American Airlines is introducing a significant update to its frequent flyer program starting May 1, 2024. This update will particularly impact the accrual of miles for basic economy tickets. This shift emphasizes direct bookings and New Distribution Capability (NDC) connections, marking a notable change in the airline’s distribution strategy. Understanding and adapting to this change is crucial for independent, home-based travel agents.
From May 2024 onward, American Airlines will allocate miles and loyalty points for basic economy tickets only when booked directly through the airline or its partner carriers. This policy change is a clear strategy to drive customers towards American Airlines’ booking channels. Earning miles remains possible for other fare classes, but only for bookings with “preferred travel agencies” or clients tied to American through corporate contracts or enrolled in the AAdvantage Business program.
Under this new policy, a preferred travel agency’s status is closely linked to the agency’s engagement with American’s NDC connection. To begin with, agencies must ensure that 30% of their bookings with American are processed through NDC, a requirement that will increase to 50% and 70% at later stages. This progression is part of a larger trend in the travel industry towards embracing digital and direct booking technologies.
This policy poses both challenges and opportunities for solo travel agents. The increased reliance on direct bookings and NDC connections requires a technological leap and a shift in how these agents conduct business. However, by adapting to these new systems, independent agents can potentially secure a spot as preferred agencies, gaining a competitive edge in the industry. Mark Pestronk had a good article on this in Travel Weekly.
The implications of these changes are multi-faceted. Firstly, there’s a clear signal that airlines like American increasingly value direct customer interactions over agency interactions. This could mean reducing the volume of business through traditional agent channels, pushing agents to innovate and find new ways to add value for their clients.
The implementation of NDC comes with notable drawbacks. Leisure travelers keen on earning points may now have to book directly with American Airlines or seek services from a larger, preferred partner agency. This shift could disadvantage many smaller, home-based agencies, as they might lose clients who chase points. Furthermore, this change introduces an additional layer of complexity for loyal clients. They may no longer be able to rely on their favored small agency as a “one-stop-shop” for all travel needs, potentially disrupting long-standing client-agent relationships.
This strategic move by American Airlines is not occurring in a vacuum. Other airlines and travel suppliers across all sectors are very likely to be closely monitoring these developments. The industry has witnessed a significant evolution in distribution channels over the years, with a growing emphasis on capturing more direct bookings while reducing reliance on agency-based reservations. This trend signifies a fundamental shift in marketing and selling travel services, reflecting changing consumer preferences and technological advancements.
In this evolving scenario, independent travel agents face the dual challenge of adopting new technologies like NDC and redefining their value proposition to customers. The key lies in leveraging NDC’s technological capabilities while maintaining the personal touch and specialized services that differentiate smaller agencies from larger counterparts. This may involve exploring partnerships, enhancing service offerings, or focusing on niche markets where personalized service is highly valued.