American Airlines is reversing course on its controversial distribution strategy.
Speaking Wednesday at the Bernstein Strategic Decisions Conference, American Airlines CEO Robert Isom said that going forward the airline must do more to enhance and promote NDC modern retailing instead of removing content from the GDSs that many corporate and leisure travel agencies rely upon.
“We’ve used a lot of sticks, we’ve got to put some more carrots in place and make sure that our product is available wherever customers want to buy it,” Isom said.
Isom also said that American wants to ensure that no customer is hurt by its retailing strategy. As a result, the carrier is abandoning plans to stop awarding AAdvantage points on bookings made via travel agencies that don’t qualify as preferred NDC distributors.
“Were not doing that because it would create confusion and disruption for our end customer,” Isom said.
American’s startling about-face came one day after the airline announced that chief commercial officer Vasu Raja, architect of the distribution strategy that the carrier has pushed aggressively since April 2023, would depart the company next month.
As part of the strategy geared toward driving direct sales and reducing distribution costs, American has slashed its agency-facing sales team and removed more than half of its fare content from legacy GDSs, among other measures.
In a regulatory filing Tuesday, American reduced its margin guidance for the second quarter by 1 percentage point due to what Isom described as a softer than anticipated revenue environment for domestic travel and American’s performance within that environment. In particular, American has experienced softness in close-in bookings.
“That, we believe, is in part due to the changes that we have made to our sales and distribution strategy,” Isom said. “To address this we are evaluating our strategy holistically and piece by piece. We’ve spent a lot of time listening to our agencies and our corporate customers and we are hearing their feedback.”
ASTA ‘grateful’ for American’s about-face
ASTA president and CEO Zane Kerby said he was grateful that American is adjusting course on NDC implementation and scrapping the preferred-agency program.
The travel agency advocacy group has engaged in a public, bitter battle with American Airlines since April 2023, when American started pulling some content out of legacy distribution systems.
“I’m grateful for American Airlines’ renewed recognition of the essential role that travel advisors play in facilitating air travel for our shared customers,” Kerby said in a statement on Wednesday. “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.”
Kerby also said he “looks forward to working with American Airlines on a responsible implementation of its NDC program.”