American AAdvantage Will Now Report To Revenue Management

Julie Rath, Vice President of Everything at American Airlines, is being promoted to Senior Vice President of Airport Operations. Hers was the shortest tenure for a head of American AAdvantage, while also in charge of customer experience and marketing.

Instead of promoting the current managing director of the program (Heather Samp) or bringing in a new Vice President, American Airlines is moving the AAdvantage program underneath revenue management, which is led by Scott Chandler.

Already the AAdvantage team had been split up between the customer-facing program (which will report up to revenue management) and mileage sales, which is headed up by Scott Laurence, the executive who bounced from JetBlue to Delta to American in a matter of weeks. Both of those teams report up to Chief Commercial Officer Vasu Raja.

There are other moving pieces, as well, such as Caroline Clayton (VP, Communications) adding marketing to her portfolio. And they’ll be hiring a new Vice President of Customer Experience who will report to Raja, further sidestepping Chief Customer Officer Alison Taylor.

A message from Vasu, Cole and Ron: Organizational update

Team,

It is important to make sure our teams remain aligned with the evolving needs of the business. With Julie Rath’s upcoming move to Airports as SVP of Airport Operations, we are using this moment as a catalyst to make several adjustments to our organizational alignment. These moves will not only get us better organized against our objectives, they also will allow us to lean into great talent and provide expanded roles and responsibilities.

Starting with the Commercial organization, we are going to split Julie’s soon-to-be open role into three areas of focus and position them in strategic places across the organization.

Loyalty will move to Scott Chandler, our VP of Revenue Management. Scott’s group oversees all commercial programs, including pricing and optimization, so we can ensure our initiatives bring value to both the customer and the company. As we know, life is better as an AAdvantage member. Adding the AAdvantage team to this organization will make sure our AAdvantage members are able to unlock benefits across the entirety of our commercial programming. With this shift, Heather Samp, Managing Director of AAdvantage, and her team will now report to Scott.

Marketing will move into Global Engagement and report to Caroline Clayton, who will assume a new title of VP of Communications and Marketing. Combining these two organizations will allow us to seamlessly communicate our commercial programs to our customers and team members in a holistic way via paid, earned, social, and other media channels and platforms. In essence, Caroline will serve as our chief storyteller. Dana Lawrence, Managing Director of Global Marketing, and her team now will report to Caroline.

We will hire for a new VP of Customer Experience, with that individual reporting to Vasu. The person in this role will be responsible for the physical products and technical touchpoints our customers experience on their journey with us. And this leader will work to make sure we are developing innovative technology that our customers and team members value. We will have more to come in the near future on this role. Both Clarissa Sebastian, Managing Director of Customer Journey – Products and Design, and Kim Cisek, Managing Director of Customer Experience – Digital Transformation, will report to the future VP.

Concurrent with these moves, we will make two additional shifts across Commercial, People and Global Engagement:

  • Leadership Development and Learning Solutions will return to the People team. As we look to ramp up our leadership development and enterprise learning programs in 2023 and beyond, the timing is right to better align these programs with our talent development, DEI and people business partner teams. Developing and retaining talent has never been more important – and this team plays a key role in this effort. Tracy Salters, Director of Global Learning and Development, and his team now will report to Cole.
  • Terrence Bradshaw, Director of Talent and Development for the Commercial Team, now will report to Quad Kent, VP of Global People Support. Making sure our Commercial team attracts and retains the best people in the industry is a priority. Terrence has done a terrific job of helping to source and develop our talent in this area in recent years, and this move will further support his team’s work and align these efforts with the People team.

As our business continues to evolve, so do the organizations we have in place to support the airline. We remain committed to our two primary goals: Running a reliable operation and returning to profitability. These moves set us up for even more success in helping to achieve our goals. Thank you for all you are doing to support American.

Having AAdvantage in the same group as revenue management would make sense if the goal were for AAdvantage to gain access to more saver award inventory. That hasn’t been the trajectory at American, which has focused on buying seats outside of traditional saver buckets and more making additional inventory (‘web saver’) available to customers based on prevailing fares.

Instead the explanation for the move is, “Adding the AAdvantage team to this organization will make sure our AAdvantage members are able to unlock benefits across the entirety of our commercial programming.” Allowing AAdvantage members to ‘unlike benefits across the entirely of the airline’s commercial offerings’ sounds more like merchandising, monetizing the member base. Great offers can still be value-add, of course. We’ll have to wait to see how this evolves in practice.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. At the moment AAdvantage is the most useful program of the big 3 for good value saver level redemption with flexibility – not as good as years past but hasn’t gone as poorly as UA and DL – I hope they see the distinction and play to that strength.

  2. Revenue management and an airline’s mileage program don’t have to be in the same organization to either increase benefits or reduce the number of award seats. Either strategy can be done under separate or the same organization.
    American is not going to give away seats that it can sell. Period. If it can better market existing excess inventory as mileage redemptions or move fleet and schedules around to improve the number of excess seats in one market – but at the expense of another market – coordination might support that goal.
    Remember, Gary, no rational profit-motivated company gives away more of its output than it has to.

  3. @Tim Dunn – here’s what you’re missing.

    * The loyalty program is the highest margin part of the business, indeed at American it fully accounts for the profits
    * There needs to be some reasonable reward that motivates customers to stay on the hamster wheel driving those profits (customer redemptions empirically increase earning activity and thus profit)
    * The output is, in a very real sense, the marketing piece of the business at least as much if not more than the airline seat.

    American had a problem, circa 2015, where its revenue management folks sought to release next to zero inventory at expected pricing to the loyalty program. That was a problem. And remember also that the loyalty program is the single biggest buyer of seats at the airline. This is why, of course, American (like others) shifted to a continuous bidding model for seats and away from saver award pricing – they couldn’t satisfy member expectations so they both tried to shift those expectations while getting more inventory at higher prices.

    Growth at the airline, and excess inventory, wasn’t keeping up with growth of outstanding miles.

    That’s a problem, but it’s bad business to shrug and say “we’re selling all our seats, nothing is available” because the customer spending on their co-brand card and buying through the shopping portal is more valuable than the one simply buying a lowest fare with cash as a one off.

  4. So the VP of Customer Experience is the one we scream at for our ruined knees in coach?
    And then Caroline Clayton will distract us with a story?

  5. Gary,
    no airline sells 100% of their seats and that is clear from their financial statements that include load factors – or just sitting in an airport and count the number of passengers that board – or watch the screens in the gatehouse for those airlines that tell how many seats are left on the flight.

    It is bad revenue management to not be able to forecast a reasonable number of seats that can be released for award travel – there should not be manual overrides that prevent that from happening. Modern revenue management is highly automated and should be based on solid data – not the heavy-handed interference of someone that wants to open up too much inventory OR not open enough. If AA cannot generate accurate forecasts, then the problem is not inventory for their loyalty program but how well their revenue management system works at all – and I am not at all saying that is the case although there are plenty of indications that Delta and United do a better job of revenue managing their networks than American.

    And whether you ever agree or not, a profit motivated company does not give away more of its inventory than is necessary. Delta gets more revenue from Amex than any other airline does in the world and yet Delta still (outside of the pandemic and recovery) generates profits from running an airline. Same thing for Southwest.
    It is precisely because American does not manage its airline network to maximize profits that it has to give away inventory to keep customers. Remember, multiple AA execs have said that their product is their network. They want to dominate markets to the extent where customers don’t have choices – and yet they can’t be global unless they serve places like NYC and LAX where other airlines offer larger networks and get higher average revenues.

    I get what you do for a living but you will always be frustrated when you don’t get what any rational business won’t give you. I for one would rather see American generate profits sufficient to not give away as much inventory and be around for decades on end. Given that they are considered the most financially fragile U.S. airline and are holding onto their cash, they aren’t putting the candles on their 100th and 125th birthday cakes just yet.

  6. Ryan Martin: and that Delta took the best advantage of it’s interpretation of that sky color to lead the airline industry in, well, um…..EVERYTHING!
    LOL…..

    I kid your obsession Mr. Dunn (you’re really the CEO of Delta right!!??) but I enjoy your posts!

    Just feeling playful (inebriated) tonight…..

  7. I’d be happy to sit down and have a drink of some sort w/ Gary.
    He writes what he does to get clicks and responses. I don’t toe the party line so Gary should not expect me to validate his thoughts but rather to provide contrasting points of view.
    I totally get what Gary does for a living; I happen to be more focused on the business side of aviation and always play the contrarian when people expect airlines to give more away.

    Deep down I am pretty sure Gary realizes it but he would lose his clientele if he admitted I was right. 🙂

  8. I appreciate your well thought out and slander free posts. What a breath of fresh air in these putrid times. Honest, intelligent debate!
    Your posts are always informative which is why I read most things.
    Information!
    That’s why I call you Mr. Dunn. Respect to you sir.

  9. “* There needs to be some reasonable reward that motivates customers to stay on the hamster wheel driving those profits (customer redemptions empirically increase earning activity and thus profit)”

    Yes – but surely those rewards driving behaviour seem to work even when offering very very low rates of return to the consumer. And most customers may have no idea of the value they derive from their loyalty engagement!

    “* The output is, in a very real sense, the marketing piece of the business at least as much if not more than the airline seat.”

    And yet AA is not putting Loyalty under the marketing banner!

    Perhaps putting Loyalty under Revenue Management simply reflects how dynamic pricing of award seats is an ever evolving part of the airline loyalty landscape?

  10. @ Tim Dunn

    “I for one would rather see American generate profits sufficient to not give away as much inventory and be around for decades on end.’

    Your points are well made.

    And yet, (respecting Gary’s point) there still needs to be a supply of inventory sufficient to generate the profits from the loyalty operation!

    Dynamic pricing is of course the “get out” – plenty of award seats, BUT priced at levels where consumers get low value.

  11. This sounds exactly like another Delta copycat move. Devalue all redemptions to 1cpp so that you can sell any fee/product via miles at that valuation, with no actually valuable alternatives. “Unlock benefits across the entirety of our commercial programming.”

    Will def be re-aligning my loyalty next year if it turns out that this is what it almost certainly is.

  12. About a year ago, AA placed a value on the Advantage program and made it a subsidiary company in Cayman Islands. Your information and travel habits are part of their company and the goal is to make money off of you-to market and sell your info-thus the reason for revenue management.

  13. @Tim Dunn – “And whether you ever agree or not, a profit motivated company does not give away more of its inventory than is necessary. ”

    You are completely mistaken to characterize award redemption as ‘giving away’ its inventory. The loyalty program is the largest buyer of seats at the airline, and these are very much purchased seats.

    When a loyalty program member buys a ticket they are buying both current travel and future redemption. That is how the airline’s own accounting treats it. They book a liability for the miles awarded – generally it is roughly about a penny per point awarded. Redemption seats are included in airline financial statements and for the largest carriers this represents 9 figures of revenue each quarter.

    “Delta gets more revenue from Amex than any other airline does in the world” part of this is luck and timing (being the largest cobrand remaining on the Amex books when they lost Costco) and part of this is Delta management being shrewd negotiators (in a 50-50 deal, Delta takes the hyphen). But mostly this is Delta’s unique position in markets like ATL, MSP, DTW, SLC combined with a strong brand. Other airlines that have tried to mimic Delta’s devaluations have consistently seen cobrand charge volume fall as a result.

  14. Gary,
    the domestic airline industry was deregulated more than 45 years ago. If Delta managed to build a route system that generates the best margins in the business, then someone else could have done so.
    In all fairness, AA has some hubs that have margins as good as DL’s big 4 – not sure as high as ATL but DFW has got to be fairly high. AA’s problem is that they still have underperforming hubs, some of which is structural – such as competing against UA at ORD (the only two legacy-legacy hub competitions at the same airport) and some of which is that AA (like UA) still does too much “strategic flying” which loses money – something Delta is much, much less willing to do.
    The biggest reason is that AA is still much less labor efficient than even UA – which itself is less labor efficient than DL – which not only impacts profitability but also the quality of a service an airline can deliver.
    FInancially, Delta is far closer to Southwest than American or United. Southwest would have a rich loyalty program if it had a global network – and WN, like DL, can squeeze the poop out of a nickel.
    It isn’t luck or mere timing if Delta can expect to get $7 billion/yr from AMEX, a dream no other airline including AA or UA would dare utter in an SEC document. It is a structural advantage that DL can “devalue” its loyalty program and still earn those eye-popping levels of compensation. Perhaps Amex is just a better partner and delivers a richer customer base.
    and, since US airlines DO publish in their 10Ks the amount of mileage redemptions and earnings they book each year, you’d have to tell us the average redemption for each airline to be able to make the case that any airline actually has “devalued” their program – but it might also show that they get a loyalty program premium just as they do a fare premium. Or, the notion of “devaluation” might be just in your imagination based on anecdotes which have little value for companies that carry hundreds of millions of passengers per year. Don’t forget to normalize for the plethora of types of awards each airline issues.

    Get back w/ us next year, Gary, and let us know how much the average award price at AA “improves” as a result of this org restructuring. I suspect that you will be disappointed if you can even calculate it.

  15. @TimDunn I’ll be short, I think the problem Gary is mentioning is when customers can’t find award seats they question their ‘loyalty’.

    As someone that is a lifetime UA Plat and was an AA ExecPlat for 7 years until I realized end of 2019 that I’m buying J fares why am I paying more to earn miles on AA when I can’t ever use them. I became a free agent and now buy whatever J ticket is the best deal / best seat / best service / best connecting airport.

    No longer am I bound to AA bc I realized their loyalty programme was no longer worth it.

    That’s the battle is providing just enough to keep customers from leaving, but not giving away the farm.

    AA has failed on that and I’m a free agent now.

  16. @Tim Dunn – no question delta has been a better-performing airline, and they argue they do not need to be as generous with their frequent flyer program as a result, but that’s also my point – that other carriers can’t just follow SkyMiles into the dumpster fire without getting burned.

    “the domestic airline industry was deregulated more than 45 years ago. If Delta managed to build a route system that generates the best margins in the business, then someone else could have done so.”

    No, deregulation has meant government no longer tells airlines where to fly or how much to charge but that doesn’t mean anyone can fly anywhere. With government security, government airport ownership, government-run air traffic control it is a cronyist business and you tell me how someone else would build a hub in atlanta exactly when delta has the government-owned gates locked up? [happy to discuss the particulars of airtran here]

  17. Delta’s Skypesos prove that you can fool all of the people some of the time and some of the people all of the time.

  18. If you really believed that Delta had a corner on government assets that no one else could crack, then you should be able to show the number of gates each carrier holds at each of their hubs and the abililty or inability of other airlines to gain access to more gates at those hubs – and show that Delta has an advantage.
    But you can’t do that because Delta doesn’t have an advantage any larger than any other airline. Hub and spoke airlines by default control a disproportionate number of gates at their hub airports. Every single U.S. hub airport except Dallas Love Field complies with federal laws regarding access to gates by upstarts. No airline is given any legal right to ask for dozens of new gates, esp. at an airport which they already serve.
    However, in the deregulated era, Delta is the only airline that has successfully built two hubs in other competitor hubs – Seattle and Boston. Delta didn’t walk into the airport authority and demand dozens of gates; they slowly built their presence in those cities, paid for some of the construction which would benefit itself, and worked with the airport authority and other airlines to gain more gates – and it has taken time and continues to take time.
    If Atlanta is really such a gold mine that no other airline can duplicate, then perhaps Delta deserves to have it as a crowning jewel. But Delta started building ATL as a hub long before deregulation and ATL has had 2 airlines hub there for nearly all of the time DL had a hub there – so DL hasn’t done anything that other airlines couldn’t do if they wanted to. American has gained access to scores of gates at DFW and has guided airport construction – as primary tenants of airports are allowed to do – but DFW is a far less efficient airport than ATL and AA’s costs to operate their – esp. labor costs – are much higher than for DL at ATL.
    Feel free to tell us how you think AirTran matters to this discussion esp. in light of the government authorized carveup of the N. Texas market that has intentionally kept AA and WN from directliy competing against each other for 50 years.
    AA’s loyalty program is not as valuable as DL’s because DL has no money-losing hubs while AA execs have long said that they have hubs that don’t make money. AA tried to grow its presence in the Pacific without a merger – as DL and UA did – and their network and loyalty program reflects the much smaller size in the Pacific. AA has struggled to build a viable network in continental Europe which competes with DL and UA – and AA’s network represents it. UA’s network has focused on major competitive coastal markets but they have been a solid number 4 of 4 airlines in many medium sized cities that are as valuable combined as multiple hubs.
    A loyalty program is only as good as the airline network it is attached to.

    You can come up w/ your own reasons for why each airline’s loyalty program and network works or doesn’t work but you won’t ever be taken seriously as long as you fail to acknowledge that what DL has achieved with SkyMiles is not a fluke or luck. You look like sour grapes when you fail to admit the honest truth about companies that are competitors.

    btw, I”m still waiting for you to provide macro data and not anecdotes to show the value of each loyalty program at the individual customer level.

    Hope you are enjoying the chat as much as the people on the sidelines and me are.

  19. @ Tim Dunn

    “A loyalty program is only as good as the airline network it is attached to”

    Much of your argument depends on the above premise. And it’s a premise I’m struggling to accept. Are you able to clarify / validate?

  20. @ Gary

    “They book a liability for the miles awarded – generally it is roughly about a penny per point awarded.”

    Surely, it’s less than that? We don’t want to confuse the redemption value per mile offered to the customer with the internal future liability assigned on the books to cover cost of deliver of redemption?

  21. @ Gary / @ Tim Dunn

    I’ve run the numbers on some DL dynamic reward pricing.

    The cost in miles is not necessarily correlated with the retail cost of the airfare, in fact there is a huge variation in miles needed for a redemption on the same route with the same retail price over different days.

    This may indicate that DL is running revenue models for reward pricing, which factor demand for the reward seats (or other variables) over and above the considerations of cost of purchasing the reward seats from at the airline and / or the retail value of the seat being offered as a reward seat.

    Your take?

  22. @platy – No, there are two different prices at which airlines book liability. Miles sold to banks may get a liability booked at around 12 or 13 basis points. But miles earned from flying see a liability of around a penny apiece. The reason for the difference at US airlines is accounting rules. See ASC 606 – which details how a business has to account for premiums when the sale price includes a current and a future good. It doesn’t apply when selling the premium to a third party.

  23. platy,
    well-run airlines DO revenue manage their inventory to include award redemptions. The process is simply not just about calculating how much an airline gets for the underlining miles that would be used in an award and then saying that an airline should provide an award based on that value.

    It is precisely because airlines revenue manage from the first down to the last seat and they have values for every seat. If the revenue management systems say that the airline can sell every seat at a value higher than an award seat – which is not zero – then there should be no award inventory on that flight if the goal is to maximize profits

    Not every flight can be in that position so there should be some inventory on just about every flight.

    And the purpose of dynamic award pricing is to say that there is an award value for which an airline is willing to open a seat that could be sold because the customer is willing to spend more miles.

    Yes, Delta said several years ago that they would move to dynamic award pricing which will change because demand continually changes in part because Delta, like American, is a network carrier and there are thousands of origin and destination and fare class combinations that can flow over any flight segment.

  24. @ Gary

    Thanks for the heads up – it seems the accounting models for airline loyalty programs, which I’ve seen previously summarised, were too simplistically depicted!

  25. @ Tim Dunn

    Yes – thanks – I think that I follow your argument, at least in the case of “classic award seats”.

    But in the case of dynamic rewards, and in the instance that “any seat” available for retail sale is available as a reward seat, the inventory can be assigned to a (dynamic) reward, surely it’s just a question of how many miles to charge for the redemption, not whether the seat is available in the “classic award seat” bucket in the first place given the economics of yield management.

    What I find curious is that the number of miles charged by DL (under “any seat dynamic pricing”) is not directly correlated with the retail cost of the seat (i.e. simply pitched at a price to offset the “lost” revenue from that seat not being available for retail purchase) – it varies hugely meaning the redemption value is widely different for the same route / cabin class / retail airfare.

    When I do the math for other airlines a “base cash” value of a redeemed point (any seat style reward) is very closely correlated to the retail cost of the retail airfare.

    The DL model appears to be different(?).

  26. I suspect that the difference is because DL prices the value of an award that touches any segment against all of the potential revenue that could flow over that segment. ie. if you are looking for an award that touches the ATL-DFW segment, DL is probably looking at any revenue that could possibly fly over the ATL-DFW segment – which might originate at JNB, LHR, RIC, or RSW.
    That demand constantly changes and you can’t see it.

    There was a time when AA was the leader in airline revenue management while DL was the clear laggard.

    While DL’s network is part of the reason for its revenue advantage, the advancements it has put into its revenue management systems are undoubtely part of the reason. I would bet that DL’s revenue management technology is more sophisticated than AA’s at this point. DL and UA’s are probably comparable. Even WN has greatly enhanced its revenue management technology. The tempe crew was very hesitant to invest in technology and I strongly suspect that included upgrading AA’s revenue management systems.

  27. @ Tim Dunn

    Many thanks and you may well be correct – it’s a big variation (highest redemption cost = 2 x lowest) and I’ve selected a long, one-sector itinerary priced at flexible retail fare (LAX-SYD), which should help to limit the variation.

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