American Airlines is canceling changes that it planned to make to its booking experience, which would have seen some passengers become ineligible for earning miles or Loyalty Points.
Under the originally planned changes, passengers on American would only earn frequent flyer miles and Loyalty Points, or credits for elite status on the airline, if they had booked their ticket either directly with the airline or through one of its preferred channels. A variety of third-party booking platforms would have potentially been excluded, including some corporate travel-booking portals.
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Speaking at a Bernstein financial conference Wednesday, American Airlines CEO Robert Isom said that the airline was scrapping the plan as part of a broader effort to pull back on its recent distribution strategy. That strategy was meant to encourage customers to book directly with the airline, meaning the carrier would not have to share a cut with a travel agent or booking service.
However, Isom said, the broader strategy, along with the specific tactic of restricting mileage earning, were creating confusion which has driven customers to book flights with rival airlines.
“That’s off — we’re not doing that because it would create confusion and disruption for our end customer,” Isom said. “We need to work closely with our agencies and partners to ensure that the transition that we’re making is not disruptive to our end customers.”
“We know that NDC [New Distribution Capability], modern retailing, provides a better experience for the customer,” he added, referring to new distribution tools available when passengers book directly with the airline or with certain preferred partners. “We know that we will get there over time. We have to go about it differently.”
The changes to mileage and elite status earning were originally slated to go into effect May 1, but had already been pushed back to July 11.
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The pivot in strategy — which is likely welcome news to American flyers, particularly those who travel for work and book tickets through a corporate platform — comes less than a day after American unexpectedly announced the departure of Chief Commercial Officer Vasu Raja. American also lowered its financial outlook for the second quarter Tuesday, saying it now expects unit revenues to decline as much as 6% compared to the same quarter last year. It previously projected a drop of up to 3% compared to last year. The airline said it would cut capacity growth in the latter part of this year.
Raja was a major driver of the airline’s new distribution strategy, along with other strategies that have produced disappointing results for the airline, like reducing long-haul flying in favor of booking passengers on codeshare partners, along with the airline’s network strategy focusing on the so-called Sun Belt, broadly lining the southern third of the United States at the expense of its northern and coastal hubs.
On Wednesday, Isom recommitted to the Sun Belt strategy, however, even as the airline’s shares fell more than 15% following the opening bell.
“I haven’t seen anything that suggests the Sun Belt cities aren’t going to continue to be a real economic engine in the United States,” Isom said. “Our regional network is so important,” he added, referring to criticism that the airline has sacrificed some of its broader network in the interest of servicing the Sun Belt hubs.
“When you take a look at that region, our unit revenue performance has been down considerably, but it’s not something that we’re going to abandon,” Isom added. “We’re going to make sure that we’re there when the [air travel market] dynamics change.”
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