Last week a Chicago-based flight attendant asked American’s President Robert Isom about “the rumor that we’re going to lose all of our Asia flying” from O’Hare.
American has announced the end to their Chicago – Beijing service and in June shared with employees that their Chicago – Tokyo and Chicago to Shanghai flights are challenged “in much the same way” as Chicago – Beijing. In fact, an American Airlines executive said he’d “love to tell [American’s employees] that Chicago – Beijing was the worst of our Chicago – Asia markets but it’s not the only one.” And he shared that “it’s hard to see how” American’s Asia flights from Chicago are on a path to profitability.
Isom didn’t say no, Chicago won’t lose Asia service. Instead he explained how he sees American’s hubs.
- New York “We don’t fly to everywhere, but we’re really good at transcons and we’re really good at fly to London Heathrow and serving the business customer. And we’re not going to be everything to everybody in a place like New York.”
- Washington National “We have a limited number of operations and we make the best of it. And it’s a position that’s incredibly important to us.”
- Dallas Fort-Worth “It’s a big connecting complex .. can serve every place.”
American Boeing 787-8 in Chicago
Nevermind that they’ve scaled back from important business destinations in New York like Zurich, will drop Denver, and fly to key business markets with regional jets while competitors fly mainline (and since business travelers also travel for leisure, it’s notable that key leisure destinations are lacking from New York as well). This is Isom’s model for how he thinks about the hubs.
In Chicago he sees competition from Southwest at Midway and United’s larger at O’Hare than American. He says “it’s a great connecting domestic operation, and when we can operate into some of our partners hubs like London Heathrow or into Tokyo where we have a JV it can work. But when you ask Chicago.. to carry the weight on its own in terms of origin and destination traffic it becomes a lot harder.”
American Airlines Chicago O’Hare
Isom highlights that American lacks a joint venture partner in China, “so the point of sale traffic that we get from Asia is not as much as other carriers have because of their long experience.” Their China Southern investment hasn’t given much, it seems and of course they don’t fly to China Southern’s largest base in Guangzhou.
American Airlines took Chicago – Beijing because “that was the first slot that we had a chance to get to.” He continues, “it was never the ideal transit spot because of the connecting ability of Chicago.” He cites “tens of millions if not hundreds of millions” of dollars in cumulative losses flying Chicago – Beijing.
That’s why American needs to focus on “know[ing] why we do what we do” and “in the case of Chicago I know that even though we will lose Asia service, and we’re taking a look to make sure we’re right size with other Asia traffic and also European traffic as well.”
American’s Vice President – Planning Vasu Raja added “the core of Chicago is an extremely profitable hub” because of connecting traffic in the Midwest and flying to partner hubs. “The only hubs that are more profitable than that are indeed Dallas and Charlotte.” However “the drags on Chicago are indeed Chicago to Asia flying.”
Doesn’t the JV between AA and JL covers Chicago? Or just some major cities?
Doesn’t this affect the profitability of the route?
If Chicago-Beijing was losing millions of dollars, it would have been discontinued a long time ago. Execs lie so much!
JFK-DEN is being dropped?
Wow, they can’t even get ORD-NRT to work?! What a disaster of an airline.
As a NY-based (mostly business) flyer, I don’t mind regional jets; and that type of airplane does not make a material difference in my travel decisions. E175s and E190s to Boston, Chicago, Atlanta, and DC have enough overhead space for a 1-2 day trip, and the boarding is faster than an A321 / 737-800.
The experience on a CRJ-200s and E145s is a different story.
@JohnB
It’s not quite that simple with Chinese routes, which are more difficult to acquire and thus airlines may be loathe to cut them, since it will be difficult to get them back
When I started my consulting job, I picked United since I’m based out of SFO. They had the business markets I needed to go to and the leisure destinations I wanted to burn my miles on. I don’t get how executives get to where they are lacking basic information.
When United purchased Pan Am’s entire trans-Pacific division decades ago, it acquired in one fell swoop brand awareness and operations across the Asia-Pacific region that, as time has indeed borne out, American could never replicate on its own, and perhaps never will, because of the history that came with that purchase dating back to the era of tightly controlled bilateral treaties that resulted in just two American (country, NOT the airline) “flagged” carriers, Pan Am and (then) Northwest Orient (yes, that was fhe airline’s full brand name for many years – complete with a gong promiently featured in the radio and tv commericals; and yes, back when airlines still competed they had radio and tv commericals far more frequently than they do today) having an extraordinary network of routes that even included a breathtaking “Fifth Freedom” hub in Tokyo that allowed for local traffic to be carried between cities throughout Asia, in addition to the long-haul traffic between Tokyo and the USA that saw both airlines have the fleets of 747s they both flew until only last year (Delta & Northwest merged in 2008).
In fact, even Delta’s prominence in Asia has changed significantly after it lost out on its two attempts to forge alliances with Japanese airlines – first with Japan Airlines during its bankruptcy and restructuring within the past decade (when it attempted to replace American and JAL’s aligning with oneworld), and more recently, with a lesser known airline outside of Japan, Skymark, which Japan’s other flag carrier, All Nippon Airways, or ANA, which has long been part of the Star alliance with United and Lufthansa (et al), quashed after it promised one of Skymark’s biggest creditors, Airbus, that it would take on Skymark’s three A380s as part of Skymark’s bankruptcy proceedings, and was a long held ambition for Airbus to not just get broader acceptance for the A380, but also to crack Boeing’s decades long dominance at both of Japan’s leading airlines.
So, even Delta has found its place in the Asia/Pacific market tough sledding in the face of its rapidly diminished presence in Tokyo after it was shut out of forging an alliance with any Japanese carriers, be it among its two biggest airlines, or even a smaller one that might otherwise overcome the disadvantage of lacking connecting traffic to both feed its long haul flights to/from the USA, or of course, to offer the type of broad based destination connectivity and/or frequency that United has via its alliance with ANA, or to a lesser extent, American has with JAL.
Toss in the opening up of Tokyo’s preferred, and much closer to downtown than distant Narita airport, Haneda, to a handful of long haul nonstop flights to/from USA (and elsewhere), and, well, all the more so that both American and to a lesser extent, Delta, have found themselves with a vastly changed landscape for their Asia/Pacific ops in recent years, and especially in an era of anti-trust immunized joint ventures that makes American’s historic weakness in the region, plus its “Junior” position at O’Hare to United, loom that much larger
Add in the rise of China’s airlines, plus the expansion of ultra-long haul aircraft such as the Airbus A340-500 originally, followed by Boeing’s “mini jumbo” twin engined 777s, or more recently its 787s, or now, increasingly, the Airbus A350 that have opened up destinations such as Boston (or elsewhere that in years past could not sustain 747s or other four engined aircraft needed for nonstops until only recently), and well, the need for two USA airlines (United & American) to now offer the type of hub and spoke connections between Chicago that might have been required in the past when available long haul aircraft had different operating economics and performance (range/number of engines, etc.) isn’t there anymore, and as such, the viability for the “Junior” hubbing airline at O’Hare, aka American, to sustain the type of hub and spoke connections to a region where it has historically been weak, and just seems like the airline is seeing the handwriting on the wall for the foreseeable future anyway as concerns being able to make trans-Pacific flights via Chicago/O’Hare work when other long haul opportunities out of DFW (or elsewhere) be they to Asia or elsewhere might work better to deploy the aircraft now being used for trans-Pacific ops.
Perhaps if AA had a different marketing model in terms of its product quality it might be able to position itself differently to achieve a different outcome, but its current management believes otherwise, and unless/until there’s a wholesale change in the C-suite at that airline, there’s no way to know if a different approach to the quality of its product might’ve otherwise resulted in a different outcome than the present one where its recalibrating of O’Hare hub that results in some Asia/Pacific flights being dropped is a smart move as part of the airline’s attempt to create a better overall “fit” for ORD when compared to its other, and as it states, more profitable hubs in DFW, CLT – or elsewhere.
Or if that move, too, has some other unforeseen/unintended outcome that results in a cascading effect as many believe is already happening at JFK Airport in NYC that in the longer term could see AA falling to third place behind both United and Delta despite having become the world’s largest airline after US Airways acquired the much larger American back in 2013 and for a time was King of the Hill in terms of size (and prestige)?
We often fly to Japan either from ORD or connecting in ORD. We usually take either American or United to get to ORD. However, we always try to avoid longhaul flights on American or the United like the plague. If American wants to succeed in this route, they need to up their game, instead of just pulling out. However, if American does decide to pull out of ORD-NRT route, I wonder JAL will be able to fill that void? If so, I would highly welcome that move.
It’s hard for a new entry into a region to break the hold its competitors have. DL inherited NW’s major presence in both Japan and China/HKG/TPE A’s did UA when it took over most of PanAm’s Asian routes. Both US carriers have built a strong hold on corporate accounts that ex-ORD AA hasn’t been able to break into. (DFW is firmer because AA only faces Asian airlines’ non-stops.). And passengers originating in Asia tend to fly their flag carriers…not to mention the push by several Chinese airlines into the US market in recent years to carry their own tourists and business customers. While ORD-PEk was bad for AA, it was a great route for upgrades!
Last time flying AA from NRT the AA pilot dragged his luggage through a crowded gate area running over people’s feet and didn’t have a care in the world. He got a lot of dirty looks but dgaf.
AA, going for mediocre.
It seems that AA management lacks vision and the will to define a long-term strategy and stick to it. They flit from short-term opportunity to short-term opportunity. When they meet resistance, they fold. The board should be concerned about management, and major shareholders should be worried about the board.
Parker & Isom and all of fat pig staff gotta go. They are ruining AA. I’m avoiding Delta, United, AA altogether. Cut tie with them 3/3/2 years ago and not looking back.
Oh well. I could care less as I “never” fly AA trans pac to NRt. Always JAL. What I am worri d about is losing the award space on JAL if the American refugees from ORD start sucking up seats. ;-(
The only thing I care about here is AA refugees sucking up Ord-nrt award space. AA transpacific to Nrt and then beyond…joke. Why fly them. I never will fly them tpac—why? No clue.
Award space on JAL is what I left out—heh
Howard Miller …. very interesting comments.
I avoid American carriers as much as possible other than United when I have to with their Star Alliance.
Everyone is talking about US and Asian carriers but there is another growing force with Air Canada establishing their US network , and building their Toronto. and Vancouver transit hubs for Asia ( and Europe)
So while AA .UA and DL slug it out for the race to the bottom, AC has quietly been going about taking market share with American flyers … and Asians too. AC has far superior domestic service ( Skytrax winner) and not bad for long haul too with 777 and a growing 787-9 fleet. In particular their business class product competes well with Asian carriers and is far superior to US carriers ( although I have not tried Polaris )
@leithl –
It looks like JFK-DEN is being dropped on Sun., Nov 4. I believe the route just started in June, so a bit surprised to see it go away so quickly. Maybe it’ll return for ski season?
Stories broke out that AA will cancel its direct flights from ORD to Shanghai and Beijing earlier this week, which I happened to have a booked flight (ORD->PVG Shanghai) between late Oct and late November. I have called AA customer service three times this week. 1st time (more than 24 hours after the news broke out) I was told that they never got the news from their management. 2nd time they said that the direct route to Shanghai ends on Oct 26 and only re-routed me via HongKong but charged me 70,000 more miles without telling me, till I got an reward redemption email today. 3 time today said that I was mis-informed by the previous CSR, Shanghai direct flight is still on – now I am still waiting for them to give me back my 70K miles. What a disaster! Even if they change the route, the implementation and lack of customer service for those affected is so poor. I have already spent so much time with them this week – now I am just keeping my fingers across that the flight back is still on or we will not be able to come back for Thanksgiving this year!