American Airlines (AAL) has experienced a significant drop in its stock value after the departure of Vasu Raja, the company's chief commercial officer, and the announcement of disappointing revised guidance. In its filing, American Airlines reported that it now expects adjusted earnings per share (EPS) for the second quarter to be between $1.00 and $1.15, down from the previous forecast of $1.15-$1.45.

Additionally, an unsettling revision has been made in a crucial metric known as TRASM (total revenue per available seat mile). American Airlines now anticipates a decline of approximately 5% to 6% in TRASM for the second quarter, as opposed to the earlier projection of a 1% to 2% decrease. The operating margin is also predicted to decline by 1%, ranging between 8.5% and 9.5%.

The reduced guidance has taken investors by surprise, with Raymond James managing director Savi Syth expressing concern about factors that have plagued the airline industry, such as excess capacity and American Airlines' specific issues. These issues include an excessive focus on leisure travel and operational mistakes.

The revised guidance comes at a time when the summer season for leisure travelers is expected to be busy, as pandemic conditions improve. In fact, Memorial Day Weekend saw a significant increase in the number of travelers, with over 2.9 million individuals passing through TSA checkpoints, signaling a strong rebound in air travel.

In contrast, American Airlines' rival, United Airlines, has maintained its profit guidance for the second quarter, projecting EPS between $3.75 and $4.25. Their optimism suggests a positive outlook for the summer travel season.

A potential concern for American Airlines is its failure to capture a larger share of the leisure and business travel market. While travelers are still flying, they are increasingly price-sensitive, seeking better deals. American Airlines' excess capacity during off-peak travel periods and its focus on the Sunbelt and vacation states, like Florida, may have limited its ability to attract lucrative business travel.

The departure of chief commercial officer Vasu Raja has also raised eyebrows. Raja's decisions to reduce long-haul flights and make changes to the company's sales force and booking process, along with a shift away from business travel, may have negatively impacted American Airlines' performance compared to its competitors.

One initiative implemented by Raja was the adoption of New Distribution Capability (NDC), a platform that aimed to provide travel agents and third-party websites with access to American Airlines' fares and schedules. However, technical issues hampered the NDC system rollout, and the company's decision to limit consumers' and business travelers' ability to purchase flights through external channels may have hindered its growth.

Despite these challenges, Savi Syth is confident in the leadership of CEO Robert Isom and believes that American Airlines can overcome its operational mistakes. However, reversing the damage will require time and a careful reconsideration of the company's large corporate strategy.

American Airlines now faces the task of refocusing its efforts on capturing both the leisure and business travel markets while addressing overcapacity concerns. Only time will tell if their efforts will be successful in regaining investors' confidence and rebuilding their market position.