American May Have Reversed Course on Distribution Strategy, But It Better Not Give Up Completely

The big news last week was that American Chief Commercial Officer Vasu Raja was pushed out and CEO Robert Isom promised to backtrack on much of what had been done in the sales and distribution world under Vasu’s reign. Some may have celebrated, suggesting that things would go back to the way they were.

I hope not.

American’s sales and distribution strategy change involved a variety of things, but today I want to focus just on the distribution side. This is about how American sells its flights, particularly through third-party travel agents. In that world, American decided to make a big, forced push to New Distribution Capability, or NDC. You can read all about that in previous posts, but this is in effect a newer, less expensive, and more capable way of selling tickets through third parties than through traditional channels.

The first push came in late 2022 when American announced it would remove 40 percent of its fares from traditional booking channels. From April, those would only be available through NDC. This was like a shock to the system, and I mean that in a good way. The distribution systems (GDSs) that all travel agencies use have spent so much time fighting the shift to NDC — none more than Sabre, the largest in the US — that it took something like this to really get them focused on creating a functional solution that they had hemmed and hawed on for years.

On the other side of this, travel agencies are creatures of habit. They liked the ecosystem they had going for them, and change is hard. They absolutely could have used a kick in the pants, and that’s what they got. Good. But then it went off the rails when American refused to bend and work with them on the transition effort.

In other words, this was going to be a good thing that quickly and painfully stopped being good.

The functionality just wasn’t — and still isn’t — there to support everything that needs to be done using NDC, but American didn’t care. It kept pushing harder and harder, forcing adoption when it wasn’t a good idea. This not only impacted travelers, but it turned NDC into a four-letter word. Just the mention of it around agencies and corporations was met with anger and scorn. NDC is supposed to be a good thing, but American ensured that it wouldn’t be viewed that way for a long time to come.

All that being said, the progress that has been made just in the last year is staggering. These integrations are the worst they’ll ever be today. And every day they get better. Eventually, these problems will be ancient history, and we can focus on the good.

What is good about NDC?

Since NDC content comes via a pipe directly from the airline, it can provide customized bundles, special offers that are personalized, and more. Ticket changes are always accurate — when they work — and there are no hated debit memos from the airline for travel agents if something gets messed up. And things are just simpler — WHEN THEY WORK. It’s also much less expensive and efficient for the airline this way. It is the future, but it’s not clear how far into the future it will be before it can truly replace traditional channels.

Despite not being fully ready, it works well enough in many cases. Even though American has taken its foot off the gas, it shouldn’t come to a complete stop. It would be a mistake if all progress was lost.

What should American do now?

If I were at American, I would put most of my fares — just excluding Basic Economy — back to being available in traditional channels. Basic Economy is a great offering for the masses, but online travel agents all use NDC already so they’ll show up there. From a corporate and brick-and-mortar agency perspective, I don’t need this. (United already pulled their Basic Economy fares and nobody cared.)

Most importantly, I’d get my premium cabin fares back in those channels to make it as easy as possible for people to buy the tickets I am having trouble selling right now. Then, I’d put some of my bundles that exist only in NDC today — like Main Plus with a checked bag and extra legroom seat — into the traditional channels. Those have always only been offered via NDC, but it’s not for technical reasons. Those can easily be sold via the GDS. These are premium products, and I need less friction so I can sell more of them.

Once those are available and bookings start flowing again (not so simple, but that’s about the sales strategy, not distribution), then I can start working on ways to get more agencies booking using NDC.

I’ve heard rumblings that American will be keeping its Preferred Agency Program, which I’ll call PAP to avoid writing it out longform. This is the one that was going to punish travelers by not allowing them to earn any AAdvantage miles if the agency they used wasn’t a part of the program. That part of it specifically is going away — American is now saying it isn’t going to punish any traveler with any of its moves — but this program is the perfect vehicle to encourage more bookings to come via NDC.

The qualification for this program was all wrong previously. It required increasingly-quick step-ups on the percent of AA tickets booked through NDC instead of traditional channels. That should be scaled back. And it also was only open to those agencies that have an incentive agreement with American, pushing out smaller agencies that weren’t large enough to have one of those. That makes no sense.

The right way to do this is to make it as simple as having regular NDC thresholds but making them far less aggressive. I’d possibly even limit those numbers to domestic travel only. After all, it gets a whole lot more complicated on international itineraries with multiple airlines. Require agencies to hit 30 percent of domestic bookings to get in the program and slowly increase that… but keep it flexible. There’s no need to stick to an arbitrary number if you see companies and agencies making progress in the right direction. That’s the art of sales, an art that has been lost at American over the last two years.

And then what to give agencies that qualify? I would hope that American would bring back the waiver and favor program it axed last year which allows agencies to use soft dollars for various services that could be costly. But why not give additional funds to those agencies that qualify for the PAP vs those that don’t?

Or maybe PAP agencies can get access to additional services in the program that other agencies can’t, like unlocking Main Cabin Extra seating. Or, what if there’s a special support desk to help the agencies in this program? American fired all of its sales support staff and now routes calls only to reservations agents. I would hope they’d hire back staff to help everyone, but if PAP agencies could get priority access with shorter wait times, that would be a great benefit.

I have another thought, but I don’t know if the GDS agreements would allow it. I love the idea of adding a GDS surcharge to help recoup costs involved when booking through the GDS like many European carriers do today… but then waiving it for members of the PAP. This might seem counter-intuitive and against what American has been saying about not punishing travelers, but it doesn’t have to be a huge surcharge.

PAP agencies would like this, because there are still plenty of fares internationally that can’t be booked via NDC, especially involving multiple airlines. There are also some travelers that they know are likely to need more hand-holding and changing, so allow those to be booked where that is more likely to be feasible, in traditional channels for now. PAP agencies have to hit a minimum booking level via NDC, so they’d be going in the right direction. But if they can’t book NDC, then they could have the fee waived to book through traditional channels.

It’s a shame that American messed this up so badly already or it could have had a really good, functional program in place that could have helped the whole industry in advancing NDC forward. Now, the best it can do is try to pick itself up out of the ashes and try to make something good come out of all this.