Skift Take

Speaking to Skift, the former British Airways CEO gave his informed perspective on the problems at American Airlines.

Last week saw a mea culpa of colossal proportions at American Airlines. Robert Isom, the carrier’s chief executive, acknowledged that the company had “dug ourselves a hole” through a misguided commercial strategy. 

This culminated in the lowering of its financial outlook for the current quarter and the departure of its chief commercial officer Vasu Raja

As we reported last week, there are multiple factors at play — but a key element has been the botched rollout of a new system for selling American Airlines fares. 

At its heart is a technology platform known as New Distribution Capability, or NDC. The plan had been that the airline would designate “preferred agencies” — who were required to book at least 30% of their flights through American’s NDC system. 

Travel agencies that didn’t get the airline’s stamp of approval faced the prospect of losing customers who would have had to book American flights on AA.com or a preferred agency. The airline initially said it would designate preferred agencies by May 1 and later moved that deadline to July 11.

“Next month, we were going to differentiate who earned AAdvantage Miles and who didn’t, based on where they booked. That’s off,” Isom told investors and analysts at the Bernstein Conference on May 29. 

Willie Walsh’s Intervention

Now, one of the industry’s highest profile figures has shared his take on a week American Airlines would rather forget. Speaking to Skift on the fringes of the IATA Annual General Meeting — the year’s largest gathering of senior airline leaders — Willie Walsh said the NDC problems at American were largely down to its rollout. 

“It’s not an NDC issue, it was the way in which the NDC was being implemented. There are a lot of airlines that use NDC and are very happy with the way that it’s run. I think it’s the strategy behind the implementation of NDC that has created the problem for American [Airlines], rather than NDC in itself.”

The IATA Director General’s comments carry extra significance as NDC is a program heavily backed by the organization. 

Pressed if he thought American’s challenges with its rollout would spook other carriers, Walsh said the broader principles behind NDC remained valid: “I don’t think there will be many [airlines] looking at what American did. I think there will be lots of airlines looking at those that have made it successful. Just because one airline’s strategy didn’t work, they’ll be looking at the 80, 90, 100 airlines in the world that have actually made it work very well for them. They’ll learn from the issues [at American] but I don’t think they would necessarily be concerned.”

IATA Chief’s Advice to American Airlines

Asked by Skift what his advice would be to American, Walsh said he was broadly supportive of the decisions taken by the airline in recent days.

“I think the measures they’ve taken are right, and I think [Robert] Isom has taken the steps that needed to be taken and they’ll correct it. I don’t think I would have done it differently, well, I may have. I did implement NDC in a different way [at British Airways]… I admire airlines that make brave decisions, but not every brave decision will work for you. They’ve corrected the issue and I think that was the right thing to do.”

Airlines Sector Stock Index Performance Year-to-Date

What am I looking at? The performance of airline sector stocks within the ST200. The index includes companies publicly traded across global markets including network carriers, low-cost carriers, and other related companies.

The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. See more airlines sector financial performance

Read the full methodology behind the Skift Travel 200.

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Tags: airline distribution, airlines, american, american airlines, direct booking, distribution, iata, ndc, Willie Walsh

Photo credit: An American Airlines Boeing 787 Dreamliner. Wikimedia Commons/Jakkrit Prasertwit / Wikimedia Commons/Jakkrit Prasertwit

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