American Airlines turns the screw on TMCs – again

“Disappointed but not surprised” were the words chosen by Clive Wratten, chief executive of the UK-based Business Travel Association, when asked for his thoughts on American Airlines’ latest turn of the screw.

Since the airline’s announcement a fortnight ago about loyalty earning restrictions, NDC adoption targets for TMCs, and the publication of a “preferred agency” list, the travel management community has been assessing the impact. Will corporate travellers shun TMCs in favour of American's direct booking channels in order to keep earning points? How critical is it for a TMC to be named a preferred agency when the carrier publishes its list towards the end of April? How achievable are the airline’s NDC booking requirements?

Wratten believes they are “harsh targets” which could be “designed to make agents fail” and brandished the strategy “arrogant” and “discriminatory against the end user”. He added: “As an industry we understand their wider strategy but it’s surprising to see them go down this particular route.”

The changes have not gone down well in other European markets that have significant transatlantic traffic. Marcel Forns, general manager of Spanish TMC association GEBTA, said: “By changing the rules, American Airlines is limiting the liberty of corporations to choose the travel agency, as well as the means of booking and how they manage their relationship with the carrier while also jeopardising transactions operated by TMCs.”

Regarding American's wider strategy, Forns said the lack of price transparency and full content available through traditional EDIFACT-based GDS channels is “a common malpractice of low-cost carriers which is increasingly being adopted by traditional airlines”.

Meanwhile, ASTA, the American Society of Travel Advisors, said the development “doubles down on American Airlines’ clear disregard for the travel agencies that distribute its services” and is “yet another manoeuvre to force NDC onto an industry that is not ready”. Like the BTA’s Wratten, ASTA says the NDC adoption levels are “unreasonable” and that its members “have more questions than there are answers”.

Indeed, Wratten said there was “real concern and some confusion” among BTA's members about how it affects non-US agencies. “It’s very different to have 30 per cent NDC [bookings] here [in the UK] than it is to have that in the US,” he noted. American Airlines told BTN Europe that the NDC adoption criteria would apply “globally” and that TMCs would not be assessed by regional operation or by brand, for example.

Justine Liddelow, commercial director at The Appointment Group, a TMC specialising in the entertainment sector with offices in the UK, US and Australia, told BTN Europe: “AA is taking away our independence, uniqueness and choice of how best to serve our clients by forcing us to sell the way they want – not [by] what is best for TAG and our clients.”

Liddelow said it is “very concerning to reach such targets” and that the nature of managing travel for the entertainment industry – which is prone to “constant changes” – makes the adoption of NDC particularly difficult. “Having to book via NDC gives control to the airline and ties our hands from being able to service these clients in the way that we are accustomed to,” said Liddelow.

“They are holding clients’ points to ransom if we don’t sell how they want us to [and that] is a poor and very alarming business practice,” she added.

When speaking to BTN Europe, Wratten said he had not seen any UK agencies publicly state they’ll achieve the 30 per cent NDC threshold but believes some will do so. Gray Dawes Travel has since told BTN Europe it will “absolutely” meet American’s NDC bookings threshold, saying it was an early adopter of NDC. “Our strategy has been consistent for the past five years… our primary focus is on NDC content online and offline,” said a spokesperson for the TMC.

In North America, AmTrav, Navan and Spotnana have publicly stated their confidence in meeting the requirement.

The mega-TMCs, including American Express Global Business Travel and CWT, have said that much of their American Airlines bookings are made by customers that have corporate agreements with the airline and thus those clients won’t be affected.

“For customers who do not have a corporate deal, our marketplace has lots of options where loyalty is still available," a spokesperson for Amex GBT told BTN Europe stablemate The Beat.

Most likely to be impacted are smaller companies – and their TMCs – who don’t have corporate agreements with American but whose travellers avidly pursue loyalty points. American's solution to that is for companies to enrol in the airline’s AAdvantage Business programme.

“It’s the TMCs working in the SME market who are most threatened by this. I don’t know about American Airlines, but business coming from outside of the conglomerates – the SMEs – is normally pretty big,” said Wratten.

He said that as a result of the strategy corporates could find themselves steered towards American’s NDC fares by TMCs as they chase the adoption targets set by the airline. If that means higher fares – compared to those available via a TMC’s net fares programme, for example – or less choice, corporates could be “penalised just to get the frequent flier points for their [customers’] travellers, and that’s mad”.

How will other airlines respond, other than by watching on with interest? “If everyone went in this direction it would be a significant threat to TMCs, to corporates and to travellers, but I don’t think other airlines will go for this,” said Wratten, noting however that Qantas with its “home dominance” is also being “a little aggressive” in its distribution strategy.

“Every TMC and airline I know sees NDC as the right way forward but it has to be done together. Airlines know that distribution, particularly in the corporate world, is vitally important,” said Wratten. “This development might not be that impactful but the messaging is, and who knows what’s coming next?”

Owning the customer

Just why its AAdvantage members are so important to the airline was illustrated at an American Airlines investors event on Monday this week where Vasu Raja, chief commercial officer, took to the stage. Around 40 per cent of the airline’s revenue comes from AAdvantage members buying “premium content”, he said, describing the programme as a “major growth priority”.

“Today we offer more premium seats globally than any other airline and that number's going to grow by 20 per cent in a few years. Our revenue is increasingly driven by AAdvantage customers who demand premium content,” said Raja.

Booking direct via its modern retailing channels benefits both the customer and the airline, he added. “Instead of the customer paying $25 or $30 per ticket [on a TMC transaction fee] they spend zero. It drives material savings for them and drives material savings for us... but as customers and companies come direct to us it's also driving satisfaction. Over several quarters we are seeing a statistically significant increase in our Net Promoter Score – which is nine points higher through modern retailing channels – and they also have higher propensity to buy higher value fares.”