American shares sink after cutting second quarter earnings forecast

American Airlines' shares fell 15% on May 29, 2024, after it updated its second quarter 2024 guidance. The guidance had changed its adjusted operating margin from 9.5%-11.5% to 8.5%-10.5%. Its adjusted earnings per diluted shares to $1-$1.15, down from $1.15-$1.45. Its year-on-year total revenue per seat mile (TRASM) is expected to be a negative 5%-6%, down further from the previous estimation of a negative 1%-3%. Its cost per available seat mile excluding fuel and net special items (CASM-ex) is forecast to be flat to a positive 1%, updated from a positive 1%-3%. Though, fuel price is set to be lower at $2.70-$2.80 per gallon, rather than $2.75-$2.95 per gallon. At the Bernstein Strategic Decision conference, American CEO Robert Isom had promised on May 29 that the airline will reset the carrier's sales and distribution strategy, according to Reuters. He said the changes to the airline's sales strategy for softer customer bookings had led to the disappointing changes to its guidance. He added that American is evaluating its strategy ""piece by piece."" He said the airline is committed to getting its customers back that had been driven away by its sales strategy, which saw perks and discounts being cut as it reworked contracts with corporate travel agencies and customers. The airline had announced on May 28 that its chief commercial officer Vasu Raja, who had spearheaded the reworked sales strategy, was departing the company. Raja had been pushing plans to have customers book direct rather than third-party alternatives. JP Morgan analysts Jamie Baker and James Kirby said: ""Scepticism regarding his role was already crescendoing following an announced sabbatical earlier this month."" They added: ""American's diminished guide speaks far more to its flawed initial forecast than any broad-based shift in passenger demand."" American will also reportedly slow its seat capacity growth in the second half of the year to address the supply chain issues in the domestic market that is hurting its pricing power. American Airlines posted its first quarter 2024 revenue of $12.6bn, up 3.1% YoY, and a net loss of $312 million, swinging from a net profit of $10 million YoY. “While we aren’t satisfied with our first-quarter financial results, we have a strong foundation in place, and we remain on track to deliver on our full-year financial targets,” said Isom on the results. US airline United Airlines had reaffirmed its second quarter 2024 earnings forecast of $3.75-$4.25 per share on May 28. American will host its annual stockholders meeting on June 5.