American Airlines slides after cut to second-quarter profit forecast

(Reuters) – American Airlines on Tuesday lowered its second-quarter profit forecast due to weaker pricing power, sending its shares down about 8% in pre-market trading on Wednesday.

The company also announced that its chief commercial officer, Vasu Raja, would leave in June. Raja spearheaded the airline’s new business strategy.

The Texas-based carrier now expects second-quarter adjusted earnings of between $1.00 and $1.15 per share, compared to a previous forecast of between $1.15 and $1.45 per share.

He projects that total revenue per available seat mile, an indicator of pricing power, will be down about 5% to 6% from last year. This compares to a 1-3% drop expected earlier.

American lowered its outlook even as summer travel demand is expected to reach record levels. The U.S. Transportation Security Administration (TSA) screened 2.95 million airline passengers on Friday, the highest number in a single day.

This travel record coincided with the Memorial Day weekend which marks the start of the U.S. summer travel season, which tends to be the most profitable season for airlines. Airlines are expected to carry 271 million passengers, up 6.3% from last year, according to Airlines for America (A4A), which represents major U.S. carriers.

American Airlines’ forecast also contrasts with that of United Airlines, which on Tuesday reaffirmed its second-quarter profit forecast of between $3.75 and $4.25 per share.

Analysts are skeptical about the American strategy aimed at differentiating itself from its competitors. Although the airline has shifted away from business travel customers, it is trying to increase its market share in smaller markets.

Some analysts are unsure whether the move would generate enough revenue to allow the company to compete with United and Delta Air.

American’s revenue rose single digits from a year ago in the first quarter, compared to double-digit increases at Delta and United.

The airline’s domestic seat growth also remains high, which analysts say is hurting its pricing power.

(Reporting by Reporting by Rajesh Kumar Singh in Chicago and Kannaki Deka in Bengaluru; Editing by Arun Koyyur and Stephen Coates)

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Sara Adm

Aimant les mots, Sara Smith a commencé à écrire dès son plus jeune âge. En tant qu'éditeur en chef de son journal scolaire, il met en valeur ses compétences en racontant des récits impactants. Smith a ensuite étudié le journalisme à l'université Columbia, où il est diplômé en tête de sa classe. Après avoir étudié au New York Times, Sara décroche un poste de journaliste de nouvelles. Depuis dix ans, il a couvert des événements majeurs tels que les élections présidentielles et les catastrophes naturelles. Il a été acclamé pour sa capacité à créer des récits captivants qui capturent l'expérience humaine.
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