American Airlines executives recently defended their distribution strategy, highlighting the steps they are taking to optimize it. After a year of transition focused on creating the right long-term customer proposition and reducing unnecessary expenses, the airline is now focused on optimization to drive revenue and profit.
American Airlines made the decision to remove up to 40% of its fares from EDIFACT channels in favor of shifting bookings to its direct or New Distribution Capability channels. While this move posed some risks to business revenues, the airline saw sequential improvement in the recovery of managed corporate travel and domestic business revenue growth outpacing capacity growth in the first quarter.
Although American Airlines’ corporate demand growth rate fell short of some competitors, the airline reported total business revenue growth close to double digits exiting Q1. Managed corporates with contracts were growing in the mid-to-high single digits. Despite this, American was serving the corporate market with 7% lower distribution expense compared to a year ago.
American Airlines emphasized the importance of engaging directly with customers through modern internet-based technology. The airline aims to make 95% of all customer transactions digitally serviceable. By focusing on digital solutions, American believes it is leading the industry in adapting to customer needs.
American Airlines made the decision to delay its preferred travel agency program start date due to the overwhelming response from agencies transitioning to New Distribution Capability. The carrier was pleased to see many agencies embracing the change and shifting towards digital selling and servicing experiences.
American Airlines acknowledges the importance of optimizing revenue through its distribution strategy. By transitioning away from low-revenue value bookings and focusing on value creation for customers and profit generation for the airline, American is on a path to sustainable growth and success.
Despite a net loss in the first quarter, American Airlines reported positive revenue growth year over year. The airline’s guidance projects capacity to increase in the mid-single digits for the full year, with an average fuel cost range provided for the second quarter and full year.
American Airlines’ distribution strategy is a critical component of its recovery plan. By optimizing distribution channels, engaging directly with customers, and focusing on revenue optimization, the airline is positioning itself for long-term success in a post-pandemic world. By embracing change and leading the industry in technological advancements, American Airlines is paving the way for a new era of travel.