American Airlines Seeks to Repair Travel Agency Ties After Direct Bookings Strategy

25.07.2024 - 23:42 / skift.com / Robert Isom / Dennis Schaal

American Airlines CEO Robert Isom outlined numerous steps the airline is taking to “course correct” after abandoning a direct distribution strategy it embarked on in 2023.

The airline could take a $1.5 billion revenue hit this year because of the policy’s ongoing effects.

“I’ll just be frank,” Isom said in answer to an analyst’s question during the airline’s second quarter earnings call Thursday. “We overindexed on direct, and we’ve got to find a way to get — to play in the richer pool of indirect revenue. And that starts with having content, having relationships — positive relationships with travel management companies and agencies and then supporting our corporate customers in the ways that they feel valued.”

Direct bookings are when customers book without a middleman through AA.com, which was a focus of its previous strategy.

Under the distribution policy that got tossed, clients would only have access to the airline’s most robust content, including Main Cabin Extra and preferred seats, if they used American’s New Distribution Capability tech and were designated as preferred agencies.

But most travel management companies, corporations and leisure travel agencies prefer indirect bookings, and go through the big global distribution systems like Sabre, Amadeus and Travelport.

The airline was punishing travel agencies who weren’t booking directly by withholding content, and the airline reversed the policy in May.

“I want to first acknowledge that our current revenue performance is not where we want it to be,” Isom said. “In May, we made a sizable adjustment to our revenue and earnings expectations for the second quarter, driven by an imbalance in domestic supply and demand and our prior sales and distribution strategy. We know we can do better, and we will rise to meet this challenge.”

To renew ties with corporate and leisure travel agencies, the airline changed the leadership of its commercial organization, and appointed Vice Chair Stephen Johnson to lead it.

In June, Isom added, American reinstated fares in the indirect channel used by travel management companies, corporations and leisure travel agencies.

“This action ensures our product is available wherever customers want to buy it and removes” the most significant “pain point” in the airline’s previous distribution strategy, he said.

The airline also embarked on renegotiating incentive agreements with travel management company partners, including American Express Global Business Travel. These agreements typically furnish financial incentives to these business travel agencies in exchange for them meeting certain performance quotas.

The talks are ongoing, Isom said.

Isom said American also expanded its Advantage Business program so that companies