The day after announcing his appointment as chief commercial officer Vasu Raja will leave the company. American Airlines Chief Executive Officer Robert Isom acknowledged in June during an investors conference call on Wednesday that the airline made mistakes in rolling out its new distribution capacity strategy and vowed to change some tactics.
“American Airlines has taken steps to address capacity and adjust its distribution strategy and will continue to monitor the market closely going forward,” Isom said at Bernstein's 40th annual Strategic Decisions Conference.
“NDC's Modern Retail [on] Internet-based channels for selling our products are the future of airline distribution. We acted sooner than necessary and did not execute well. We regret that and the hardship it has caused our agents and corporate community.”
Going forward, Isom said American will evaluate its strategy “in a piecemeal fashion.” “We've spent a lot of time listening to our agents and corporate customers and listening to their feedback. We took immediate action to respond and adapt, and will continue to work in the coming weeks to optimize for our customers and American as we move forward.”
Isom added that American Airlines is focused on where its content is available: “Instead of removing content from agencies that rely on legacy technology, we need to further encourage, strengthen and promote NDC,” he said.
“We've imposed a lot of penalties. We need to provide more carrots and ensure our product is available where customers want to buy. … To the extent that our approach has driven customers away from American Airlines, we are committed to winning those customers back.”
American Airlines is also scrapping plans to differentiate AAdvantage loyalty miles earning eligibility based on booking channel. The change will be implemented Scheduled to come into effect on May 1stHowever, in late April, Postponed to July 11th“That's wrong,” Isom said. “We're not going to take away customers' right to earn frequent flyer miles.”
The CEO also addressed the reasons why the company lowered its second-quarter outlook on Tuesday, citing a weaker-than-expected domestic revenue environment and softness in last-minute bookings. “We believe this is due in part to changes we have made to our sales and distribution strategy,” he said.
Isom said the company expects year-over-year capacity growth to slow from just over 8% in the first half of 2024 to about 3.5% in the second half.
Isom also commented on Raja's departure. “I've known Vasu for a long time,” he said. “I respect his creative thinking and passion. He was an innovator, a disruptor and a great friend. But sometimes you need to reset, and that was the case in this case. We need to pay more attention to the markets, be more detail-oriented, and move forward as a team to really make it easier for American to do business.”
“We congratulate American Airlines CEO Robert Isom for acknowledging that the company's previous approach was flawed,” said Zane Kirby, president and CEO of the American Society of Travel Advisors, in a statement. “Reversing the decision to not award AAdvantage points and miles on travel agency bookings is a testament to the travel agent's primary position as an airline distribution channel.”
ASTA has strongly criticized American Airlines' distribution strategy, Complained to the U.S. Department of Transportation Require your carrier to move your content back to the EDIFACT channel.
Rita Visser, director of global travel sourcing and GPO at Oracle, posted on LinkedIn on Wednesday: “Do I think the industry needed a nudge to move forward with NDC? Yes! Do I think American Airlines got it wrong? Yes! This will go down in history as a part of airline commercial strategy, along with deregulation, fee reductions and churn. Get the popcorn ready.”
Corey Garner, a former US executive and founder of Garner Consultancy, also wrote on LinkedIn on Wednesday: “Vass has left his mark on every aspect of the commercial organisation, but that doesn't mean the organisation he leaves behind will automatically produce the opposite strategy.”
“Some things can be changed immediately, like restoring content to EDIFACT and making immediate changes to cookie-cutter commission/discount levels. But others will take years, especially efforts to repair programmatic relationships with customers and former sales staff,” he said.
