📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

American Airlines CEO Admits Mistake, Vows To Win Back Clients

Published 30/05/2024, 15:02
© Reuters.  American Airlines CEO Admits Mistake, Vows To Win Back Clients
DAL
-
UAL
-
AAL
-

Benzinga - by Shivani Kumaresan, Benzinga Staff Writer.

American Airlines Group Inc (NASDAQ:AAL) is retreating from a strategy that CEO Robert Isom admitted drove away valuable corporate clients and hurt the airline’s revenue.

The Fort Worth, Texas-based airline had aimed to capitalize on a reduction in business travel post-COVID-19 by cutting sales staff. It also removed some fares from channels used by large companies, hoping to encourage direct bookings through American's website or app.

The approach backfired.

American Airlines did not see a boost and lost business to its competitors, reported the Wall Street Journal.

Both Delta Air Lines Inc (NYSE:DAL) and United Airlines Holdings Inc (NASDAQ:UAL) reported a 14% increase in corporate travel revenue in the first quarter.

“We can never be difficult to do business with,” Isom stated during an investor presentation. “Others are benefiting from what we've done over the last six months or so. We'll get that back.”

American's shares fell 13.5% on Wednesday, marking the largest single-day decline since June 2020. This drop followed the company's announcement of a reduced profit forecast for the second quarter due to weaker-than-expected revenue.

The airline also announced the departure of Vasu Raja, the architect of the new corporate booking strategy.

Also Read: Turbulent Outlook For American Airlines: Analysts Cut Forecasts As Competitive Pressures Mount

Raja, who served as American's chief commercial officer since 2022, aimed to reduce costs by bypassing travel agency commissions and enticing corporate clients with direct bookings.

Despite these efforts, the strategy alienated travel agencies and high-spending corporate customers. The company has now enlisted consulting firm Bain & Co. to reassess the approach.

American will now ease restrictions that limited frequent flier mile awards to bookings on its website and favored agencies. Instead of removing fares from traditional booking channels, the airline plans to add incentives to promote modern booking technologies.

Following American’s announcement, other airline stocks also declined as investors feared broader industry demand issues.

Stephen Johnson, American's vice chair and chief strategy officer, will take over the commercial operations and oversee the search for Raja's successor.

Price Action: AAL shares are trading higher by 1.3% at $11.47 at the last check Thursday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Image: Shutterstock

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Read the original article on Benzinga

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.