American Airlines, travel company? Listen to the carrier’s chief commercial officer, Vasu Raja, for a while and it’s clear that changes are afoot at the world’s largest airline.
Airline business changed to American Airlines. So-called blended trips, or those that include both business and leisure aspects, are driving the company’s growth as it emerges from the pandemic.
US Chief Commercial Officer Vasu Raja, speaking at the Skift Global Forum on Tuesday, said nearly half of the airline’s revenue now comes from such blended travel. Additionally, this new travel classification is driving the carrier’s revenue growth more than anything else today.
“What the pandemic really unlocked, and the recovery that resulted from it, was the big meltdown,” Raja said. “People don’t need to keep a professional life for five days, a personal life for two days and set aside two weeks a year for holidays.”
Raja attributed the 20-point gap between American’s revenue recovery and its capacity in the second quarter to the rapid expansion of merged business and leisure travel. During the period, the airline’s revenue increased by 12% compared to 2019, while its capacity was still down by 8.5%.
The idea of blended travel, and the work-from-anywhere philosophy more broadly, which has rapidly gained popularity during the pandemic, has led to changes in airline flight destinations. Outdoor-focused destinations, whether beaches or mountains, have recovered fastest – many are seeing more air service today than in 2019 – while traditional heavy travel markets businesses like New York and San Francisco have fallen behind.
Raja cited Bozeman, Montana as an example of a destination where America has seen an increase in mixed travel. Passenger numbers at Bozeman Airport rose more than 43% in the six months to June compared to 2019, according to data from the U.S. Bureau of Transportation Statistics. Nationally, passenger numbers were still down about 9% over the same period.
Every airline serving Bozeman has expanded there compared to three years ago, according to the Diio by Cirium timetable. American carried more than 50% more seats than in the six-month period, but the biggest change was the addition of Southwest Airlines, which went from not serving the Montana city at all to its third largest carrier in terms of seats.
American Airlines travel agency?
Raja’s presentation made one thing clear: American Airlines no longer sees itself as just an airline. Asked about its shift towards more domestic and less international long-haul flights since the pandemic, Raja described the airline – or travel agency, perhaps – as offering the “largest global network in the world”.
It may look like a standard boilerplate statement, but it was missing a key word: “airline”. Before Covid-19, former US CEO Doug Parker and other executives described the carrier as the “largest global network Airline company in the world.” With that single word removed, Raja hinted at what American’s transformation into the world’s largest global travel company could look like.
“If you are an AAdvantage member [loyalty] program, you are a member of the biggest and best travel rewards program in the world,” Raja said. He added how travelers can earn and redeem points through a large group of global partners to more destinations at better rates than any other program of its kind.
“That American Airlines does everything,” he said, apparently referring to the broader travel company. “But American Airlines also runs an airline, which is also called American Airlines.”
The airline side of its business, he said, is increasingly adding flights on North American routes where it sees the greatest return for its growth, particularly mixed travel. Internationally, travelers can get where they need to go via connections with American’s partners, including British Airways, Japan Airlines and Qatar Airways. American, the airline, still flies to distant destinations but increasingly concentrates this long-haul flight on partner hubs, for example Doha and London.
“Increasingly, where we choose to go and fly our flights, will realistically likely be much more heavily in the national system,” Raja said. “[It] likely will be for a while due to nothing other than the fact that right now the North American demand base has recovered at a much faster rate than the rest of the world.