When airline online booking engines first opened midway through the Nineties, agents feared their businesses would be swept away.
28 years later, it seems the airlines’ dream scenario of disintermediation is coming true. While business through GDSs continues, Iata’s agenda says there is still a channel for agents – NDC is the future.
NDC allows the airline to dynamically adjust any agency commissions they might or might not pay, according to how hard they need to drive the sale of a route, or even a seat. Many airlines are already using carrots (agent gets commission) and sticks (agent pays a fee) to drive agents where they want them, while the choice between direct and GDS channels exists. Some major airlines are not driving NDC agendas in travel agencies at all.
Dramatic
It was a dramatic announcement that American Airlines made at its fourth-quarter results – the airline now seeks 100% Internet bookings – in both direct and travel agency channels. And the travel agent contribution to this will be via the NDC channel. Agents will soon have no choice in the channel they will use. GDS Edifact content (ie legacy GDS technology content) will soon be removed.
Corporate travel publication businesstravelnews.com reported that the airline’s executives voiced these wishes and more in AA’s Q4 earnings announcement last Thursday, January 25.
This is despite the fact that in November last year the carrier said it had had no plans to discontinue Edifact support.
"We sell our product through the Internet. That's what our customers demand," said AA’s Chief Commercial Officer, Vasu Raja. "That's how we can give them the best content at the lowest expense to them and the best servicing… As we go forward, we're going to lean further into this.”
The company reports it is up 15% in revenue over 2019, and down 8-9% in cost of sales.
The carrier reported that 80% of AA bookings in the quarter had come through its website, its app or NDC. This was a significant jump from the 69% it reported for Q4 2022.
Of that 80% figure, 65% of the bookings had come through the carrier's own channels – these had shown the greatest growth rate and the airline had been surprised by how fast the transition had happened.
CEO Robert Isom said the real issue in 2024 was that AA wanted to continue to transition its retailing partners to use the Internet. Now, the agents will not be able to make their own channel choice. If they want to book AA it will not be on GDS.
AA said it would also offer more loyalty-programme mileage for customers who shopped through the Internet. This will have the effect of attracting customers away from travel agencies and presumably will allow the airline to ‘own’ more customers. It doesn’t describe how it will efficiently service all those new direct customers, but it does say it plans to roll out “better servicing capabilities for internet distribution”.
The ratio between unmanaged business and managed was almost 3:1.
The company said its new AAdvantage Business programme continued to see strength among small and medium-sized businesses. This programme gives loyalty benefits only on bookings made direct, outside travel agencies.
Additionally, record numbers of AAdvantage loyalty programme (the non-business loyalty programme) customers acquired AA’s co-brand credit cards in 2023. New AAdvantage enrolments in 2023 were up 51% on 2019 figures, according to the company.
