Airlines are often accused of being high-handed in their implementation of NDC, bullying travel agents into NDC channels, failing to listen to what corporate customers really want, and removing customers’ free choice.
Here’s the story of one NDC strategy that backfired on the airline and will have long-term repercussions.
American Airlines in 2023 made a daring gamble – to completely disintermediate its ticket sales. So, it took the radical step on April 3, 2023, of removing 40% of its fares from GDS channels, making them available only in NDC-connected channels.
AA simultaneously started dictating to its corporate clients where and how they could book tickets. It replaced a loyalty programme for corporates with one that would recognise direct bookings only.
The intention of this purge of agents out of its business, presumably, was probably to remove GDS sector fees from its business – that’s what airlines want NDC to accomplish for them. By driving online bookings, AA could own every customer and gather data from them (also high on the wish list of airlines). It would also mean the airline would never have to incentivise travel agents or pay them any commissions, and it would be rid of travel agent overrides, and travel agents, forever.
Appeals from corporates and parties like the American Society of Travel Advisors (ASTA) for engagement and for a re-think fell on deaf ears. AA was bulldozing ahead willy-nilly, no matter what. It announced in January 2024 it was going after “100% internet bookings”.
For a short while, things appeared to be going along swimmingly, and all airline eyes were on AA – could this US giant pull it off? Would that mean that all airlines could pull it off?
Come May 2024 and reality hit. AA cut its profit outlook and its share price dropped by 14%, its biggest drop in four years. Analysts attributed this disaster directly to its alienation of the retail travel industry. Following the sudden May 2024 departure of the architect of the entire channel-switch strategy, erstwhile CCO, Vasu Raja, the airline started backtracking and rolling back the new policies, simultaneously launching a charm offensive in the US retail travel industry.
By July last year, the airline had restored most of its fares to GDSs and CEO Robert Isom said the carrier’s absence from GDSs had been its biggest pain point. The value of what was lost, as retail travel agencies moved their corporate clients to other airlines, is incalculable. Corporate loyalty programmes became channel-agnostic again. In July 2024, Isom estimated the airline could take a US$1,5 billion hit for the 2024 financial year – largely because it tried to bypass travel agents.
It was clear that the airline needed to re-engage with retail agents and start treating its customers like customers. Isom told skift.com: “That starts with having content, having relationships – positive relationships with travel management companies and agencies and then supporting our corporate customers in the ways that they feel valued."
Speaking at the Skift Aviation Forum in Texas last November, Isom said AA had reported a loss of $149 million for the third quarter of the 2024 year – this was during a period when corporate travel across the US was booming.
He now says American is currently trying to improve relationships with travel buyers across the US. “On that front, we've got to do a better job listening,” Isom told skift.com.
AA’s annual report, released last week showed a weak nett income of $846 million, a 2,9% increase over the $822 million nett income of 2023. Worse, it predicts a nett loss for Q1 of 2025 and a full year 2025 result below Wall Street expectations.
In the same year, Delta showed a pre-tax nett profit of $5,2 billion, on a par with its 2023 income.
United showed 2024 pre-tax net income of $4,2 billion, a 23% increase over 2023 profit.
Shareholders have swung into action. In September 2024, AA shareholders announced their intention to sue management over its reckless strategy, claiming the airline made “overwhelmingly positive statements to investors regarding American’s new sales and distribution strategy” during the period January 25 to May 28, 2024.
