American Airlines shares dropped more than 13% on Wednesday after the company reported a profit and revenue guidance cut, sending the stock to its lowest point this year.

Key Facts

American Airlines shares closed down 13.5% at $11.62, their lowest closing price since last November.

The drop follows a guidance cut reported by the airline late Tuesday, when it said it now expects second-quarter adjusted earnings between $1 and $1.15—a decrease from the previous outlook between $1.15 to $1.45 per share, according to a Securities and Exchange Commission filing.

The airline’s operating margin was lowered by one percentage point, to between approximately 8.5% to 10.5%.

American’s total revenue per available seat mile, a measure of its revenue growth, according to Yahoo Finance, is expected to drop by about 5% to 6% compared to the 1% to 2% it originally forecasted, according to the filing.

The stock drop also follows news that American’s chief commercial officer, Vasu Raja, will leave the company next month.

Surprising Fact

American’s Wednesday closing price is near some of the lows it recorded near the start of the COVID-19 pandemic, which brought the company’s stock from about $29 per share before the pandemic to as low as $9.04 per share in March 2020.

Key Background

American Airlines has contended with backfiring business strategies including the slashing of sales staff and moving to make some travel agency bookings ineligible for its frequent flyer program, the latter decision of which CEO Robert Isom said the company would reverse, CNBC reported, with Isom citing a need to avoid “confusion and disruption for our end customer.” Bookings made by corporate customers for American Airlines flights have trailed behind that of Delta and United, with both companies reporting increases in corporate travel revenue in the first quarter not seen by American, according to The Wall Street Journal.

Further Reading

As Disrupter Vasu Raja Departs American Airlines, CEO Robert Isom Expands His Role (Forbes)

American Airlines Self-Inflicts Market Turbulence (Bloomberg)

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