Loyalty program members experienced an 8% growth in transactions and a 13% growth in revenue, which exceeded expectations. Loyalty members tend to prefer booking directly with the airline.
(Image Source)
GLOAmerican Airlines is reporting that the changes they implemented to their distribution strategy earlier this year are producing noticeable results. The carrier’s chief commercial officer, Vasu Raja, stated that around 70-75% of their revenue is now being booked through direct channels, and they expect this percentage to increase further. As a result, they plan to accelerate these changes, aiming to have 100% of their sales accessible through their app or website by the end of the year.
In April, American Airlines removed up to 40% of their fares from traditional Edifact channels, making them available only through New Distribution Capability (NDC) channels for travel agencies.
Raja highlighted the positive booking trends among members of the AAdvantage loyalty program compared to non-members. Although non-members traveled 5% less year over year, their revenue increased by 5%. Meanwhile, loyalty program members experienced an 8% growth in transactions and a 13% growth in revenue, which exceeded expectations. These loyal members tend to prefer booking directly with the airline.
Moreover, the cost of sale is significantly lower for AAdvantage customers, as the airline found that a considerable portion of calls to reservations made by travel agencies did not result in successful bookings. Raja emphasized that the shift to direct channels has led to implicit cost savings for the airline.
However, American’s decision to limit some content, particularly the lowest fares, to NDC connections has sparked criticism from ASTA (the American Society of Travel Advisors). ASTA argues that this move is anticompetitive and negatively impacts consumers. They have lodged complaints about American’s strategy with the U.S. Departments of Transportation and Justice.
As part of their new distribution strategy, American Airlines is also revising or terminating incentive contracts with travel agencies.
Source: Business Travel News
