If it wasn’t already clear prior to the end of last year, American Airlines executives crystallized it during Thursday’s Q4 earnings call: American eventually plans to go to 100% internet bookings — in the direct and travel agency channels.
Agency internet bookings are via the New Distribution Capability (NDC) technology standard.
“We sell our product through the internet. That’s what our customers demand,” American chief commercial officer Vasu Raja said. “That’s how we can give them the best content at the lowest expenses to them and the best servicing. … As we go forward, we’re going to lean further into this. We need to make it easy for our customers to consume our content through the internet.”
How soon that will happen is anyone’s guess. In November, BTN sister publication The Beat reported that an American spokesperson said the carrier has “no plans to discontinue Edifact support.” Edifact is the tech standard for legacy GDS bookings.
Still, for the fourth quarter, 80% of American’s bookings came through its website, app or NDC, up from 69% in Q4 2022, according to the company. Of that 80% figure, 65% came through the carrier’s own channels, “which is our greatest rate of growth,” American CEO Robert Isom said, adding that the company was “a little surprised” at how quickly the transition has happened.
“Strategically, we’re going to distribute through the internet. At some point, the number becomes 100 [percent],” Isom said. “And the real issue in 2024 is, we want to just continue to transition as many of our retailing partners to use the internet with us.”
Of course, there wasn’t much of a choice for some customers when American in April 2023 began to pull content out of the legacy Edifact channel. On earnings calls and in interviews since then, company executives have justified that decision and did so again on Thursday’s call.
“We’re up 15% in revenue,” compared with 2019, Raja said, adding “we are down 8% to 9% percent in selling expenses.”
Raja also added that American plans to offer more loyalty-program mileage for customers who shop through the internet, plans to roll out better servicing capabilities for internet distribution, “and we are going to start restricting the amount of selling and servicing that we do through non-internet-based channels.”
Fourth-quarter domestic revenue from business travel was at about 90% of 2019 levels, Isom said. The ratio between unmanaged business and managed was almost 3-to-1, with unmanaged business more than 100% recovered from 2019 and managed business less so, Raja added. “The impact on managed business is really flat from traffic on higher yields,” Raja said.
The company also is “excited” about the continued rollout of the AAdvantage Business program, introduced in October and which does not reward travel agency bookings. “We continue to see strength among small and medium-sized businesses,” Isom said.
When it comes to loyalty, in 2023 two-thirds of American’s revenue came from AAdvantage members, Isom added.
“More than ever, our revenue growth is fueled by a growing number of AAdvantage customers who acquired our co-brand credit cards in record numbers in 2023. AAdvantage customers represent both our greatest source of value and greatest opportunity going forward,” Isom said.
New AAdvantage enrollments in 2023 were up 51% compared with 2019 figures, according to the company.
Source: Business Travel News