American Airlines CEO admits the airline messed up its plan to disrupt how tickets are sold

Benjamin Zhang
Updated ·2 min read
15
American Airlines CEO admits the airline messed up its plan to disrupt how tickets are sold

  • American Airlines slashed its revenue and margin outlook for the second quarter.

  • The airline also announced the departure of Vasu Raja, its chief commercial officer.

  • American's CEO said its struggles were partly due to recent changes in ticket-sales strategy.

American Airlines on Tuesday lowered its earnings outlook for the second quarter and announced the departure of its chief commercial officer.

At an event on Wednesday, CEO Robert Isom said the lower earnings guidance could be attributed to a weaker-than-expected marketplace and the airline's weaker-than-expected performance.

A key factor in lower bookings is the airline's recent changes to ticket-sales strategy, Isom said.

That's a not-so-tacit admission that the airline's recent shake-up of its corporate ticket sales and third-party ticket sales strategy quarterbacked by the outgoing CCO, Vasu Raja, hasn't worked.

"We are adapting our distribution strategy," Isom said at the event, which was hosted by Bernstein. "We moved faster than we should have, and we didn't execute well."

In February, American Airlines announced changes to its ticket-distribution strategy, including new rules limiting the accrual of loyalty points needed to achieve elite status to tickets purchased from the airline and through select travel agencies.

The strategy encouraged customers to buy directly from the carrier instead of from third-party websites and travel agencies.

Last year, American gutted its corporate sales team, responsible for managing business-travel needs for its major corporate clients.

Isom said American was reevaluating its distribution strategy to make it easier for travel agencies, corporate clients, and customers in general to interact with the airline. This includes pausing some of the policy changes announced in February.

"Our approach has driven customers away from American, and we are unequivocally committed to getting those customers back," Isom added.

In a regulatory filing, the airline said it expected profit margins for the current quarter to be 1 percentage point lower than it had predicted in April. In addition, American expects second-quarter revenue to be as much as 6% lower than the same period in 2023.

Raja, who joined the company in 2004 and took over as CCO in 2022, will officially leave the company in June.

Shares of American Airlines fell by more than 13% in trading on Wednesday.

Read the original article on Business Insider