travelBulletin

AA’s NDC champion drops off the podium

A profit downgrade announced at American Airlines today has come alongside the abrupt departure of the carrier's Chief Commercial Officer, Vasu Raja - someone who has made no secret of his ambition to cut the travel trade out of the distribution equation. BRUCE PIPER investigates.

AMERICAN Airlines has been in the news a lot over the past couple of years, mostly for its aggressive approach to distribution which has seen it target direct bookings at the expense of traditional flight resellers. AA’s implementation of IATA’s New Distribution Capability (NDC) has been a key priority for the carrier – but it’s also led to death by a thousand cuts for the carrier’s relationship with the travel trade, with a significant proportion of flight inventory no longer available within GDS (i.e. all of the cheapest flights), the cessation of managed corporate contracts and most recently the elimination of AAdvantage frequent flyer miles accrual on flights booked through travel agents and other resellers such as cruise lines and tour operators.

Today’s departure of the architect of these changes, AA Chief Commercial Officer Vasu Rama, will have airlines across the globe looking over their shoulders, with Rama’s dismissive and divisive approach seen in some quarters as an ideal travel agent-less vision of the future. It appears that may not be such an idyllic aspiration, with the news of his exit coming alongside a significant profit downgrade which has seen AA shares slump almost 10%.

A statement to the New York Stock Exchange confirming the news didn’t provide any explanation as to Rama’s move to step aside. It comes after a spate of negative headlines calling out AA for its war on travel agents – and now travellers – as it keenly pursued its NDC strategy. The carrier simply announced that “Vasu Raja, Chief Commercial Officer of the Company, will depart the Company in June 2024”. Effective immediately his role is being taken on by Stephen Johnson, in addition to his current duties as American Airlines Vice Chair and Chief Strategy Officer, while a new Chief Commercial Officer is sought.

The profit downgrade sees AA lower its guidance for adjusted operating margin, earnings, revenue and profit – and the ructions are certain to be a hot topic of discussion in Dubai next week at the upcoming Annual General Meeting of the International Air Transport Association. AA’s aggressive approach had sparked huge opposition from the US travel trade, including from the American Society of Travel Advisors (ASTA) which as well as formal protests established an online campaign at savemymiles.com to educate consumers and travel agents about AA’s approach.

“Travel agencies are now in the crosshairs of American Airlines’ latest abuse of its market power,” the specially created website thunders, urging travel advisors to rise up and lobby politicians to voice their concern. The sentiments were mirrored by the World Travel Agents Associations Alliance (WTAAA) – comprising organisations from across the globe including Australia’s ATIA – which noted that “by discontinuing AAdvantage accrual on tickets booked through most agencies and imposing stringent thresholds for agencies to maintain preferred status, American is actively discouraging travellers from booking through the travel agency channel”.

It remains to be seen whether Vasu Raja’s departure will see AA change course, but many other airlines are likely to have been watching on with fascination at the American approach, looking to see whether it would succeed – similar to the situation some years ago where Lufthansa led the pack by introducing its controversial GDS surcharge, which has now been widely emulated by many others. And of course there may be other factors involved in the profit downgrade, but clearly AA will be licking its wounds and potentially looking to revisit some of its advisor-unfriendly policies.

On the local scene, many travelBulletin readers have noted that American Airlines and Qantas have an extremely close relationship, not just as fellow members of the oneworld alliance, but more widely via a comprehensive ACCC-sanctioned partnership which allows the pair to coordinate operations on the trans-Pacific including in marketing and sales, freight, pricing scheduling, yield and inventory management, frequent flyer programs, lounges and “distribution strategies including agency arrangements”. AA’s negative approach to those who distribute its products is surely likely to have infected some parts of the Flying Kangaroo, to its undoubted detriment.

Perhaps mirroring some aspects of the AA approach under Raja, QF’s relationship with the travel trade reached a low point under a range of initiatives led by former Head of Distribution, Igor Kwiatkowski, overseen by ex CEO Alan Joyce and his then lieutenant, Andrew David. With the decidedly different Cam Wallace now leading Qantas International, along with the recent appointment of Kathryn Robertson as QF Executive Manager – Global Sales and Distribution, it can only be hoped that the recent trajectory of rapprochement continues.

Don’t get me wrong, I don’t think we’re going to see a reversal of those nasty decisions cutting agency base commission, but at least some recognition of the business (and services) the travel trade provides for the carrier wouldn’t go astray.

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