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 carrierâs chief executive, acknowledged that the company had âdug ourselves a holeâ 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 â 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 âpreferred agenciesâ â who were required to book at least 30% of their flights through Americanâs NDC system.
Travel agencies that didnât get the airlineâs 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.
âNext month, we were going to differentiate who earned AAdvantage Miles and who didnât, based on where they booked. Thatâs off,â Isom told investors and analysts at the Bernstein Conference on May 29.
Willie Walshâs Intervention
Now, one of the industryâs 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 â the yearâs largest gathering of senior airline leaders â Willie Walsh said the NDC problems at American were largely down to its rollout.
âItâs 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 itâs run. I think itâs the strategy behind the implementation of NDC that has created the problem for American [Airlines], rather than NDC in itself.â
The IATA Director Generalâs comments carry extra significance as NDC is a program heavily backed by the organization.
Asked by Skift if he thought Americanâs challenges with its rollout would spook other carriers, Walsh said the broader principles behind NDC remained valid: âI donât 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 airlineâs strategy didnât work, theyâll be looking at the 80, 90, 100 airlines in the world that have actually made it work very well for them. Theyâll learn from the issues [at American] but I donât think they would necessarily be concerned.â
IATA Chiefâs 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 theyâve taken are right, and I think [Robert] Isom has taken the steps that needed to be taken and theyâll correct it. I donât 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. Theyâve corrected the issue and I think that was the right thing to do.â
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