03 December 2011

AA Lays Out Business As Usual... For Now

As expected American Airlines has petitioned the court in its Chapter 11 pleadings to pay its obligations to the distribution channels.

For now that means its business as usual.

AA is quite far along in building an independent distribution infrastructure that supports direct and indirect distribution services. Rather than relying on a single channel for its revenue management - it is already one of the most diversified of the major network carriers.

It is unlikely that AA is going to change that strategy mid stream. Even with Tom Horton at the controls - the company would be ill advised to place most of its eggs back into the GDS only basket.

The company has invested much time and effort in building a multi-functional and advanced capability network of services. While it still depends 65% (from court filings) on the agency marketplace, the company has built a number of new bridges into the channel.

Many have mistakenly assumed that its drive to Direct Connect was to eliminate the Agency from the mix. Nothing could be farther from the truth. AA has embraced the agency community and is not going to walk away or do anything that will undermine that relationship. However it does not mean that the distribution channel systems can ride on the back of this relationship. AA has made it clear it believes that it needs to control the product offerings and the holistic nature of its pricing.

Many legacy airlines have yet to focus on the issue of consolidated pricing of the air fare products. AA has grasped that nettle and is moving to ensure that it will  deploy the necessary technology to deliver that end. Its new Jetstream reservation system being developed on the HP Agilaire platform will incorporate several ITA Software innovations. Check out the case story of the Boombox implementation.

Anyone who thinks that AA is going to back off from its ultimate goal of controlling its distribution has not understood the animal. In my view the company will emerge stronger and more competitive from Chapter 11. And whatever it takes to ensure that it can deliver its products in a cost efficient manner - it is going to pursue.

After the make nice period is over, we are going to see AA implementing the necessary processes and structures to ensure that it remains competitive. If not why go through this Chapter 11 process.


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