American Airlines Stock Drops After Company Lowers Outlook, Key Executive Departs

American Airlines (AAL) shares dropped more than 8% ahead of Wednesday’s opening bell after the full-service carrier slashed its current-quarter outlook and announced the sudden departure of its chief commercial officer, Vasu Raja.

American, the world’s largest airline by fleet size, said it now sees second-quarter unit revenue declining between 5% and 6%, down from its earlier forecast of a 1% to 3% contraction. The airline also trimmed its bottom-line guidance for the period, saying it expects adjusted earnings to range between $1 and $1.15 per share, below its prior projection of $1.15 to $1.45 per share. Analysts had been calling for adjusted earnings of $1.30 per share.

The airline’s soft guidance for the current quarter, which includes the busy summer season, comes as travel demand over the period is expected to reach record levels. Trade association and lobbying group Airlines for America (A4A) expects U.S. carriers to transport 271 million passengers over the 2024 summer season, representing a 6.3% increase from last year.

Chief Commercial Officer Departs

In a separate statement late Tuesday, American said Chief Commercial Officer Vasu Raja, who had assumed the role for a little over two years, will be stepping down next month and temporarily replaced by Vice Chair and Chief Strategy Officer Stephen Johnson.

Raja oversaw the airline’s post-pandemic pivot to direct sales from selling tickets through agencies, a move that some analysts have argued has contributed to the airline losing corporate business travel market share to rivals United (UAL) and Delta (DAL). In the first quarter, American reported business revenue growth in the high-single digits, whereas Delta and United posted a double-digit increase.

Monitor This Key Chart Level Amid a Further Descent

Despite a golden cross appearing on the American Airlines chart in late February, the shares have traded mostly sideways to lower since that time, increasing the likelihood of a false signal. 

Amid expected weakness after the airline’s lowered guidance, investors should keep a close eye on the $12.85 level, an area where the price by find buying interest from a horizontal line linking a number of prominent swing lows over the past 13 months. A breakdown below this important technical level could see the stock descend to its 2023 low at $10.86.

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As of the date this article was written, the author does not own any of the above securities.