American Airlines’ Vasu Raju out
Vasu Raju is out. What of his legacy follows him out the door?
In a terse statement, American Airlines announced Vasu Raju, executive vice president and chief commercial officer, is out as of June. Stephen Johnson, vice chair and chief strategy officer, will fill in and search for Raju’s replacement.
Raju was seen as the sometimes arrogant champion of American’s entire product strategy: good operational reliability (so better than before) but poor product quality while shifting sales to direct-to-consumer channels for business and leisure travelers alike and eliminating costly sales teams and company contracts.
Vasu Raju has consolidated power as he has risen the ranks at American to chief revenue officer and SVP of network strategy, responsible for network (the southern strategy) and alliances (Oneworld). Raja built up an ATL-like megahub at DFW, built up CLT with its relatively low use fees to facilitate north-south East Coast traffic largely with commuter jets, and mostly ditched New York, Los Angeles, and Chicago, in that order.
As Cranky Flier frequently writes, draw a line from New York to Los Angeles; above the line is United territory; below the line is American (Delta combines midcontinent megahubs with coastal hubs largely built over the COVID pandemic). The sunbelt is growing, went Raju’s argument, and flyers living and working there will have to fly American on one-stop tickets. Cranky Flier explained American’s strategy:
“LA has been crushed, Chicago has been slashed, and Dallas/Fort Worth and Charlotte have risen in importance. The idea is for American to create a fortress network that becomes so important to those in the middle of it that the airline has a captive audience. Companies will have no choice but to book the airline even if there is no sales relationship.”
Call it the Northwest Airlines strategy.
To aid in its execution, Raju slashed American’s sales team and even threatened to stop awarding loyalty points to tickets booked through nonpreferred channels. This was all an attempt to force the market to adopt new distribution capability, ready or not, alienating American’s key partners, travel agents and corporate travel managers in the process.
While Delta reported a 14% jump in managed travel in March 2024 and United reported similar results, both Raja and American CEO Isom attempted to dodge questions about American’s business sales on last quarter’s earnings call. As the Airline Observer’s Brian Sumers reported, Raja said, “We've seen total business revenues, which is really, for us, a very important thing to look at, grow similarly — certainly in Q1 [we had] double digit rates of growth.” Managed corporates — contracted corporations — are growing a little less than that, but still high in the mid-to-high single digits.”
Bloomberg’s Mary Schlangenstein, the original questioner, asked a dagger of a followup: “If your managed corporate is growing at a lower rate, is that an indication that you're seeing some pushback from people that don't want to go to your direct booking system?"
As Sumers wrote, “This time, CEO Robert Isom chimed in. To my surprise, he answered honestly. While he started by saying ‘we don't think that's the case at all,’ Isom also admitted that ‘we've got some fine-tuning to do.’”
The plan to stop awarding loyalty points on American Airlines tickets purchased through certain channels, a massive stick courtesy of Raja, is now dead. What next for the US carriers worst performing airline?
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