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An Airline Industry First!
A Public Execution For Making The Wrong Decision.
Or, At Least The Right Decision Too Early.
Summary: The American Airlines decision to revamp its retail channels to shift more to direct bookings really torqued off some in the travel business. That, added to a sudden need to downgrade financial guidance. This led to the decision to corporately execute the VP who drove the new policies. The intent was clearly to let Wall Street know that the perpetrator has been eliminated. But there's more to this.
The Robespierre Management Model. Back during the French Revolution, it was a common practice to assure the citizenry that evil doers and nasty anti-establishment types were dealt with decisively. The masses wanted blood, see.
So, the people running the show set up their trusty guillotine erector set, invited the public, pulled the rope, and sent the nasty offender to his timely end. This proved to the cheering crowds of the great unwashed that he would no longer be a threat to public order. The citizenry blood lust was satisfied.
Last week, this model was elevated to the corporate level.
Background. American Airlines’ Chief Commercial Officer recently made fundamental changes to distribution policies. In short, it gave preference to booking via AA.com, with the goal of moving more of the process to the AA website and out of the control of third parties.
Among some other things. In any case, these decisions were consistent with sound planning - reducing costs and enhancing control of the sales chain makes sense.
But oops. Within the travel sectors, this landed like a baby grand out of the 8th floor window. The affected channels still have huge decisional sway, and the actions by AA resulted in big revenue diversions away from AA.
Toss in a separate embarrassing mea culpa revelation that earnings guidance would be – oops - revised downward, and the angry mobs, a.k.a. Wall Street and the financial sectors, demanded blood.
To stem the outcry, the AA regime needed to showcase swift retribution to those responsible for this outrage.
Out came the company guillotine, press releases blazing. The CCO was publically taken care of, drop kicked out the front door.
In today’s business situation, American actually had no choice. It’s strictly business. It has to do with stock price and confidence from the folks who comment on it. Therefore, this was an imperative. Unfortunately.
The process was very Robespierre. (Google it, if you must.) They corporately whacked the Chief Commercial Officer and then sent out a specific press announcement confirming and confessing that he was gone. No comments about the guy or any nice-nice stuff. Just the firm communication that as far as AA was concerned he was sleeping with the fishes.
Message: Hey, Wall Street, we’ve guillotined the reactionary. Y’all can trust us now.
Of Note: Being Right At The Wrong Time. Lunacy is defined as claiming to see things that others don’t. It can also be an indication of being a visionary.
Which definition actually applies depends on how the future turns out.
Here’s some reactionary perspectives on the demise of AA’s CCO. His actions were right and harbingers of the future trends, notably, getting more control of the customer retailing process.
The only problem was that the competitive conditions weren’t right, yet. The opposition is still strong from vested interests that have some control over the booking channels. Plus, the expected similar policy shifts at United and Delta didn’t materialize.
But his concept of streamlining retailing of the product, lowering costs, and concentrating the process to being in-house, is still one that will be pursued in the future by all airlines. Take it to the bank.
But the now-former AA CCO won’t get any credit for his foresight.
Evolution of Crazy Talk Into Reality. The ex-CCO can take some comfort in past history.
Back in 1981, the original Frontier Airlines unilaterally cut travel agent commissions from 10% to 7% - or something like that. The rationale was that economic conditions were dismal and as airlines cut back, reduced wages in some cases, laid off staff and slashed other costs, their (jive) travel agent “partners” should take some of the burden.
The move was too early. The rest of the industry did not follow Frontier’s example, hoping to get some of the traffic the TAs immediately shifted away from Frontier. But the seed of Frontier’s vision was accurate, and eventually, the control TAs had over sales evaporated. This was covered in the T&G a couple weeks ago.
Then there was Lamar Muse, founder of Southwest. His own board of directors gave him the heave-ho when he made the suggestion that WN had a great opportunity in establishing a big operation at Chicago/Midway. The rest is history.
The AA story over the past week is instructive. Most aviation media will declare the offending CCO a failure.In regard to timing of the decision, that’s accurate.
But regarding what he was attempting to accomplish, he was an arrived-too-soon visionary that got marched to the corporate gallows.
Again, nothing personal. It’s just business.
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