Airline concedes it needs to ‘bring TMCs along with us’. Ian Taylor reports
American Airlines made an abrupt about-turn on its strategy to impose new distribution capability (NDC) technology on agents and travel management companies (TMCs) last week.
The reversal came with an admission by chief executive Robert Isom that “our approach has driven customers away from American” and the departure of chief commercial officer Vasu Raja.
Speaking at an investors’ conference in New York, Isom said the airline’s US sales performance had “worsened materially” since April and its loss of business amid “a softening in bookings” had cost the carrier “a couple of hundred million dollars” in the most recent financial quarter “due in part to changes [in] our sales and distribution strategy”.
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He said: “We’re taking immediate actions to respond.”
American, US partner of British Airways, triggered a battle over imposition of NDC technology in April last year when it withdrew more than 40% of its fares from GDSs and made full content available only via NDC channels, which distribute fares and ancillary content via online APIs (application programme interfaces).
US agents’ association Asta accused American of “a clear abuse of market power” and filed a complaint with the US Department of Transportation.
American ramped up the pressure in March by announcing it would stop awarding loyalty points and air miles to customers booking through “non-preferred” agencies – with preferred status requiring agents and TMCs to implement NDC and sell 30% of tickets via NDC channels by late April (Travel Weekly, March 14). The carrier subsequently postponed that move, but the threat remained in place until last week.
Isom said: “We dug ourselves a hole. We have to make sure our product is available in all channels, so we’ll be making changes pretty quick.”
He noted: “We were going to differentiate who earned miles and who didn’t based on the way they booked. That is off. We’re not doing it.
“We’re going to modify our distribution strategy [and] work closely with agencies and partners to ensure the transition we’re making is not disruptive.”
He suggested: “We all know NDC – modern retailing, internet channels for selling our product – is the future of airline distribution. But we moved faster than we should and didn’t execute well. We regret that and the difficulty it created for our agency and corporate communities.
“Instead of removing content from agencies relying on legacy technologies, we need to incentivise more and enhance and promote NDC. We’ve used a lot of sticks. We have to put more carrots in place.”
Isom added: “We have to make sure that when we put out new technology and ask TMCs to come along with us, we have the technical capability to help them get there.”
He said: “In terms of rebuilding relationships with intermediaries, we’re going to have to get out on the road.”
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