American Airlines CEO to push direct distribution strategy as agents say it’s a deliberate bid to put them out of business

American Airlines CEO to push direct distribution strategy as agents say it’s a deliberate bid to put them out of business

American Airlines (AA) CEO Robert Isom is planning to make another push for direct selling at the Bernstein conference taking place in New York today (EST time). This comes despite travel agents’ claims that AA’s sales strategy is a deliberate attempt to put small agents out of business.

Isom will be speaking at the conference following a drop in the airline’s earning outlook. It now expects its unit sales revenue for the quarter to be down 6 per cent on last year.

Following the drop in its predicted fortunes, it revealed that its chief commercial officer Vasu Raja is departing the firm next month.  Raja has been with the airline since 2004. Before taking up the CCO job in April 2022 he also held the role of chief revenue officer and senior vice president of network strategy, where he was responsible for network and alliances.

Isom has been vocal about his ambitions to shift to direct selling in recent years, much to the chagrin of American travel agents.

Robert Isom

Speaking at the Skift aviation forum back in October 2023, Isom made a case against travellers booking through third-parties.

“When you shop for American, you ought to be able to shop and get access to everything without having to go through a number of different routes [or sources of information],” Isom said, arguing that its flyers shouldn’t “need a lot of intermediaries to tell them what’s available.”

Under Isom’s leadership, American Airlines has made a number of strategic moves that prioritise direct sales rather than sales from an intermediary.

Starting from 1 May this year, customers earn loyalty points and flights when they book directly through the airline or through a “preferred” travel agency.

“We want to make it more convenient for customers to enjoy the value and magic of travel,” said Raja, said at the time. “Not only does booking directly with American provide the best possible experience, it’s also where we offer the best fares and it’s most rewarding for our AAdvantage members.”

Naturally, American travel agents have not reacted well to Isom’s strategic shift. Last year  the American Society of Travel Advisors (ASTA) filed an unfair trade complaint to the U.S. Department of Transportation, saying the airline was causing “substantially higher air ticket prices for consumers and frustrated travel management companies.”

In a letter to the Federal Trade Commission FTC (sent on the 9th of May), ASTA’s chair Lina Khan said American Airline’s decision to only reward customers who booked directly or through a “preffered agent” was a deliberate effort to put small travel agencies out of business.

ASTA advert

“ASTA recently learned that AA requires agencies to sign an egregiously one-sided agreement as a condition of participation as a preferred agency,” the letter states.

“Among other things, it permits American to terminate the agency’s preferred status for any reason, or no reason at all, on thirty days’ notice. Practically speaking, the inclusion of this clause means that regardless of an agency’s achievement of the prescribed NDC booking thresholds on the measurement dates (or any other dates AA may arbitrarily choose to use instead), preferred status can be revoked at will at any time.”

According to ASTA’s public campaign savemymiles.com, over seven thousand travel advisors and their clients have sent letters to their congress representatives to voice their concerns about American’s decision.

 

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