JP Morgan analysts say American Airlines leadership isn’t doing enough to shore up profits, calm anxious investors, and improve stock performance after disappointing second-quarter results.
“We weren’t expecting huge course corrections from American, though we thought they’d at least throw us a bone,” JP Morgan airlines analyst Jamie Baker wrote in a note to clients Friday after the airline reported a 46% year-over-year decline in profits, which it blamed on an oversupply of cheap domestic tickets.
“Management’s lack of vigor, absence of really anything that could be characterized ‘”new,” and implied embrace of the status quo are troubling for us,” Baker added. He has a bullish price target of $15 for the stock, about 43% above Monday’s closing price.
American Airlines executives plan to lean on additional earnings from a recently revamped ticket distribution strategy as part of a turnaround strategy. Announced in May, the plan unwinds many of the policies implemented by the airline’s outgoing chief commercial officer, which gutted American’s corporate sales operation and restricted how tickets are sold to customers.
The disastrous policies cost the company $750 million in lost revenue during the first half of the year, American Airlines CEO Robert Isom said during the earnings call on Thursday.
JP Morgan’s analysts don’t believe they are alone in their assessment of America’s lack of action.
“Several analyst questions (during the earnings call) focused on the lack of any incremental capacity cut, revisions to the order book, or network rebalancing that one might reasonably expect in response to uninspiring returns, so we doubt our disappointment will prove unique,” Baker wrote.
An American Airlines spokesperson declined to comment, pointing to Isom’s comments on the earnings call.
“We have not met our expectations this year, and our entire team is focused and working with urgency to get us back on track, improve results and deliver on our commitments,” he told investors.