American Airlines cut its 2024 outlook on Thursday due to the lingering effects of a botched reservation system upgrade, but shares rose as it signaled a swift recovery in last week’s IT outage that bedeviled rivals.
While the major US carrier has taken “aggressive” steps to fix ill-conceived changes to its booking system that drove away consumers, the problem “will continue to affect (American’s) revenue performance and profits for the rest of the year.” , the company said.
American now expects full-year earnings per share of between 70 cents and $1.30, down significantly from the range it provided in April of between $2.25 and $3.25 per share.
Earnings in the second quarter were $717 million, down 46.4% from the year-ago period. Revenue rose two percent to a record $14.3 billion.
In May, American announced the departure of Vasu Raja as chief commercial officer, who had overseen a revamp aimed at getting customers to book directly through the airline and its app rather than going through corporate travel managers or online platforms .
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After declaring the change a disaster, American moved to restore fares to distribution channels used by travel managers and corporate programs, ending plans to differentiate mileage by channel and embarking on extensive customer outreach.
“We are taking actions that will improve our performance, but the recovery will take some time,” said CEO Robert Isom, who called in Steve Johnson to oversee the process.
In addition to American-specific issues surrounding its booking practices, the carrier is also facing an industry-wide overcapacity that has pressured fares in recent weeks.
Isom said the company had cut capacity in the third quarter and was planning for 2025 so the carrier “doesn’t exceed demand”.
Despite its reservations system problems, American won praise for its blistering recovery from last Friday’s CrowdStrike information technology outage that led to thousands of flight cancellations on rival Delta.
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Isom credited an “incredible” IT team as well as a strong technology investment. But he characterized the issue as an ongoing challenge.
“Technology today, it’s something that we’re going to have to continue to make sure that we build resilience and make sure that a patch is put in place that can destroy so much of the world’s communications,” Isom said.
American also pointed to a strong operating performance over the July 4th Independence Day holiday and a breakthrough in protracted labor talks with its flight attendant union. A union vote on the deal is expected later this year.
Shares of American Airlines were up 4.8% near midday.
Source: AFP