American Airlines sent shockwaves through the travel industry earlier this month when it announced that only those consumers booking direct or through preferred agencies will be able to earn loyalty points through its AAdvantage program, and that preferred agencies will only keep that status if they met certain NDC thresholds.
American’s move is an obvious attempt to force the industry to adapt to NDC at a faster pace than it is comfortable doing—ASTA said as much in its reaction to the news last week—and also a clear attempt to give consumers another reason to book direct.
Peter Viltas, the executive vice president of industry relations at Internova, spoke to TMR recently about the change and how it might impact the industry.
What is American Airlines’ thinking?
On its retailing website, American says that the move was, in part, prompted by “subpar booking and travel management experiences” that its flyers had received from “third-party distribution partners.”
However, American’s ultimate goal is to have the consumer go directly to them, Viltas told TMR. That’s evident by the move to pull basic economy fares from the GDS and massively reduce its sales force at the same time.
“Everything they are doing is to have the consumer book directly on AA.com. They did that publicly,” he said.
The issue for American is, according to Viltas, no matter how much it wants customers to go direct, the kind of clients that used advisors due so for reasons that don’t include aversions to technologies or an inability to book themselves.
“The kind of customers we have – they use us not because they don’t know where the app is. Most are well-educated and well-traveled, they have a phone and see their boarding passes there. If they wanted to make a booking themselves they are more than capable of doing so, but they choose to go through a travel advisor. They want a professional.”
Viltas told TMR that this is just the start of what could end up being a significant change in the industry.
“This is the start of a story and the next chapter will be written in April when they start saying how is and who isn’t preferred,” a moment that could mark a major shift in consolidation in agencies because “if you lost your preference you have to find an agency who is maybe preferred.”
The issue could also become a problem for American when there is another major event that impacts air travel, whether that be a weather event, a pandemic, a geopolitical event, or something else entirely. American presumably will not have the same support from the agency community if it succeeds in attempting to move everything directly.
What agencies are really preferred?
According to Viltas, there has been a “firestorm” of emails over the past week from advisors wondering if they are preferred or not, and from clients to advisors wondering if they’ll be able to keep booking American and earn their AAdvantage points with their advisors.
Agencies might be preferred today but lose that status starting on May 1, so if a client asks today if they are preferred, the answer would be “yes,” and then that answer could very easily be “no” in just a few months.
There are also questions about whether or not corporate bookings that are already guaranteed AAdvantage points play into that initial 30% threshold. There are even more questions about the timeframe that American will use to determine that percentage, too. TMR has reached out to American for clarity on both of those questions.
What can the industry do?
“I agree that the industry has not moved fast enough to consume NDC,” Viltas said. “Aggregators cannot deliver what the majority of agencies want because it doesn’t fit into their back office system.” Plus there’s a cost issue for agencies, both in time and in dollars, that comes into play.
“No, the majority of the industry is not prepared. The majority of the industry is laying the groundwork, looking at their options, slowly implementing it,” he added.
What can advisors, particularly those with clients in regions dominated by American, some of whom have done nothing to prepare for the wave of NDC requirements, do now? It’s time to have an action plan, Viltas told TMR. Otherwise, you won’t be able to stay competitive, especially if another airline makes an aggressive move like American.
Viltas said that Internova is asking all of its advisors to make an NDC booking a day in order to get them comfortable using the system. The bottom line is that many in the industry have resisted NDC, Viltas said. Still, it’s not the industry’s responsibility to train and educate advisors for the future, which seems to be coming quickly.
For Internova, “our goal is to remain preferred,” Viltas said.
“We have advised agencies to get the training, start making the bookings, and then speak to your AA rep and explain to them your path forward.”
