American has decided that the way it sells travel through third parties and to companies in general is broken, and it has launched a risky effort to completely remake the space. If this works, Delta and United will be sure to follow and third party travel sellers will face severe pain. If it doesn’t, well, American will just retreat like airlines have done many, many times before. That being said, American is going all-in and it will not be easy to reverse.
This complete change in the airline’s sales strategy has been in the works for some time, but the results have only started to appear. Airlines should generally want a healthy tension between the relationship people on the sales team and the numbers people in revenue management. At American, that tension is now gone and the numbers have won a complete and total victory.
Former American head of sales and Chief Customer Officer Alison Taylor’s influence on the relationship side began to wane for many months under CEO Robert Isom (if not earlier), and she lost territory to Chief Commerical Officer Vasu Raja. In January, she “retired” from the airline and Vasu absorbed the organization. Since then, the changes have been swift from both a policy and a headcount perspective.
Vasu installed Thomas Rajan, formerly in HR at American, as VP of Global Sales, and the purge began. Long-time executives retired while the lower levels saw huge layoffs (more than half the team) as the new vision of a leaner sales organization comes to fruition. This wasn’t just about cutting out the bloat. No, this follows a major shift in the airline’s strategic vision.
Under Vasu’s leadership, American is remaking itself. Vasu sees a world where business travel has structurally changed. It’s a world where corporate travel is down and will remain that way. Thomas Rajan explained his concrete view to me in more detail:
…the 6-day a week road warrior doesn’t exist. People say we’re at 80 percent today; they are waiting for the last 20 percent to come back. I would challenge that notion. If people are walking around and they look, the contract with the employees in the workplace has changed….
American seems remarkably sure of this path forward while others aren’t nearly as convinced.
In this world, American wants to appeal to the traveler directly and is less concerned with corporate relationships. It has reportedly taken a hard line in getting companies to fulfill the obligations in their agreements, something that was probably long overdue. American is also, according to The Company Dime, eliminating agreements with companies that spend less than $1.5 million a year., just focusing on the big fish that American finds valuable enough to be willing to bend and work traditionally. Everyone else can deal with American on American’s terms or get out.
Instead of trying to nurture a relationship, American is convinced that it isn’t necessary. It’s the product that matters, and people will book how American tells them to book if they’re offering the right product. What does that mean? It’s not what you think.
When people talk about the product, they think about the food, the entertainment, the amenities, etc. That is not what American thinks of as being the product. As Thomas told me, “our product is not so much just the hard product but it is the network that we are a part of, the ability to operate that product reliably, create an ecosystem with our loyalty program, that if those customers enjoy and appreciate the quality and reliability, they want to engage with the ecosystem.” American thinks quite highly of its “product” these days. Really, it’s the network that is probably making them feel so bold.
LA has been crushed, Chicago has been slashed, and Dallas/Fort Worth and Charlotte have risen in importance. The idea is for American to create a fortress network that becomes so important to those in the middle of it that the airline has a captive audience. Companies will have no choice but to book the airline even if there is no sales relationship. It’s a somewhat bleak view on what matters to travelers, but that’s not to say it isn’t reality.
With only the biggest of companies mattering any longer, American has created its future view for corporate travel. But what about the broader, murky world of third party travel sales? It is trying to blow that up as well.
Travel agencies can be broken up into a few different categories. You have the online travel agencies (OTAs) like Expedia and Priceline that are all about volume and low fares. Then you have the travel management companies (TMCs) who handle all that corporate travel work that American is trying to make disappear. And there are still those agencies focused more on leisure or unmanaged business travel, a more premium product that has higher fares.
Disclosure time: Cranky Concierge would mostly fall into the latter category, though we aren’t an agency that deals with airlines directly. We partner with a much larger host agency that handles all the high level interactions and negotiations with the airlines.
These agency relationships are largely transactional, but the airlines that play nicest should do best, at least until the situation changes. If you’re an agency and you have a choice between two airlines where one offers better service and will help more with problems — not to mention potentially higher commissions — you’re more likely to pitch that airline to clients. American is testing this theory.
With the massive network advantage that American has been building in its hubs, American thinks that being easy to work with no longer matters. It has now released a slew of negative changes that have angered the agency world.
For example, agencies have long earned “Flex Funds” which could be used for anything from opening up a preferred seat assignment to making a name change or waiving an advance purchase requirement or offering an upgrade. At Cranky Concierge, we’ve used those programs to try and fix mistakes or deal with problems that we may have run into along the way.
The reason that these are important is that agencies are made of people, and people make mistakes. There are also problems that arise out of anyone’s control on the agency side. There are some airlines that will try to help fix those problems, and American is apparently quite happy not being one of those. Some minor issues like name corrections will now be allowed without penalty, but there doesn’t appear to be a remedy for larger problems.
On top of the policy changes, cutbacks in staff will likely make it harder to even find someone to help get resolution to issues that do exist. Or maybe there won’t be any resolution at all in this new world. It’s take it or leave it.
This, however, is a mere minor issue compared to the bigger change, one that has been brewing for some time and is probably worth another 10 posts of its own. The industry has been warming toward selling tickets using New Distribution Capability (NDC) for years. This allows airlines to control more of what is offered to the customer in the sales process. It’s the key to merchandising, you know… the thing that airlines have promised and failed to turn into reality. It also makes it harder for agencies to service their customer bookings.
Initially the global distribution systems (GDS) resisted, but even notorious pain Sabre has finally come around. The problem is that it’s not ready. And American doesn’t care, or at least it doesn’t believe it. Thomas was blunt, “Sabre will be ready for this NDC conversion,” but good luck finding anyone else who thinks that’s true.
Starting in April, American will remove its lowest fares — about 40 percent — from the GDS using the old way of selling. Agencies who don’t adapt will now find themselves only with high fares in the market. This will create all sorts of problems until the systems are truly functional and ready. American, however, is tired of waiting, and pushes much of the burden on to agencies which it really seems to have no sympathy for. Again, from Thomas:
…when somebody is unhappy about the fact that their business is being disrupted, I care about that, but I also reocngize if you’re unhappy about that, you have the power to change it. Just like for us, when our business was facing extinction, we made real decisions in the way we do business. We want to move the conversation from a model that used to be built in the past that was a basic servicing model. There’s a lot more value to be had. We actually believe there’s a bigger pie for everyone in the future.
The panic is starting to rise very quickly as agencies begin to learn just how clunky and under-prepared these systems are at dealing with normal workflows. It has now risen to the point where the travel agent lobbying group ASTA has issued a public call for American to delay implementation until the end of the year.
ASTA’s rationale is reasonable and measured.
Most of the key players… have stated that they will not be fully prepared to facilitate NDC implementation by April. Without significant and key front-, mid-, and back-office travel fulfillment systems ready and able to fully process NDC transactions, significant disruptions to shopping and booking, including ticketing, refunds and re-ticketing are inevitable.
So far, this call has fallen upon deaf ears. American, armed with its fortress network as its product, seems comfortable going ahead. So what if agencies aren’t able to see 40 percent of American’s fares? Because of American’s huge network advantage in the cities it cares about, it will find a way to backfill that traffic that disappears from the agency side. That’s all American wants anyway; to have the customer working directly the way it wants to work.
There are so many potential problems with this move that it’s hard to state them all. Travel agents are exactly that… agents for the airline. They are there to service bookings, help with changes, resolve problems, and do that without burdening the airline’s internal systems. A big shift toward direct traffic too quickly could result in disaster for American’s internal servicing efforts since it’s unclear how much servicing can be done on NDC bookings.
For American, it thinks the time is right. The question now is… will this be a game-changer or will American fall right back into old habits when the next downturn hits? That’s how it has always worked in the past, and it will always work that way. The difference this time is that American thinks the world has changed and it’s time for a completely different structure to take over.
If American is right, Delta and United are bound to follow. But at the same time, Delta and United are waiting with open arms for all corporations and agencies, hoping that they will boost their market share, especially on those higher dollar tickets. If Delta and United are successful at wounding American with this strategy, then the status quo will presumably return. Agencies are certainly hoping that’s the case. I’ve seen multiple cases of large agencies saying to only book American as a last resort, and that’s no surprise. In a sense, this is a fight for survival.
In the meantime, consumers who use travel agencies can expect turbulence. This move makes it harder to compare options, something that undoubtedly excites American. It also makes it tougher to service bookings, so that can cause delays in getting travelers help.
The coming months will determine whether American is right or if it has made a severe miscalculation. It’s the kind of bold move that Vasu has become known for, but not all bold moves are going to succeed.
You can wear a halo so long you forget it is old, tarnished and tattered.
You can drink the filtered and flavored water for so long you forget it isn’t clear.
The former industry-leading airline is now an after-thought.
You get what you manage.
This is now a dumbed-down operation that hands out costly participation trophies ?.
The largest airline in the country (and world depending in how you count) is an afterthought?
Yes it is, if that is the stance they are willing to take with their customers. The world is a lot more than Charlotte & Dallas.
I think this change is awfull too, but I struggle with the term “afterthought” as applied to an airline that carries more passangers than any other US based airline.
Are you trying to say you will be trying to avoid them in the future?
They will become an afterthought if this becomes their attitude to the customers that keep them alive. And we know the old saying… the bigger they are, the harder they fall.
As long as airlines and any other company make money, they can run their businesses any how they want. But they often forget that we, customers, have choices. We will not dance to their tune if we don’t like the music they play.
I recently canceled my AAdvantage citi and Barclays credit cards after losing my higher AAdvantage status. I was Executive Platinum for years when the number of miles flown was the mileage plan’s currency. Last year I did not spend on travel the amount of money required to have even Platinum level. Yes, the pandemic changed the game.
I am done with loyalty programs that do not offer any advantage to me, a customer. I am no longer the kind of customer AA seems to want.
Same here, five years ago, when the airlines switched from miles to money as the currency of status, elevating the corporate-travel managers — aka CKs — over entrepreneurial customers. I changed from loyalist to mercenary. Haven’t looked back.
Guess I come at this from a different angle.
Why do we need third parties much anymore? I realize it pays Brett’s bills, but most people are capable of handling their own air travel now. My company does all our own booking, and in fact most of my guys handle their own.
I don’t see the value to the consumer, and I think American doesn’t either.
This is. I think, also another way airlines are competing with ULCCs. Those guys aren’t looking to pay third party fees either. Again, I am asking where the value is?
I guess I’ll bite: It depends on the sort of travel I’m booking. We do all of our domestic travel bookings straight from airlines’ websites. We book most international stuff through Brett, unless it’s really straightforward. Those tend to be business-class bookings, sometimes leisure, sometimes work. The value that we see is a combination of finding creative routings plus recovery from irregular operations. Dollar-wise, this means that a decent fraction of the money we spend on airfare goes through a travel agent, since these booking are a lot more expensive than flying Southwest to Raleigh or whatever.
In the world with less business travel that AA anticipates, front-cabin self-pay are the sort of customers that airlines will need. So in one sense I think AA is shortsighted. But I’m not sure how many people like us actually book through full-service agencies. If that fraction is small, AA will be fine.
MANY business men prefer to use agents. If there is a delay/cancellation the agent can quickly rebook passenger on the next flight or alternate city. Who wants to stand in line to get a ticket revalidated, or reissued? The app /website cannot do it all.
There is huge value to companies that negotiate contracts with AA. There is also value to individuals who want to book trips they can’t get AA.com to sell.
Part of the problem with American’s position is the assumption that they act as if they are the only game in town, but in all of it’s hubs that is far from the case. Most of the large city to large city routes are flown by another carrier that would love to attract the business that American doesn’t give a dam about.
It certainly is not a forgone conclusion that this change will be successful. This will either cost them dearly or become the new normal in the industry.
Depends on the company, their travel patterns, and what travel policies the company has, if any.
#Small company, mostly domestic travel, employees pre-approved up to $x – sure, go ahead, book yourself.
#Larger company, lots of international travel, have to take lowest price w/in 4hr window or get approved, company wants to make sure bookings are directed towards preferred vendors for flights/hotels/cars/limos for best return on back-end rebates and future pricing, want to know where their employees are for duty of care/big brother reasons, company wants the TMC to handle disruption rebooking and option research (not their own high paid employee), etc. – bookings *must* be through corporate travel agent (I’ve worked for a client like this!)
#US Government contractor company (of any size) who has to jump through Fly America Act compliance hoops – please corporate TMC, take my money and help meee!
Companies come in all sorts of shapes and sizes and flexibility with expenses. Some merely want the service of a TMC as a nice to have, some NEED the service of a TMC…
John G – It’s a fair question. Corporate travel does not pay our bills, but it does for many enormous TMCs. There are a ton of companies still using them, and American is fine taking the bet that it won’t lose share.
You may not see value, but plenty of other companies do. It doesn’t matter if American sees the value or not. If companies do, they will continue to use them. If they don’t, they’ll leave. American is betting that they’ll either leave or the TMCs will be able to adapt quickly.
There are many reasons why companies and corporations will continue need third parties (TMC’s and or Travel software). The primary one that comes to mind is the Duty of Care responsibility for their business travelers. The liability associated with that can be huge. And given the current state of the world… it is even more important now than ever to know where employees are than ever. And another that will be absolutely huge relates to all the Environmental, Social & Governance (ESG) junk that public companies face… especially those operating in Europe. While ESG Phase-3 hasn’t hit the US yet (CA, NY and a few others may however beat the Fed to the punch), Phase-3 carbon footprint reporting involves everything upstream of the company which includes all business travel. That means you must centrally track, manage and report on all business-related travel which simply can’t be done without a TMC and/or travel software where 100% of employees are in use compliance.
IMO, AA is shooting themselves in the foot with corporate travelers. Our company pushes more than $1M/yr to AA in North America alone (likely double that globally through their alliance) and I am done with them given these changes and the new cold shoulder to corporate travel.
This is all hilarious to me, as a low end leisure Traveler that flys from SFO. My go to is 90% United these days, as the price is almost the same on any other airline and UA always has the best schedule and/or travel time. Star Alliance international awards are *ok* through UA as well.
It seems that Delta is my #2 these days, it may be just were I fly, but Delta is usually the best option if UA doesn’t have the route or schedule I need.
I *never* fly American. Its never an option or a consideration. Even SFO-PHX, which I do a lot, UA always has a better price or schedule.
(PS what the hell happened to Southwest. They got stupid expensive on most routes to the point UA is cheaper).
A bit too deep in the weeds for this 4mm (former) EXP flyer, but seeing AA doing anything first, as opposed to following as a late third behind any industry trend, is surprising.
The system reminds me of Southwest which likes to control its distribution system/customer relationship and stays away from GDSs. The control of information and direct relationships with customers has a tremendous value. I expect this trend will continue. For airlines that run on very thin margins, it makes sense tor AA to squeeze as much profit from the system as it can.
Brian – That is the old Southwest. Southwest is now huge on “channel of choice” as they call it. They have gone all-in with the GDSs and have effectively told agencies that they want them to be able to book wherever they want to book. It’s a complete reversal of position, but Southwest learned it was leaving a lot on the table. From what I understand, the airline is happy with the results.
I missed this the first time through:
Airlines should generally want a healthy tension between the relationship people on the sales team and the numbers people in revenue management. At American, that tension is now gone and the numbers have won a complete and total victory.
Whoa. That’s quite a statement.
Care to elaborate on how Sales provides value equal to that of RM to deserve the same level of influence?
Sales relationships with certain corporations or agencies could drive whether a route is profitable or not. Take for example markets like JFK-LAX or JFK-LHR. Without sales managing relationships with entertainment companies & banks, gathering market intelligence, incentivizing shifts in traffic from high margin customers etc., profitability and market share could tank.
Perhaps another example could be a more niche route like JFK-ZRH. There are a handful of banks and pharma companies with high margin fares but relatively limited volume. Targeted sales actions could determine where those customer fly with UA/LX vs DL vs (previously) AA. There’s simply too much capacity for the limited high value customers, which requires more attention from the sales force for the market to be successful
Swiss launched SFO-ZRH in part because it got a commitment from Genentech to a certain level of business travel. Genentech being a SF based company owned by Roche, a Swiss based company. So, yeah, there was definitely a time where sales influenced route planning.
I doubt it was anywhere near enough to drive the route decision, but I wouldn’t be surprised if Swiss got Genentech’s air cargo business (likely via its freight forwarder[s]) on that lane as well.
When you have two areas that make high-value products (med/pharma/tech), especially two areas that are hubs for the same parent company, a direct route like that creates value for what travels BELOW the wing, not just those who travel ABOVE the wing. :-)
100%. Another example is DL CVG-CDG with GE. Definitely some above wing value but also a ton of below wing
abcdefg – Who said anything about an equal relationship? All I said is there should be a healthy tension. As a former pricer, you’d think I’d want to see all the power with RM, but RM people do not understand or appreciate the value of relationships. Sales people put too much into the value of the relationship. The healthy tension is what creates happy medium.
I implied healthy tension = equal relationship.
I view sales as “negotiated RM with a personal touch” but Sales will never have the capability to optimize the network. Sales will contribute to it though.
“our product is not so much just the hard product but it is the network that we are a part of, the ability to operate that product reliably, create an ecosystem with our loyalty program, that if those customers enjoy and appreciate the quality and reliability, they want to engage with the ecosystem.”
OneWorld is abysmal compared to SkyTeam.
The responses here are a bit funny. American is effectively telling its distribution partners that they can continue to distribute the product but will do so as the company that actually builds and manages the product sees fit. It wants its distribution partners to behave in a way that makes it more money. Other than the aggressive timeline creating headaches, what exactly is counter-intuitive or problematic about that? What other businesses would not try to do the same?
Further, American has had this system out since 2008. Expedia, Booking.com and other OTAs have been using that system — 20% of American tickets — for years. American NDC works just fine for shopping, bookings and changes — when Cranky says “as agencies begin to learn just how clunky and under-prepared these systems are at dealing with normal workflows” it’s agency systems that are so awful. Agency systems that have had since 2008 to get with the program but haven’t. Shoot, I was at a Sabre meeting in Ft. Worth in March 2019 — they still haven’t gotten ready. How laughable is it that ASTA thinks that a year-end 2023 reprieve would make a difference to these dinosaurs?
And another thing regarding servicing.* I’d wager that more American tickets are changed via AA.com and the American app than via TMCs. Want to know the price to change an American flight or change your flight? You can do that in two minutes on an American channel, but it’ll take you a call/chat/email to your TMC to do that, which is a lot slower and harder. TMCs don’t realize this, but travelers aren’t dumb, they rely on American more than TMCs, American sees it, and American’s right.
*This ‘graph: “[Agents] are there to service bookings, help with changes, resolve problems, and do that without burdening the airline’s internal systems. A big shift toward direct traffic too quickly could result in disaster for American’s internal servicing efforts since it’s unclear how much servicing can be done on NDC bookings.”
emac – The OTAs are a different story. They pride themselves on being terrible at servicing a booking. It’s just a matter of plugging in where the data comes from and then presenting it. That’s the easy part. Well, it should be easy, but as you note, Sabre is horrible at even this part.
But Sabre is also the system that the majority of US agencies use, and so there is risk for AA there. I find it a complete and total failure that Sabre and other systems have not been able to provide a useful solution to agencies after so many years, but they do have market power so it’s not as simple as flipping them the bird and moving on.
As for servicing bookings, I think you way underestimate the value that agencies provide. You’re talking about a simple booking that can be quickly changed. But now think about complex issues, irregular operations, all that stuff that will ultimately result in hours on hold with the airline trying to get someone who doesn’t know the rules. There is HUGE value in servicing.
Thanks for the reply Cranky.
The servicing value you outline is awesome, but not something that most travelers need — nor even something that most corporate travelers changing trips need. I remember your fight with BR a few years ago, you and Cranky Concierge proved your value there, but that was an edge case.
And for the majority of travelers, the majority of changes, airlines apps/websites are far faster and just as capable (if not more) for researching and making changes than your average agency* (Cranky Concierge is obviously way above average). Ten years ago agencies could claim to deliver better service, but the airlines invested hundreds of millions into their own tech in the last decade and can now handle the majority of changes online — while agencies invested essentially nothing. United shared a stat at the UATP conference last week: 87% of trip changes are made on United direct channels. That number needs some clarification, but one way or another it shows that *travelers* find airlines far faster and more capable than agencies for the majority of their trip servicing needs.
Back to AA NDC — it works just fine for something like 99% of bookings, AA NDC is not the problem. No, AA NDC it doesn’t do splits/divides, but 99.99% of travelers don’t need splits/divides or other such EDIFACT relics. (Sabre solves this simply refusing to book multi-pax itineraries for AA NDC — insert laughing/crying emoji.) I know this because I work for a TMC that’s using AA NDC, we’re thankfully not dependent on the GDS, not dependent on GDS-dependent agent tech, mid- or back-office.
*There are plenty of exceptions, it’s just that these many exceptions together constitute a small portion of the overall population of changes. Splits/divides, changing carriers, complex international, etc. Suppose we could debate irrops, but even TMCs handle irrops by quickly rebooking the corporate traveler on another carrier and getting the previous ticket refunded later (if it’s not just the traveler rebooking themselves because that’s faster than contacting the TMC).
emac – Oh my yes, let’s not even get into Sabre’s boneheaded plan to just allow single person bookings. If that’s called “being ready” as American suggests, then that is a very low bar, and a terrible plan on Sabre’s part.
You definitely fall into AA’s camp on how you see the future. I get the impression AA doesn’t see much value in servicing from the agency side.
But if that’s the case, then why are they setting up a special servicing desk for agencies? There are a lot of mixed messages coming out of AA tha make me think the airline isn’t quite as confident as it acts.
Ultimately, it’s the tech providers in between the agency and airline that have failed here. And that’s no surprise since Sabre actively spent years fighting any change that would hurt their ability to hold sway. Once they finally realized they were being stupid, they haven’t been very good at catching up. That leaves American to make the push to get agencies to try to either fix or replace their intermediary tech solutions. And I get the feeling that many aren’t up to that task. So it becomes a question of how good they are at keeping their book of business intact. That’s the only way to sway the airlines is to hold a lot of dollars in your back pocket.
You’ve got to be kidding if you think AA’s direct channels are even remotely up to par for PNR servicing. In the past 5 years or so that AA has supposedly added this vaporware technology to make changes to even aa.com-originated bookings, it has worked for me exactly…ZERO times! Each time I have tried, even when a travel alert is in place directing me to use aa.com, it just throws an error pop-up saying the change can’t be made online and to call in. AA’s direct channels are the absolute joke of the industry compared to UA and DL (I shudder as I say that)!
The arrogance out of DFW is only second to what comes out of ATL these days. AA’s ‘product’ is far more than just its route network, which internationally is not great by comparison. So that idea is a real head-scratcher when taking into account what AA has done Spirit-fying it’s aircraft cabins.
Bryan – I think the timeline issues are the biggest ones here, at least in my mind. The intermediary systems suck at getting up to speed, and I expect that there will be more headaches than American thinks there will be. But there are smart people at American making these decisions. It’s not clear to me that anyone can know exactly how this will play out though.
Thanks for the reply Cranky – completely agreed on the aggressiveness of it and the lack of full understanding on how it’ll play out. To me, it’s about content flexibility and pushing as close to the allowable timeline to execute it – I’d guess mostly to send the message to the industry that they have the flexibility and are very willing to use it as a leverage point.
It’s pretty much a burn the boats kind of moment for the airline – but honestly if you don’t do something like this, the likelihood of continuing to follow versus lead the industry just perpetuates itself into the future.
Isn’t this pretty much how Southwest has been doing business with the traveling public for decades? It might also be noted that Southwest has been the most consistently profitable airline over the last 40+ years. Maybe it’s onto something? But maybe I’m mistaken. If I am, please set me straight.
Ghost – It’s how Southwest USED to work but it has completely flipped as it realized it was leaving too much on the table.
I’ve always loved Southwest’s distribution strategy. To book Southwest you have to go to Southwest.com or the app* — you’re choosing Southwest, it’s not just the lowest-priced carrier on Expedia or Google Flights. Think of how good for the brand that is, how much happier their customers are, they chose to fly Southwest.
*Outside a few corporate tools where Southwest is available via a direct connect or GDS.
Maybe the current Southwest model will be where all of this settles out in the end. We’ll see.
Thanks for the clarification.
American’s decision to dismantle its sales team is more of a reflection that they have been unable to give American an advantage in competitive industry markets – which is why they continue to shrink in New York City (other than what they have gained through the Northeast Alliance), Chicago, and Los Angeles as well as to competitive international markets in continental Europe other than heavily summer seasonal markets and to Asia. They have shifted resources to their fortress hubs esp. in the Sunbelt where their schedule dominance plays a bigger role in flight selection than whatever a sales team can do.
AA does have to be careful in assuming that they will continue to have schedule dominance in a lot of small and medium sized cities. Delta held back on capacity last year and disproportionately grew Boston and Los Angeles and is now re-adding capacity to its core hubs, esp. Atlanta and the SE, the very markets where AA gained a schedule advantage. United NEXT is all about replacing small regional jets with mainline capacity which is intended to improve their market presence in the medium and small cities where they have historically had a low market share.
AA is trying to commoditize even business travel – and they may be right. I suspect, though that Delta and United and even Southwest will be happy to pick up what American no longer sees value in pursuing – or did pursue for years w/o a great deal of success.
When I did my engineering degree – many, many moons ago – we had one course on economics. One thing that stuck with me is that as an industry matures, the distance between producer and consumer shrinks. That is the historical evidence. So you start out with producer – wholesaler – retailer – consumer. But over time, you end up with producer – consumer. Is that what is inevitably happening here? Think Ryanair or Tesla.
Kilmer – I think the difference here versus, say Tesla, is that in most cases, car dealers haven’t been allowed to even sell direct. In this case with airlines, they can, but it’s the consumers (or the companies) that choose the third party to handle the work on their own. If the airlines can get to a point where they can convince the companies to stop working with agencies, then that’s the way to solve this problem. But if your customers prefer working with agencies, then why penalize them for that?
It’s a consumer choice.
It took almost 30 years but the circle is complete. I sold my agencies (90% corporate/10% leisure [blech]) when DL capped commissions. Stock up on aspirin and antacids, Cranky — you’re gonna need them!
Cranky – do you have insight on what’s happening on the override side of things? There is at least as much – if not more – money in the commission and override budget than there is in the budget for sales labor costs. Back in my Distribution days, the biggest pain point/joke was the TMCs whining about their override check. (The theory was that paying an override ensured that the airline/hotel got “preferred share” from that TMC. As most of us in the business know, what the suppliers are actually paying is protection money. TMCs won’t ever really help a supplier in a market….but they can *hurt* a supplier that doesn’t play ball.). IMHO, if AA has no plans to cut back on their override costs, that tells me that they are hedging their bets on the success of their sales re-org.
Wildcat – I don’t have any direct interaction with airlines nor do I ever see overrides, but from what I’ve heard, American is being aggressive at reducing those as well. That’s all anecdotal though.
The network as product bit is interesting to me. I’m in RDU – a quick connection (or drive) to AA’s CLT network with access to what remains of DL’s focus city routes here. Still, I’m a pretty loyal United flyer. As a fully remote worker, the airplane and the lounge are my office. Leaving earlier and sitting in the lounge at IAD for three hours is no problem for me, as I’m just as productive as if I had gotten to my hotel earlier and worked from there. I was so delighted by UA as a 1K flyer before the pandemic, and more so in the years after when they gave me pity Silver status up through February of this year when I wasn’t traveling at all, that I’d be hard pressed to change – even for more non-stops.
Realize I’m a sample of one, which means nothing, but a deep dive study of the psychographics of loyalty flyers would be interested.
Also a sample of one, but I’m an agency TA with a client who was AA Exec Plat for 8 years while living as a US expat in China. About 90% of the way to million miler. He lost status over the pandemic due to China’s extreme travel restrictions–couldn’t leave the country and no true Oneworld partners domestically to allow him to maintain status. He earned a ton of CC miles but that only worked to maintain status 2020-2021, as rules were changed to disallow earning toward status.
When China finally reopened, he started flying Oneworld again and our sales rep wasn’t able to do anything to extend his status qualification period. I thought it was pretty shocking treatment of a longtime loyal flyer, definitely soured him on AA.
AA seems to be attempting to do what others have by acting like they have 1) perfect product/systems that can do everything they/you want them to 2) people don’t care about service.
1) ignores unforseen long-term issues like the pandemic, or short-term ones like system/crew meltdowns, when their automated systems will say “contact your agent” to make up for the ones they don’t have.
Alot of the system issues that persist are of their own making, i.e. the unnecessary snafus of codesharing, no matter how many years they’ve been at it…inability to do same-day change for alternative routings…”ticket queue” instead of instant ticketing, leaving people stranded at the gate…ignoring/lying about IROP’s so people can’t make alternative plans….the Issues are endless. So why not fix those before they remove the support for existing agents?
2) airlines – and AA in particular – have a long history of never knowing what they are: a “premium” brand/service? all-things-to-all-people? The New Spirit? They’ve tried “more room throughout coach” – they’ve tried their own simpler/rigid pricing strategy of few fare levels – they’ve tried variations of Basic Economy…only to turn around and do the opposite when it wasn’t The Magic Solution management claimed it would be, leaving the carnage of fired employees and abused passengers in their wake.
The largest, and often most profitable company in the world – Apple – proves that people are willing to pay more for a consistently premium experience. But it can’t be happenstance, with wildly different price premiums, and an employee workforce that doesn’t feel supported [and by extension agencies].
From those I know in IT, as well as a lot of customer service interaction, off-shoring development and customer service to a cheaper model doesn’t necessarily produce better results for the bottom line, much less longevity and the customer experience. I’m sure their ultimate goal will be to go the way of contact-less Frontier, where you can never reach anyone by phone, and the chatbot/interactions can last for hours of frustration.
It usually comes down to the decision of one [man] to say: “Screens are out!” “Screens are in!” [and often the same man, ala AA/UA]. Look back to the “synergy and savings!” promised by the merger of UA/Hertz/Westin. Improving an airline is a difficult challenge, and not served by kicking in the teeth the people most experienced to help.