"We’re not doing that because it would create confusion and disruption for our end customer."
American Airlines won’t be implementing a change to their AAdvantage program that would have limited eligibility to earn miles for travelers booking through certain travel agencies. American Airlines CEO Robert Isom spoke Wednesday at the Bernstein Strategic Decisions Conference, and said the plan to limit mileage earning only to travelers who book through certain “preferred” booking channels was not going to be implemented.
“We’re not doing that because it would create confusion and disruption for our end customer,” Isom said.
Major industry trade groups, including the American Society of Travel Agents (ASTA), World Travel Agents Associations Alliance (WTAA), Association of Canadian Travel Agencies and Advisors (ACTA), and Foro Latinoamericano de Turismo (FOLATUR), had pushed back on the plan, saying it would punish passengers and agencies alike.
The announcement came just a day after American announced that Chief Commercial Officer Vasu Raja would be departing the airline in June. Raja had been the primary architect of the distribution strategy that would have included the controversial changes to mileage earning eligibility. The plan also drastically cut American’s sales team, focusing only on the carrier’s largest corporate customers.
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Also on Tuesday, American adjusted its profit margin targets downward over previous estimates for the second quarter, while competitor United Airlines reported that its profit expectations for the same period were roughly unchanged.
Brett Snyder, author of the popular travel industry blog Crankyflier, and CEO of the travel assistance service Cranky Concierge, was a vocal critic of the scheme and welcomed the news that the airline planned to roll it back, but noted that the airline lost a lot of goodwill in the process. “It’s encouraging that American has finally realized the mistakes it has made over the last year and a half, but there is significant damage done. This can’t be unwound quickly.”
In an effort to gain greater control over how its fares were marketed to consumers, American had used a number of tactics to convince travel agencies to migrate to a platform called NDC, which would have given them the ability to offer the full spread of American’s fares, including fare bundles that include add-ons like checked bags, seat assignments, priority boarding or refundable fares.
American had planned to limit AAdvantage mileage earning only to passengers who booked through an agency that had turned on NDC, putting their customers’ mileage accounts in the middle of their dispute. A list of “Preferred Agencies” (i.e., agencies who had given into American’s NDC demands) was never published by the carrier, and the policy implementation was delayed from May to July while American worked to convinced more agencies to make the switch.
Agencies felt strong-armed, and would-be customers were left wondering if they would be earning miles for their flights on American—particularly if they were traveling for work and had to book through a certain agency or corporate booking tool as mandated by their employer.
Snyder explains, “[American] has relationships burned with travel agencies, corporate clients, airline partners. The sales team has been decimated, and can’t be built back up easily. It will take time.”
American’s executives had been noticing a change in customer behavior—and it may not have been the change they were hoping for. Instead of making sure they booked via a channel they could be sure would earn AAdvantage miles, Isom’s remarks on an April earnings call suggested customers were booking elsewhere.
“As we take a look at the first quarter, there’s quite likely some benefit that our competitors received because of some of … the changes that we’ve made.”