At an investor conference on Wednesday, CEO Robert Isom announced the company would abandon NDC and revert to its previous corporate strategy.
When Vasu Raja took over as American Airlines’ Senior Vice President of Strategy in October 2019, he was seen as a breath of fresh air. He pushed for a Boston hub, a Northeast operating agreement with JetBlue, and a Seattle hub partnership with Alaska Airlines. His boldest move was advocating for a Seattle-Bangalore flight in February 2020.
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However, the pandemic quickly upended these plans, and later a judge dismantled the JetBlue alliance. During the pandemic, Raja crafted an innovative strategy: while competitors cut back, American ramped up flights to the Sunbelt, directing beach-seeking travelers through its Charlotte and Dallas hubs.
Unfortunately, Raja also pushed a plan for American’s corporate customers to book directly through the airline’s site rather than travel agencies, dismantling the corporate sales division in favor of a new distribution capability (NDC). This strategy failed, and Raja paid the price. On Tuesday, American announced he would depart in June, stepping down as Chief Commercial Officer, a role he took in April 2022. Raja joined American in 2004.
At an investor conference on Wednesday, CEO Robert Isom announced the company would abandon NDC and revert to its previous corporate strategy. “Others are benefitting from what we’ve done over the last six months. We’ll get that back. I know for a fact we can recapture what we’ve ceded to others,” Isom said.
American has already reversed a plan to limit mileage points for some travel agency tickets. “Our approach has driven customers away from American,” Isom admitted. “We’re unequivocally committed to getting those customers back.”
Isom expressed admiration for Raja, calling him a creative thinker and a good friend, but acknowledged the need for a reset. “We will absolutely innovate. We will swing for the fences. It’s essential in this business,” Isom stated. However, he emphasized the need for short-term results.
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This shift marked a distinct change for Isom, who was reported to have been paid $31.4 million in 2023. Traditionally focused on schedule reliability, Isom now aims to devote more attention to revenue generation.
Isom took responsibility for the corporate strategy misstep but insisted it was the right approach, despite its flaws. “We have driven some customers away. We have restricted customers from using our product. Those are the kinds of things we have to be attentive to,” he said.
Wall Street reacted negatively to American’s announcement of lowered revenue and profit forecasts for the second quarter, typically the airline’s best period. By midday, American’s shares had dropped about 14% to $11.53.
This isn’t the first time Isom has been involved in an executive shakeup at American. In 2016, he replaced Scott Kirby, who moved on to become CEO of United Airlines.
Dennis Tajer, spokesman for the Allied Pilots Association, urged Isom to address more than just the corporate ticketing issue. He highlighted that United and Delta have superior long-haul international strategies.
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Vasu Raja’s vision of focusing on domestic and short-haul international routes while relying on partners for long-haul flights isn’t working. “Now Robert Isom has taken full responsibility,” Tajer said. “He has come into the cockpit and said, ‘This is my airplane.’”