Raja isn’t wrong that much of the technology used in airline sales is antiquated, and that many of the seats airlines discount for managed travel programs could be sold directly to other customers at higher fares.
However airlines don’t sell all seats that way, and travel agencies do represent many customers even if those agents aren’t selling high margin ancillary products like assignments. Raja slashed sales staff and managed deals and imposed penalties on agencies that wouldn’t switch to not quite ready for primetime technology. He thought they’d make the switch, and American would generate more revenue at lower cost in any case. That didn’t quite happen but it’s only part of the story.
"If there were tools for agencies to go and sell different services and products to you and to me that the airlines really valued, suddenly travel agencies would have to compete at a level that they arguably don’t have to do when everyone’s effectively selling the exact same product," he said. "When you endeavor to go and drive that kind of change, regardless of how well or not it has gone, it’s not going to be met with thunderous applause."
Raja's focus has been on moving to direct distribution of tickets and self-serve tools for customers, selling short-haul flights in the Sun Belt, and monetizing the AAdvantage program.
He described their network as being their product – they sell flights that get people from one place to another by creating connections. Now he says having a good product is also important: "If I fly one time a day between Los Angeles and New York, and you fly 20 times a day between Los Angeles and New York, I can do anything I would like with a product but I’m still disadvantaged relative to you. But that doesn’t mean that I shouldn’t have a really good product."
Raja also says that their product isn’t just about seats; it's also about “the selling experience (was it easy for a customer to book and change a ticket?)” as well as flight attendant service: “I very much believe in what I’ll call a really practical kind of product.”
Criticizing ‘strategic’ flying is easy if defined as money-losing: United Airlines pulled out of New York JFK because they saw it losing money but then lost Los Angeles corporate deals because nobody wanted to fly cross-country to Newark.
Similarly when Raja oversaw dismantling competitiveness in New York before driving JetBlue partnership (which would have solved this had it continued), he talked five years ago about stopping losses by drawing down flights improving P&L without considering value from AAdvantage card deals attributed wrongly.
American has hubs in Chicago Los Angeles New York but isn’t preferred carrier; opportunity missed Bay Area Alaska Airlines partnership; transatlantic gateway Philadelphia limited high yield local traffic Charlotte poor man Atlanta; international flying pulled Chicago except London clear second United non-joint venture long haul eliminated Los Angeles retreat Seattle Pacific gateway never happened greatest tragedy New York
Apparently Raja traces back December 2006 Delta announced flight Accra advertising only airline five continents JFK seems wrong Delta ascendance began ill-advised slot swap US Airways proposed 2009 US Airways leadership sold Delta position US Airways management took over American 2014 strategy shifted no longer compete business become airline brought people scheduled optimized into back out same day
Raja acknowledges New York massive wealth center turns travel realizes makes Jeff Bezos point one-way two-way doors: “What constitutes strategic flying?” Raja said “Is strategic flying loss-making? Or strategic something exit market San Francisco Los Angeles East Coast happens risky making one-way decision exit?”
As American removed premium seats Boeing 787-8s six years ago Raja groused publicly employees didn’t enough premium seats sell hurting Chicago adopt employer incentives succeed United became first permanently eliminated change standby fees basic economy Kirby wanted since 1998 spent years President CEO eliminating change fees neutralized major Southwest advantage competes heavily Houston Chicago Denver California once industry executive status quo led shift away
Kirby came America West Executive Vice President took over US Airways President took over American served President before becoming United CEO acknowledged contract viewing service history America West convinced Delta mattered differentiate earn revenue premium offer commodity economy paper-thin adding seat back entertainment screens disavowed decision rip claims nothing do President
What means about Raja clearly focused schedule difficult disentangle simply work incentives faced came over 20 years fleet network planning pricing not surprising areas deep expertise important wouldn’t surprised see senior roles future opportunity grow come across mostly arrogant smartest guy rooms lead sense infallibility useful articulating broad sweeping vision less useful needing revise improve success understanding role product service route network ultra-low cost carrier even there
For American need earn revenue premium peers high cost likely change requires offering flights delivering on-time table stakes Customers prefer competitors willing spend more
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