Following the abrupt departure on May 28 of American Airlines’ Chief Commercial Officer, Vasu Raja, the airline’s CEO, Robert Isom, has started rolling back some of the more extreme features of AA's latest strategy, which actively worked against retail travel agents globally.
A report by management consultants Bain & Company has indicated that the airline’s most recent sales strategy could be contributing to lagging revenue and falling sales over the past few quarters.
AA cut its profit outlook on May 29, and its share price dropped 14%, which, according to Bloomberg, is the biggest drop in four years.
In a new sales strategy under the title ‘modern retailing’, designed and executed on Raja’s watch, AA announced its intention to encourage consumers to book directly with AA instead of dealing with retail travel agencies and TMCs.
Now, Isom has said the airline will modify its strategy to ensure that customers are not negatively impacted by changes the airline might make.
According to several US news sources, the plan to reserve the ability for customers to earn AAdvantage loyalty points for direct bookings or from preferred agencies only, which has badly burned TMCs, will be removed. This was to have been implemented in the first week of June.
Isom acknowledged that a recent softening in bookings was viewed as being connected to the distribution strategy. “To address this, we’re re-evaluating our distribution strategy holistically and piece by piece,” he said in an interview on CNBC.
“We all know that NDC, modern retailing, and internet-based channels for selling our product is the future of airline distribution. But we moved faster than we should have and we didn’t execute well,” Isom said.
“We regret that and the difficulty it caused for our agency and corporate communities,” he added.
The news came to the American Society of Travel Agents (ASTA) as they were holding its annual conference in Dallas this week.
Said Zane Kerby, ASTA CEO: “I’m grateful for American Airlines’ renewed recognition of the essential role that travel advisors play in facilitating air travel for our shared customers. I want to extend my thanks to American Airlines CEO Robert Isom for acknowledging its previous approach was flawed. Reversing the decision to withhold AAdvantage points and miles for agency bookings is a testament to the firm position that travel agencies hold in the airline distribution channel.”
ASTA executives told US media that AA had stopped communicating with the association about a year ago. ASTA had driven a campaign asking its members to take paid advertising to drive their point home and make consumers aware of AA’s strategy.
It is unknown if any more features of the new distribution strategy are going to be pulled back, however, Isom has said that AA will “be very attentive to the marketplace as time goes forward”.
