American Airlines stock tanks following 'surprising' guidance cut
Is American Airlines' Strategy Failing?
American Airlines' stock plummeted following a significant guidance cut and the departure of chief commercial officer Vasu Raja. The revised forecast includes a decrease in adjusted EPS and TRASM for Q2, signaling lower revenue growth and efficiency. This comes amidst operational challenges and a strategic focus on leisure travel that has not met expectations.
The airline's strategy, including a problematic rollout of the New Distribution Capability and cuts to long-haul flights, has been criticized for limiting revenue opportunities, especially in business travel. While competitors like United Airlines maintain strong guidance, American struggles with overcapacity and price sensitivity among travelers. Despite the challenges, there is optimism that new leadership can correct these missteps over time.
What specific guidance figures did American Airlines revise for its second quarter earnings per share and TRASM?
American Airlines revised its second quarter guidance for adjusted earnings per share (EPS) to be between $1.00 and $1.15, down from its prior forecast of $1.15 to $1.45. Additionally, the company now expects its total revenue per available seat mile (TRASM) to be down approximately 5% to 6%, compared to its prior forecast of down 1% to 2%.
How did the revised guidance for American Airlines' second quarter compare to its previous forecast?
American Airlines significantly lowered its financial outlook for the second quarter. The company adjusted its expected earnings per share (EPS) downward from the previously forecasted range of $1.15-$1.45 to a new range of $1.00-$1.15. Additionally, the airline revised its total revenue per available seat mile (TRASM), a key revenue metric, expecting a decline of about 5% to 6%, compared to the earlier forecast of a 1% to 2% decrease3. This adjustment reflects a more substantial downturn than initially anticipated.