a man in a suit and tie

Vasu Raja, the Chief Commercial Officer at American Airlines, is out. But I’m not ready to celebrate his departure just yet…

Vasu Raja Out At American Airlines, But Will His Replacement Be Even Worse When It Comes To AAdvantage?

Raja has been a leading figure at American Airlines for two decades and was the driver behind much of AA’s network and loyalty strategies. His departure creates a power vacuum at American and will make AA confront it trajectory in a way that is long-overdue.

I do approach this as an infrequent flyer on American Airlines, but a frequent user of AAdvantage for myself and for my clients at Award Expert.

It’s true that some fares on AA, like many transatlantic flights this summer, are absurdly priced compared to historic levels. But what does that even mean these days? Those flights are still about what you’d pay on a similar United Airlines route using MileagePlus or Delta Air Lines route using SkyMiles.

But the sweet spots are great. I just flew from New York to Tokyo in first class on the JAL A350-1000 then connected to Seoul on the 787-9 in business class, all for 80,000 AA miles…simply amazing. Rates for travel between the USA and Europe, from Europe to the Middle East and East Asia, and between the USA and East Asia remain very competitive and while the space might not be flowing like milk and honey in the Promised Land, it is very possible to secure this space with a bit of patience and flexibility.

And there’s even some advantage to the dynamic pricing of AA flights. Yesterday, I booked a walk-up ticket from San Francisco to New York JFK in three-cabin first class on an A321T for 46,500 miles.

And Raja chose not to gut that. On the contrary, in January he said:

We’re going to make it more rewarding to become our customer. Miles will go farther. We are able to go do things where people are able to get upgrades on other partners, redemption at a level that they’ve never seen before which will make it more attractive.

And while that may be reflected negatively in the ability to book far more Alaska Airlines flights (at a far higher price) than in the past, I do think he realized that some of the more lucrative longhaul redemptions were a key element in keeping discretionary passengers loyal.

The old adage that the enemy you know is better than the enemy you don’t know rings true. God forbid we get some clown like ex-Comcast chief Richard Nunn, the CEO of MileagePlus at United, who comes in and destroys the value of the program.

Compared to MileagePlus and SkyMiles, AAdvantage is the best loyalty program right now of the Big-3. I want it to stay that way but I am not confident it will under new leadership that may quickly decide that redemption rates are long overdue for a massive devaluation.

American Airlines has a profitable loyalty program and loses money flying. AAdvantage is truly the goose that lays the golden eggs. I am of the opinion that Delta and more recently United get it so wrong when it comes to building long-term loyalty and I have never been freer when it comes to choosing a carrier (even if I do still prefer to fly United).

So now things will get better or worse at American Airlines….and we’ll be missing Raja if things get even worse on the loyalty side.

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Finally, I’m not going to speculate why Raja left. The news from CEO Robert Isom this morning that AA will no longer discriminate between booking channels in terms of awarding Loyalty Points or AAdvantage miles suggests a correction, but is not necessarily indicative of why Raja will step down.

Maybe it is his health. Perhaps an HR problem. It could be that he got an offer he could not refuse from another carrier. So rather than speculate that he was fired for his poor stewardship of corporate bookings (with the JetBlue – British Airways axis the final straw), let’s just say that he left AA until we know more.

CONCLUSION

American Airlines is at a crossroads. Raja is out and it can either double down on its existing loyalty model or make thoughtful changes that could make AAdvtanage even more valuable to those passengers on the margin who can drive discretionary spending to AA…but only if they deem it worthwhile. American Airlines must realize that consumers do have a choice and are (generally) not stupid.


image: American Airlines

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