American Airlines (AA) CEO Robert Isom has extended an olive branch of sorts (for now, anyway) to travel agents in response to the airline’s controversial direct sales strategy and recent dip in financial performance.
In what is perhaps a business lesson in listening before you jump, AA has reversed a decision announced in February to restrict the accrual of loyalty points necessary for elite status to tickets only bought directly from the airline or through select travel agencies.
As of July 11 this year, only designated preferred online and offline travel agencies that were required to book at least 30 per cent of their flights through AA’s NDC portal would have been able to continue to earn AAdvantage miles when ticketing AA fares.
However, despite record first-quarter revenue of approximately US$12.6 billion, American Airlines reported a net loss of US$312 million for Q1 2024 last Thursday.
With more market softening predicted AA slashed its revenue and margin outlook for Q2 2024 this week.
At a Bernstein Investors Conference on Wednesday in New York, American Airlines CEO Robert Isom cited a weaker-than-expected marketplace and the airline’s underperformance as key reasons for its lower earnings guidance.
“Next month, we were going to differentiate who earned AAdvantage Miles and who didn’t, based on where they booked. That’s off,” Isom said.
“We’re not doing that because it would create confusion and disruption for our end customer, and we’re going to make sure that we take care. We’re listening to feedback.”
The airline also announced the departure of Chief Commercial Officer Vasu Raja next month, with American’s CEO admitting that recent changes in ticket sales strategy are contributing to its struggles.
The airline’s revised ticket sales strategy is a significant factor behind declining bookings Isom said.
Isom’s remarks indicated that the shake-up in corporate and third-party ticket sales, including travel agents, led by outgoing CCO Vasu Raja, has not delivered as planned. “We are adapting our distribution strategy,” Isom admitted at the Bernstein event.
“We moved faster than we should have, and we didn’t execute well.”
In recent months, travel agents have expressed concerns over potential job losses and decreased business. In the U.S., The American Society of Travel Advisors (ASTA) has been vocal about the industry’s adverse effects, advocating for a more collaborative approach.
Despite the backlash to its direct strategy, American Airlines remains firm. The airline continues to invest in its digital platforms, enhancing user experience and providing exclusive offers to direct bookers.
“We’re learning and adapting,” Isom said. “We know that NDC, modern retailing provides a better experience for the end customer. And we know that we will get there over time, but we have to go about it differently.
“We’re going to make it easier, we’re going to execute better, and we’re going to do a lot more to try to bring people along with us,” he said.
AA will launch nonstop seasonal services between Brisbane and Dallas-Fort Worth on October 27. This will make it the US carrier’s second Australia-bound route and the longest flight on its network by distance, at 15 hours gate-to-gate.
By the end of this year, it will offer services between LAX, San Francisco, New York (JFK), and Vancouver and between Brisbane, Melbourne, Sydney, and Auckland.
