Yesterday we learned how American Airlines Chief Commercial Officer Vasu Raja is leaving the company as of June 2024. The airline isn’t taking long to reverse course on some of the changes that Raja had spearheaded.
American won’t cut mileage earning on third party tickets
Earlier this year, American announced plans to eliminate AAdvantage mileage and Loyalty Points earning opportunities for many fares booked through third parties. The idea was that if you didn’t book directly through American or through a “preferred” travel agency, you wouldn’t be rewarded.
This was a controversial change, but made sense in the overall context of American’s war on both business travel and travel agencies. The change was first supposed to be implemented as of May 2024, then the timeline was pushed back to July 2024, to give travel agencies more time to adapt to these changes, and become preferred agencies. There’s now another major update.
At a conference this morning, American CEO Robert Isom revealed that the airline is reversing course, and no longer plans to implement its penalty for non-preferred bookings. Suffice it to say that this is a major change in plans, and it’s something that AAdvantage members will no doubt be happy about.
Clearly American realizes its strategy isn’t working
Running an airline isn’t easy, and it can be a delicate balance between trying to maximize revenue and minimize costs. For so long, it seems like American’s focus has been on minimizing costs, from cutting corporate sales teams, to attempting to save on distribution costs in a pretty radical way.
This was largely part of Raja’s overall vision for American, and clearly Isom and the board finally decided that this is no longer working. For the past year, Raja was more excited by the words “El Paso” than “business travel.” And while Delta and United executives have talked about how they’ve seen an uptick in business travel, American’s executives haven’t made the same observations.
Just yesterday, American also adjusted down its guidance for the second quarter of 2024. Among these changes was an expectation that TRASM (total revenue per available seat mile) would be down 5-6% compared to the same quarter last year, rather than being down 1-3%.
When you consider American’s high cost structure, it’s not exactly great to run the airline like an ultra low cost carrier. Hopefully this is the first of many changes at the airline, and we see a renewed focus on American trying to generate premium revenue, rather than just focus on lowering cost.
Bottom line
American Airlines no longer plans to cut AAdvantage mileage and Loyalty Points earnings on tickets booked through non-preferred travel agencies. This revelation comes just hours after it was announced that American’s Chief Commercial Officer will be leaving the airline.
Hopefully this is the first of many changes we see at American, to make the airline easier to do business with. While I can of course appreciate the desire to encourage direct bookings, there are limits to how far an airline can go, especially when competitors aren’t matching.
What do you make of American backtracking on its plans?
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