The changes American Airlines this year began to make to its distribution strategy are having a measurable effect, according to the carrier. About 70 per cent to 75 per cent of the carrier's revenue is now being booked through direct channels, American chief commercial officer Vasu Raja said during an earnings call on Thursday (20 July). And he anticipates that figure will grow.
"We are encouraged by this, and we actually are going to accelerate the changes," Raja said.
"By the end of the year, 100 per cent of what we sell, customers will be able to service online through our app or our dot-com. We'll roll out those features over time for new distribution technology. But as this happens, we'll make increasingly less and less of our fare content available through traditional technology where customers are not able to get that quality experience they are looking for from us."
American in April pulled as much as 40 per cent of its fares from EDIFACT channels, making them accessible only in New Distribution Capability channels.
Raja made those comments in the context of comparing booking trends among travellers who are members of its AAdvantage loyalty programme versus others, rather than comparing business with leisure customers. Non-members during the second quarter travelled 5 per cent less year over year, but revenue from that group grew by 5 per cent, he said.
For loyalty members, transactions grew by 8 per cent and revenue grew 13 per cent.
"That is certainly above what we had expected," Raja said, adding that not only do these loyalty member customers bring in additional revenue and come with a lower cost of sale but American also found that about "25 per cent to 30 per cent of calls through reservations are bookings a travel agency originated and for some reason is unable to go and service."
He added that these customers generally also fly more frequently, some already have bookings into the fall and, "importantly, they prefer coming to us direct”.
Corporate travel segment
Overall bookings remain strong, said American CFO Devon May. "International entities continue to lead the way in terms of year-over-year performance, and we are encouraged by domestic business demand, notably from small- and medium-sized enterprises," he said.
Raja reiterated figures from prior quarterly calls and said that American's customer mix still was 35 per cent leisure, 35 per cent blended travel and 30 per cent business. Within the business segment, there's roughly a two-to-one split between unmanaged travel and managed travel.
"That's been pretty consistent for several quarters now," Raja said. "It looks to be pretty consistent going into the future. This is actually how the business operates now."
American's managed travel has recovered to about 80 per cent of historical levels, and that has "plateaued for several quarters now," Raja said.
"However, unmanaged demand continues to grow in our system. Total business revenues have really regained their 2019 composition in the system, so we remain encouraged on business demand."
American reported record second-quarter revenue of $14.1 billion, up 4.7 per cent year over year. Passenger revenue of $13 billion was up 6.2 per cent from a year prior and capacity for the quarter, measured in available seat miles, was up 5.3 per cent year over year.