American Airlines Group Inc. CEO Robert Isom has made a bold move by dismissing the carrier’s commercial chief, Vasu Raja, following a critical report from Bain & Co. that highlighted issues with a new marketing system. The report, commissioned by American, revealed concerns from corporate travel advisers about a recent shift in the airline’s sales strategy, which has led to lagging revenue in recent quarters.
Raja’s departure was announced late Tuesday, along with a cut in profit outlook that caused American’s shares to plummet by 14% the following day – the largest drop in nearly four years. This unexpected shake-up marks the first major crisis for Isom since taking on the role of CEO in early 2022 and represents a setback in his plans to boost revenue for the airline.
The new system, known as “modern retailing,” aimed to steer customers away from booking agencies and towards purchasing directly through American. However, this move angered some corporate clients and travel management firms who criticized the system’s technology and claimed that American was falling behind its competitors in managed corporate travel volumes.
Isom acknowledged that the airline had moved too quickly with the implementation of the new system and failed to execute it effectively. He has pledged to modify the strategy moving forward to ensure that no customer is negatively impacted by the changes. One of the first changes being made is the decision to put on hold a plan to limit AAdvantage miles and loyalty points for trips purchased directly from the carrier or its partners, a move that had upset many travel managers.
Industry officials have praised American for reversing course on this aggressive plan, with the American Society of Travel Advisors expressing relief over the decision. The organization had raised concerns about the system with US Transportation Secretary Pete Buttigieg earlier this month, highlighting the impact it was having on customers.