AA’s hard stance on pushing direct bookings, which included no longer offering frequent-flyer points to travelers who don’t book direct, apparently has backfired. AA cut its revenue and profit forecasts In its quarterly earnings call yesterday, and today watched its shares tumble 18%—the biggest fall since Covid.
As a result, American will be forced to cut its capacity growth for the rest of the year by about 8% and part ways with chief commercial officer Vasu Raja, who headed the strategy that encouraged travelers to bypass travel advisors and other third parties.
“We know we’ve dug ourselves a hole in this second quarter, and our operating earnings are going to be off by a couple of hundred million dollars. We’ve got a lot of work to do to recoup that,” said American CEO Robert Isom.
Indeed, ASTA in August filed an unfair trade complaint against American with the US Department of Transportation, accusing the carrier of causing “substantially higher air ticket prices for consumers and frustrated travel management companies” by pushing agencies to use AA’s NDC direct-booking technology.
The announcement comes just days after AA’s May 1 deadline, after which it said it would award AAdvantage miles and loyalty points only to customers of “preferred” agencies, meaning those that have a 2024 incentive agreement or American NDC channel, and use it for 3% of sales by April 21, 50% by October 31 and 70% by April 30, 2025.