American Airlines said it has begun recapturing corporate business that was lost when the airline heavily pursued direct and New Distribution Capability (NDC) bookings in parts of 2023 and 2024. That strategy alienated travel agencies and corporate customers, resulting in lost share of indirect bookings. American scrapped the strategy in May.
Speaking during American’s Q3 earnings call Thursday, CEO Robert Isom said American bottomed out in the second quarter of 2024 at 11% below its typical share of indirect U.S. bookings — a channel that generated $14 billion in revenue in 2023.
In the third quarter, American said it rebounded slightly to a 10% deficit, as the airline restored fare content in GDSs, hired more sales staff, re-engaged with travel agencies and corporations and reinstituted other agency-friendly policies. The rebound accelerated in September, Isom said, leaving American down 7% in terms of its historical share of indirect bookings.
“We know full restoration of our revenue will take some time, but with the progress we’re seeing and the actions underway, we aim to fully restore our revenue from corporate channels as we exit 2025,” Isom said.
He added that American has entered into new agreements with more than half of the largest corporate and leisure travel agencies, and said the airline is in advanced negotiations with the remaining ones. American has also amended agreements with many top corporate customers, Isom said.
American chief strategy officer Steve Johnson, who is leading American’s re-engagement efforts with travel agencies and corporations, said that in the initial stages of the outreach, the airline had to work through their anger for being spurned. But as time has progressed, he said agencies have commonly told American that they welcome more airline competition in corporate travel.
During the 13 months between April 2023 and this past May, American took aggressive steps aimed at driving more direct and NDC bookings and fewer legacy GDS bookings. Those steps included slashing its corporate sales staff, pulling more than 50% of sales content out of legacy GDSs and ending many agency incentive contracts.
American estimates the failed strategy could cost the airline $1.5 billion in revenue this year.
Since late May, American has increased its account manager headcount by 20% and added dozens of sales support staff, with hiring still underway. American also restored all but basic economy fares to the GDSs and has brought back other benefits for corporations and travel agencies, including a series of enhancements to the AAdvantage Business incentive program for small and midsize companies.
Isom emphasized that the re-engagement effort will continue.
“There’s a ton of work to be done,” he said.
American’s Q3 results
For the third quarter, American reported operating revenue of $13.6 billion, up 0.8% from last year and $225 million better than the estimate by investment analysts at Deutsche Bank. Operating expenses increased 1.1%.
American reported operating income for the quarter of $89 million, reversing an operating loss of $223 million in last year’s Q3.
The airline reported an overall net loss for the third quarter of $149 million, including non-operating expenses, most notably interest.
