Profit warning, executive departures, American Airlines plunges 16%, marking the largest drop during the pandemic
American Airlines' profitability and operational efficiency have declined, with financial pressure greater than expected. In addition, the departure of the Chief Commercial Officer led to a nearly 16% overnight plunge in the company's stock price on Wednesday morning, dragging down the overall aviation sector stocks in the U.S. market
On Wednesday night, the stock price of American Airlines (stock code: AAL) plummeted, with the US stock market falling nearly 16% in early trading, marking its worst intraday performance since June 2020.
Analysis indicates that the main reasons for the sharp drop in stock price are threefold: American Airlines lowered its EPS expectations, operating profit margin declined, and the Chief Revenue Officer resigned.
Firstly, American Airlines expects to earn less in the second quarter than previously estimated, so it has revised down its earnings per share forecast for the second quarter of this year from a range of $1.15 to $1.45 to a range of $1 to $1.15, representing a 17% decrease in the midpoint of the expected range.
Secondly, American Airlines also stated that the operating profit margin, which measures the company's operational efficiency, will be approximately 1 percentage point lower than expected. The specific reason is that the revenue from "Revenue per Available Seat Mile" (RASM) is lower than expected. RASM is a common indicator in the aviation industry used to measure how much revenue an airline can generate per seat per mile flown. A decrease in this indicator indicates a reduction in revenue relative to the distance flown and the number of seats available.
Furthermore, the company's Chief Revenue Officer, Vasu Raja, announced his resignation. During his tenure as Chief Revenue Officer at American Airlines, Vasu Raja drove an important strategic transformation, which involved reducing ticket sales through agents and prioritizing direct ticket sales through the airline's own app and website. This strategy aims to improve operational efficiency and financial performance by increasing direct sales, while strengthening direct engagement with consumers.
The negative news from American Airlines has also impacted other airlines, leading to a general decline in US airline stocks in early trading, with JetBlue Airways falling 5.3%, Southwest Airlines falling 4.7%, United Airlines falling 0.3%, and Boeing falling 0.1%