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American Airlines trims second quarter expectations as chief commercial officer exits

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American Airlines is lowering some of its second-quarter financial forecasts and has announced the departure of its chief commercial officer.

Shares slid more than 14% Wednesday and shares of all other airlines fell as well. Passenger airlines were among the worst performers on the S&P.

American Airlines said in a regulatory filing with the Securities and Exchange Commission that it now anticipates second-quarter adjusted earnings in a range of $1 to $1.15 per share. Its prior forecast was for $1.15 to $1.45 per share. Analysts surveyed by FactSet forecast second-quarter earnings per share of $1.20, on average.

Total revenue per available seat mile is now expected to be down approximately 5% to 6%. Its prior forecast was for a decline of about 1% to 3%.

The airline said in the filing that CCO Vasu Raja will be leaving the company next month. He joined the company in 2004. Stephen Johnson, vice chair and chief strategy officer, was named to lead the commercial organization and assist with the search for a new chief commercial officer.

In February American Airlines announced that starting with tickets issued on May 1, customers would have to buy tickets directly from the airline or its partner carriers or from preferred online travel agencies if they wanted to earn points in its AAdvantage loyalty program. The airline said at the time that it would list the preferred travel agencies in late April.

When the changes were announced, Raja said in a prepared statement that American Airlines was looking to make travel more convenient for customers and that by booking directly with the airline customers would get the best fares and it would be the most rewarding for its loyalty program members.

But the changes were met with criticism by some customers, who were unhappy with the limitations being placed on how they could earn points for the loyalty program.

American Airlines CEO Robert Isom, speaking at the Bernstein Strategic Decisions Conference on Wednesday, said that Raja was an innovator and disruptor, but that a change was needed.

“He is a good friend, but sometimes we need to reset. And in this case, we do,” Isom said. “We have to be better at executing those long-range plans. We have to be more attentive to the marketplace. We have to be more detail-oriented, and we have to go forward as a team and really make it easy for American to do business with.”

Isom said at the conference that American Airlines no longer plans to differentiate who earns AAdvantage miles and who doesn’t, based on where they booked.

“We’re not doing that because it would create confusion and disruption for our end customer, and we’re going to make sure that we take care of it,” he said. “We’re listening to feedback. We’re learning and adapting.”

In April the pilots union at American Airlines said that there had been “a significant spike” in safety issues at the airline, including fewer routine aircraft inspections and shorter test flights on planes returning from major maintenance work.

American Airlines, based in Fort Worth, Texas, said at the time that it has an industry-leading safety management system. An airline spokesperson said then that the airline is in regular contact with regulators and unions “to further bolster our strong safety record and enhance our ever-evolving safety culture.”

By MICHELLE CHAPMAN
AP Business Writer

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