisions Conference, Isom spoke to attendees about the airline and its performance, right after the company announced in a government filing on Tuesday that it was cutting its sales outlook for the second quarter and chief commercial officer Vasu Raja Departed in June.
“We adjusted our guidance today,” Isom said. “And as I said, I’m disappointed in that.”
On Tuesday, American reported it anticipated unit revenues to fall as much as 6% in the second quarter and shrunk its adjusted earnings estimate to a projected range of $1 to $1.15 a share after previously expecting it to be $1.15 to $1.45 a share. Isom attributed the change to a “softer domestic revenue environment.”
There were a few reasons for that, he said.
American has been seeing “softness in costs and bookings,” relative to the airline’s expectations. He said the company believed it was in part due to the changes that it made to its sales and distribution strategy. He also mentioned “the domestic supply and demand imbalance led to a weaker domestic pricing environment.”
Bank of America Global Research reported that the guidance cut “seems to be a combination of both higher domestic competition, competitor fare sales and higher capacity, as well as a loss of corporate share given a de-emphasis post-pandemic.” With Raja’s departure and the addition of a new chief commercial officer, the research group anticipated American to pivot to a more “corporate-focused sales strategy.”
Researchers at TD Cowen called the news “no surprise to investors.”