American Airlines Downgrades Forecast and Loses CCO

29 May 2024

American Airlines recently revised its financial forecast downward and announced that Chief Commercial Officer Vasu Raja will leave his position next month. This comes amid a challenging period for the airline, which has been underperforming compared to rivals Delta and United Airlines. The company now expects a sharper decline in unit revenues for Q2 and has lowered its earnings per share estimate to $1-$1.15. Raja’s departure follows recent strategic changes aimed at increasing direct bookings. Vice Chair Stephen Johnson will temporarily assume Raja’s duties. Following the news, American Airlines' stock fell over 8% in after-hours trading.

Key Points:

* Unit revenue expected to decline up to 6% in Q2 2024 (previously forecast at max 3% decline).
* Adjusted earnings per share for Q2 2024 lowered to $1.00-$1.15 (previously $1.15-$1.45).
* CCO Vasu Raja is to depart next month, following recent commercial strategy changes.
* Challenges include weaker international connectivity and pushback from corporate customers on new ticket distribution strategies.
* American Airlines stock dropped over 8% after the announcement.

Trading Idea:

* Short American Airlines (AAL) with a stop-loss at $16.41.
* Target prices (T.P.) for downside move: $10.89, $7.61, $4.06 (and further down to $2.89).