On Wednesday, Bernstein SocGen Group adjusted its outlook on American Airlines (NASDAQ: NASDAQ:AAL) shares, reducing the price target to $18 from $22, while maintaining an Outperform rating.
This change comes in response to American Airlines' lowered earnings forecast for the second quarter and the unexpected departure of Chief Commercial Officer Vasu Raja, casting a shadow over the anticipated summer travel boom.
The airline's revised earnings per share (EPS) guidance from $1.30 to $1.08, a 17% decrease, reflects weaker unit revenues, now anticipated to be down 5% to 6% compared to the previous estimate of a 1% to 3% drop.
This downturn was attributed to a lack of absorption in domestic capacity, signaling potential challenges for the market as a whole.
American Airlines pointed to the domestic market's oversupply as a core problem, with the recent slump in close-in bookings further exacerbating the situation.
According to the firm, this could be the result of American Airlines losing corporate travel share due to changes in its distribution strategy, which could potentially benefit competitors such as Delta Air Lines (NYSE:DAL) and United Airlines.
The airline's performance shortfall, particularly in close-in bookings, raises questions about its capacity to capitalize fully on the high-demand summer season.
The transition in commercial leadership suggests a shift in commercial strategy that may require time to take effect, adding to the uncertainty of near-term performance.
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