American Airlines stated at the end of May that Vasu Raja, who has acted as its Chief Commercial Officer since 2022, will step down in June.
The CEO of American Airlines, Robert Isom, made a public statement at the end of May, during which he stated: “We know we’ve dug ourselves a hole in this second quarter, and our operating earnings are going to be off by a couple of hundred million dollars. We’ve got a lot of work to do to recoup that.”
While speaking at the Bernstein Strategic Defense Conference on May 29, Isom paid tribute to his colleague but suggested that change was needed while doing so.
“I’ve known Vasu for a long time,” Isom said. “I admire his creative thinking, his passion, he is an innovator and a disruptor. He’s a good friend. But sometimes we need to reset, and in this case, we do.”
Raja joined American Airlines in 2004 and held the Chief Commercial Officer role since April 2022. No explanation was given for his departure in an American Airlines statement issued on May 28.
During Raja’s tenure, American Airlines consistently underperformed against rivals Delta and United across many key metrics. In 2023, its operating margin—an important measure of profitability—was 8%, excluding one-off account items. This figure is stark in contrast to Delta’s figure, which was 12%, and United’s, which was 10%.
The outgoing Raja oversaw American Airlines’ direct selling changes to its ticket distribution channels, which many saw as controversial. The move resulted in the American Society of Travel Advisors (ASTA) making a formal complaint about the distribution process.
Isom stated that these changes are under review, and noted that the company “moved faster than we should have” and that they “didn’t execute it well.”
The review represents a turnabout for the airline. When speaking at the Skift Aviation Forum last October, Isom appeared determined with his strategy. “When you shop for American, you ought to be able to shop and get access to everything without having to go through a number of different routes [or sources of information],” Isom stated, and argued that its flyers shouldn’t “need a lot of intermediaries to tell them what’s available.”
Isom struck a much more conciliatory tone on May 29, during which he 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 easier for American [Airlines] to do business.”
However, even in acknowledging Raja’s disruptive and, to some, controversial approach, Isom was adamant that the airline would continue to be bold with its decision-making. He was quoted as saying: “I am passionate about executing, we will absolutely innovate, we will swing for the fences – it is essential in this business. But we have to produce in the short run to get to the long-term. Right now that means taking a look at our sales and distribution strategy and what needs to be done.”
Isom also confirmed that efforts to improve American Airlines’ performance in these areas are underway, and added that he was “really pleased” with the team in place for the project.
Late on May 28, the company shared its financial outlook. It expects second-quarter adjusted earnings to be at $1 to $1.15 per share, down from a previous range of $1.15 to $1.45 per share. As of the morning of May 29, American’s shares were down by approximately 15%.
In addressing the Bernstein Conference, whose audience consists primarily of investors and analysts, Isom tried to boost morale in the face of plummeting share prices. “We’ve worked hard to build a reputation of delivering,” he claimed. “We say it; we’re going to do it. There’s a lot more that we’re evaluating right now, we’re focused on maximizing the opportunities that are ahead of us.”
America’s disappointing financial performance comes despite the company’s strengths, which include several fast-growing airport hubs and a young, streamlined fleet of aircraft.
