At the end of May, American Airlines announced the departure of Chief Commercial Officer Vasu Raja, and downgraded earnings projections, as business and managed travel revenue dropped off amidst a cost-cutting campaign that pushed those customers and resellers to move their interactions with the airline online.
The airline spread the story that it was a Bain Consulting report that did him in, but that wasn’t quite accurate. He’s still being paid through January and isn’t going to speak too much out of turn. But he’s giving his first interviews since the split.
Speaking with Skift he outlined challenges for airlines:
The relationship between airline revenue broke and hasn’t fully recovered. Airlines used to earn more simply as the economy grew.
Airlines generally have fixed costs which are difficult to compete on – same price for fuel, planes, and labor is hard to get at a discount. They can’t grow in places like New York.
Frequent flyer programs differentiate airlines now. Long haul less competitive routes produce outsize results. (American cut here under his watch.)
Customers have more of a premium demand than they did pre-pandemic.
Raja said there’s “a lot I would do differently.” He reviewed challenges from bankruptcies to the financial crisis to the MAX crisis and Covid. But he never got to what he would actually do differently, in terms of a mistake in strategy during his time at American.
He does say that “delivering quality, not just the lowest price” is important going forward. In the past he’s talked about the schedule and the network as the product, not the experience of the product itself, so that’s a shift for him.
And he does acknowledges legacy technology stacks which stand in the way of the objectives he’s had of getting premium and ancillary products into the hands of consumers. Travel agencies aren’t all the bad guys standing athwart history here (although some of them may well have been).
He thinks there’s room for a new airline, starting fresh without a legacy tech stack, but they can’t serve New York. That’s an infrastructure problem and a regulatory problem.
On the current fee disclosure regulation lawsuit (DOT wants to regulate how fees are displayed and airlines have sued to stop it) he suggests that customers doesn’t just want cheap, they want more choices – the implication of this is both that customers need to understand the choices, but also that the regulatory approach should be encouraging information not locking in specific ways of doing business and selling current products.
Raja also gave an interview to former American Airlines executive Cory Garner on LinkedIn. It was fairly milquetoast. He had far more energy in the Skift interview than the LinkedIn one.
Raja has been right that in the longer-term that not all corporate deals are profitable, more service needs to be done online, and sales partners need to sell all of the airline’s products (including paid seats and bags). However the technology for this hasn’t been ready and Raja was too aggressive in forcing everyone to use it as a condition of doing business with the airline.
He gets the power of the AAdvantage program but has underemphasized the onboard product and experience – a key gap for a Chief Customer Officer. The biggest problems at the airline, though, lie at the feet of the current and former Chief Executive Officers.
Raja earned 8 figures last year and gets $1.4 million walking away from American so he has runway to be picky about his next move but he says his next activity is highly likely to be in travel.
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