American's new biz travel incentive is for direct bookings only
American Airlines’ new incentive program for small and midsize businesses, AAdvantage Business, applies only to direct bookings.
During American’s Q3 earnings call on Thursday, chief commercial officer Vasu Raja highlighted AAdvantage Business, a program for unmanaged corporate travel that is replacing Business Extra.
Unlike Business Extra, companies can only access the perks of AAdvantage Business if they book via the American website or app and not via a GDS, including GDS bookings with New Distribution Capability (NDC).
Companies booking with AAdvantage Business earn miles that can be redeemed for company travel. And in a new wrinkle, company employees earn bonus points toward AAdvantage loyalty status on top of the points they get from a flight as an individual AAdvantage member.
“Through AAdvantage Business, companies of all sizes can access our content in a way that is cheaper, simpler, better servicing and in a way that is more rewarding for travelers. We’ll accelerate their status,” Raja said.
Cory Garner, a former NDC strategist at American who now runs a consulting firm, said the realignment of American’s program for unmanaged business travel to be exclusive to direct channels is a “monumental change.”
Why American excluded NDC bookings isn’t quite clear.
“Perhaps it’s a signal that either implementing NDC via the GDSs was never the sole endgame or has not turned out to be the panacea that some believed it would be,” Garner wrote in an email.
American further cuts distribution costs
American continues to express confidence in its strategy to pull back from traditional Edifact-based GDS distribution in favor of direct and NDC sales channels.
“We’re finding that we’re able to generate more revenue with less cost of sale, which is very encouraging to us,” Raja said.
In Q3, Raja said American’s total revenue was up 2% year over year, while the cost of sales was down 13%.
American reported that 78% of third-quarter bookings came via direct and NDC channels, up from 53% in 2019. Approximately 10% of bookings came via NDC channels alone.
According to AmTrav (36th on Travel Weekly’s 2023 Power List), a travel agency that has been tracking American’s NDC changes since the airline pulled a large portion of its content from legacy GDSs in April, approximately 50% of American’s fares are currently withheld from corporate booking tools that aren’t NDC-enabled.
New pilot contract hits bottom line
For the third quarter, American reported a net loss of $545 million, attributable to the ratification of the airline’s new pilot agreement, which included retroactive raises to January of this year. Excluding one-time costs, American reported net income for the quarter of $263 million, with an operating margin of 5.4%.
Third-quarter revenue was $13.48 billion, up 0.1% year over year and $60 million less than analyst estimates, according to investment website Seeking Alpha. Capacity was up 6.9%.
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