The following opinion piece was written by Tom Horton, president of American Airlines.
If you’ve recently bought a computer or smart phone, you know you are not simply buying a device but a technology package that best suits your lifestyle, needs and budget.
The device is just the base product. Some people want a lot of storage space for photos and movies. Some people want a bigger screen for games. Others want faster downloads.
Same goes for satellite TV service. Sure, you want basic programming but maybe you want several TVs hooked up, high-def channels, a sports package or premium channels such as HBO or Showtime.
At American Airlines, we are trying to apply the same principles of consumer choice and customization to the travel experience, and that is the main thrust behind our merchandising strategy that you are starting to hear more about.
We are blazing a trail toward a future in which our customers can truly tailor the travel experience for their needs and budget and the elements that they truly value.
In the future we envision the airfare would become the base product, such as basic satellite service, a car with no extra features or plain vanilla laptop.
From there, customers would be able to build a bundle around the basic service in a way that makes most sense to them. Perhaps they want an Admirals Club day pass, a specific seat or boarding priority. Perhaps they want a meal or to check a bag.
We envision a future in which customers can customize their travel experience. This will give customers more choices and allow us to differentiate our products and services versus competitors and generate more revenue in the process.
We are already laying the groundwork for this new era of buying and selling travel services. You might be familiar with our "Your Choice" initiative that makes options such as earlier boarding, the ability to stand by for an earlier flight, visits to the Admirals Club lounge, and onboard Internet connectivity more affordable and accessible to the customer throughout their journey.
One example under "Your Choice" is our boarding and flexibility package, which offers customers convenience, flexibility and savings. For a modest cost, the package provides the opportunity to board earlier in Group 1 of general boarding, stand by for an earlier flight, and save 50% off the regular service charge for flight changes.
And we are adding even more technology firepower to further our innovation efforts. Earlier this year, we struck a deal with ITA Software to provide us with what we call an offer engine. It will provide inventory, pricing and shopping visibility, and will manage the various product and service choices customers want to consider as they customize their travel experience. Think of it as a shopping hub. But in the future the products on our shelves can extend far beyond airfares.
Our efforts to customize our products and services beyond basic airfare are what we call merchandising. This effort also has a link to some other recent headlines you may have seen regarding our disputes and negotiations with certain global distribution systems (GDSs) such as Sabre and Travelport, and online travel companies such as Orbitz.
Traditionally, GDSs, for a fee that we pay them, have distributed our fares to travel agents who in turn make them available to their own customers, including many corporate customers.
Now, however, we have the technology to deliver our products and services — not just our fares but our optional services as well — directly to travel agents.
In fact, we have been successful in signing agreements with such online agencies as Expedia.com, Priceline and Vegas.com, as well as traditional agencies, to deliver our content to them using our direct connection.
Understandably, while the GDSs have generally resisted and opposed our direct-connect strategy, we continue to invite them to play an important role in aggregating information from our direct connect side-by-side with information from other airlines and travel suppliers.
Many travel agents may prefer to continue to work with a GDS to access direct connect content, while others may choose to use a different content aggregator. We want travel agents to have that choice.
What often gets lost amid the headlines and legal battles is the fact that our direct-connect technology will allow us, down the road, to deliver to agencies the same customized products and services and merchandising options that ITA Software’s offer engine will allow us to deliver to customers through other channels, including on AA.com.
We believe this customization will provide a big benefit to customers and to travel agencies, as the latter will be able to become an even more valuable adviser to clients who will need more guidance and assistance in understanding the multitude of new choices — both in terms of service options and budget — that we expect will be available in the future.
We think our merchandising and distribution strategy represents a big opportunity for American Airlines and our customers, and we're proud that our company is leading the way.