The changes American Airlines began to make to its distribution strategy earlier this year are having a measurable effect, according to the carrier.

About 70-75% of the carrier’s revenue is being booked through direct channels, American chief commercial officer Vasu Raja said during the airline’s Q2 earnings call Thursday. And he anticipates that figure will grow.

“We are encouraged by this, and we actually are going to accelerate the changes,” Raja said. “By the end of the year, 100% of what we sell, customers will be able to service online through our app or our dot-com. We’ll roll out those features over time for new distribution technology. But as this happens, we’ll make increasingly less and less of our fare content available through traditional technology where customers are not able to get that quality experience they are looking for from us.”

American in April pulled as much as 40% of its fares from legacy Edifact channels, making them accessible to travel agencies only in New Distribution Capability (NDC) channels.

Raja made his comments in the context of comparing booking trends among travelers who are members of its AAdvantage loyalty program versus others. Non-members during the second quarter traveled 5% less year over year, but revenue from that group grew by 5%, he said. For loyalty members, transactions grew by 8% and revenue 13%.

“That is certainly above what we had expected,” Raja said, adding that loyalty members generally fly more frequently and “importantly, they prefer coming to us direct.”

Raja also said, “The cost of sale is materially lower amongst our AAdvantage customers. It’s not just that we’re paying less in booking fees and commissions and things like that. But what we’ve found is something like 25% to 30% of our calls to reservations are actually bookings a travel agency originated and, for some reason, is unable to go in to service. So there’s a lot of implicit savings that we see from it.”

American’s move to restrict some content (particularly the airline’s lowest fares) to NDC connections has drawn the ire of ASTA, which has argued that the move is anticompetitive and negatively impacts consumers. The travel agency trade group has logged complaints about American’s strategy with the U.S. Departments of Transportation and Justice.

Also, part of American’s new distribution strategy is ending or significantly reconfiguring travel agencies’ incentive contracts. 

Source: Business Travel News

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