Following the implementation of a booking procedure that irritated numerous customers, the carrier’s profitability plummeted, and it is now withdrawing the contentious plan for fear of future losses.
The new plan is known as ‘modern retailing,’ and it aimed to encourage clients to bypass booking agents and purchase directly from American Airlines. As part of the transition, the airline’s sales department was reduced.
However, the decision enraged some corporate customers and travel management services, and American’s chief commercial officer, Vasu Raja, admitted that its growth in managed corporate travel volumes was behind that of competitors. Raja was dismissed in May.
Net profits for American Airlines’ most recent fiscal quarter fell 46% year over year to $717 million. The airline’s CEO has admitted that they’re off track despite the record revenue they saw in the previous quarter.
Robert D. Isom, CEO, president, and director of American Airlines, said in a conference call that they can do better and will rise to the challenge. He blamed the industry’s supply and demand mismatch and its previous sales approach for some of the company’s problems. Isom admitted that modern retailing had flopped.
The CEO’s need for a reset signaled a shift in strategy, and he elaborated by saying that American Airlines moved quicker than they should and their execution was weak.
However, partnerships suffer the consequences of such decisions. TD Cowen analyst Helane Becker explained earlier this year that American Airlines would not be able to reverse the situation in three months. Getting everything back on track may take eighteen months or much longer.
In his most recent financial report, Isom recognized that the company has a large number of corporate client fences that need mending and consumer connections that need to be repaired. He also noted that a reset would require some time, which would likely have a negative impact on the company’s profits for the balance of the year.
