American Air Fired Commercial Head After Pointed Bain Report

(Bloomberg) -- American Airlines Group Inc. Chief Executive Officer Robert Isom dismissed the carrier’s commercial chief in the wake of a critical report from Bain & Co. about a controversial new marketing system that alienated corporate clients, according to a person familiar with the matter. 

Isom was prompted to fire veteran executive Vasu Raja within the past few days after the report, which American commissioned from Bain. It revealed concerns by corporate travel advisers over a recent shift in the airline’s sales strategy, which contributed to lagging revenue over the past few quarters, the person said Wednesday.

Raja could not be reached for comment. American announced his departure late Tuesday, and also cut its profit outlook, sending its shares down 14% the next day — the biggest drop in nearly four years. The unwelcome drama is the first major crisis encountered by Isom, who became CEO in early 2022, and marks a setback in his plans to grow revenue at the airline.

Read more: American Airlines Plunges After CEO Admits Misjudging Demand

The new system the CCO had overseen, dubbed “modern retailing,” sought to push customers away from booking agencies in favor of buying directly through American. The airline’s sales department was cut back as part of the switch. 

But the shift angered some corporate clients and travel management firms, including claims that its technology wasn’t sufficiently developed. Raja had acknowledged recently that its growth in vital managed corporate travel volumes was trailing that at rivals United Airlines Holdings Inc. and Delta Air Lines Inc.

‘Didn’t Execute Well’

American compounded its error, industry officials have said, by having previously declined requests from its longtime customers to slow down deployment of the system. 

“Modern retailing is the future of airline distribution,” American’s CEO said Wednesday at an industry conference. “But we moved faster than we should have and we didn’t execute well.” 

Isom pledged to “modify” its strategy going forward, saying the airline needs to make sure “no customer is made worse off from the changes that we make.” 

One of the first things American is putting on hold: A plan to limit AAdvantage miles and loyalty points for trips bought directly from the carrier or its airline partners, or through agencies that gained preferred status based on certain criteria, including the amount of bookings they made through the system by certain deadlines. That move, which was set to start next week, had particularly rankled travel managers. 

“That’s off,” Isom declared Wednesday, earning some immediate praise from an industry trade group.

The airline’s plan “was extremely aggressive,” Zane Kerby, CEO and president of the American Society of Travel Advisors, said in an interview. “That came as a real shock earlier this year. We are certainly happy that they’ve made this about face.”

American pulled about 40% of its fare content last year from customers using legacy distribution systems, removing the lowest-priced tickets and forcing corporate customers to pay higher fares, Kerby said. His organization, which calls itself the world’s leading association of travel professionals, raised concerns over the system with US Transportation Secretary Pete Buttigieg in a meeting earlier this month. 

(Updates from seventh paragraph with CEO’s comments at industry conference.)

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