Robert Isom had warm words for Vasu Raja, the airline’s outgoing chief commercial officer, but hinted that it was time for him to go
The CEO of American Airlines has made his first public comments since the announcement that the company's Chief Commercial Officer, Vasu Raja, will be stepping down next month.
On Tuesday afternoon, the Dallas-based airline revealed Raja’s departure, which coincided with a downgrade in the airline’s financial outlook for the current quarter.
“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,” said American Airlines CEO Robert Isom.
Speaking at the Bernstein Strategic Decisions Conference on Wednesday, Isom praised Raja but indicated that change was necessary.
“I’ve known Vasu for a long time. 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, who joined American in 2004, has held his current role since April 2022. No explanation for his departure was provided in the airline’s statement on Tuesday.
During Raja’s tenure, American consistently lagged behind competitors Delta and United across several key metrics. In 2023, its operating margin, a critical profitability measure, was 8%, excluding one-off accounting items. Delta's was 12%, and United's was 10%.
Raja’s Turbulent Tenure
Raja’s time as CCO included overseeing controversial changes to American's ticket distribution channels, leading to a formal complaint from the American Society of Travel Advisors (ASTA) about the carrier’s distribution processes.
Isom acknowledged that these changes are now under review, admitting, “we moved faster than we should have and we didn’t execute well.”
This represents a significant reversal for the airline. Last October, Isom defended the strategy at the Skift Aviation Forum, emphasizing the need for streamlined ticket purchasing processes. However, on Wednesday, he adopted a more conciliatory tone.
“We have to be better at executing those long-range plans. We have to be more attentive to the marketplace, more detail-oriented, and go forward as a team to make it easier for American Airlines to do business,” he said.
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Continuing Innovation
While acknowledging Raja's innovative yet contentious approach, Isom emphasized that the airline will continue to be bold in its decision-making. “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 reevaluating our sales and distribution strategy and determining what needs to be done.”
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| American Airlines Chief Commercial Officer Vasu Raja speaking at the Skift Global Forum in 2022. Credit: Neil van Niekerk/Skift |
Isom confirmed that efforts to enhance American's performance in this area are already underway, expressing confidence in the team leading the project.
Late on Tuesday, the airline adjusted its financial outlook, now anticipating second-quarter adjusted earnings of $1 to $1.15 per share, down from the previous range of $1.15 to $1.45 per share. As of 10 am EDT on Wednesday, American’s shares had dropped by about 15%.
Addressing the Bernstein Conference, which included investors and analysts, Isom delivered a rallying call amid the declining share price. “We’ve worked hard to build a reputation for delivering. When we say it, we do it. There’s a lot more we’re evaluating right now, and we’re focused on maximizing the opportunities ahead of us.”
Despite the disappointing financial performance, American Airlines maintains several strengths, including rapidly growing airport hubs and a relatively young, streamlined fleet.
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