In November 2017 American Airlines announced Dallas Fort-Worth – Reykjavik service. At the time I wrote that they were clearly,
- Countering Wow Air and Icelandair who were planning to fly the route. (There’s no universe in which it makes sense for three different operators to fly DFW-Iceland.)
- If American really wanted to fly to Reykjavik they’d be adding the service from Philadelphia, which they view as their transatlantic gateway and the city from which they test new European routes with inexpensive equipment.
This was the kind of airline competitive response we used to see prior to consolidation and ‘capacity discipline’. And it’s the kind of uneconomic capacity that United, Delta, and American claimed that Emirates, Etihad, and Qatar do. But it’s exactly what American was doing.
Last summer American’s CEO Doug Parker explained their approach to competition,
Somebody starts flying a flight from Dallas to anywhere and American either is already there or we’re gonna be there. Because we’re not going to let customers have another option other than American in and out of here.
Back in October, before Wow Air collapsed, American’s Vice President of Planning Vasu Raja told employees they were considering making Dallas Fort Worth – Reykjavik year round.
Now with Wow Air gone and Icelandair having pulled out of the market American Airlines is dropping Dallas Fort-Worth – Reykjavik too according to RoutesOnline.
- American ostensibly believed there was a market for Iceland service when they had to compete against two other airlines
- Now that there’s no competition at all on the route they’d decided the route doesn’t make sense after all.
American is moving their Reykjavik flight to Philadelphia this summer, effective June 4 using the same flight numbers. It’s daily service operated by a Boeing 757.
- Philadelphia – Keflavik, 10:15 pm – 8:00 am, Flight AA232
Keflavik – Philadelphia, 11:00 am – 1:30 pm, Flight AA231
That’s classic airline anti-competitive behavior. It reminds me of Legend Airlines starting premium Dallas Love Field service, so American Airlines did as well. In 2000 they began flying to Los Angeles four times daily and Chicago O’Hare 5 times daily with Fokker 100s configured with 56 premium seats.
When Legend failed, in part driven out of business by American Airlines lawsuits and in part by low prices that resulted from this new capacity, American withdrew from the Love market.
None of this is illegal. If an airline could make money filling a plane at the prices it sells tickets at, whether or not it fills that plane, it’s not capacity dumping — just bad business judgment. The US airlines fought hard for that interpretation, but they forget it when it’s convenient and they’re lobbying the government for protectionism from foreign airlines.
REALLY. . .This is worthy of an blog, It’s called the airline business. Northwest was the master of doing this in years past especially at MSP (DL has picked up the practice there). Delta has made competition impossible in. ATL and United in DEN and ORD. This is nothing new, noteworthy or surprising. I glad AA is finally defending it’s turf.
Good job of calling them out! The result of all this is that DFW travelers now have no direct flight to Iceland. AA was never interested in actually performing service there, just in making sure to keep those passengers captive to them by killing off an option.
Typical but interesting. I really think airlines like Icelandair, Jetblue Alaska, Spirit, etc. should try to build different focus cities. I know this ends up with too much O&D traffic so maybe I’m a fool but if the big airlines defend their fortress hubs why not put your hub into cities like PIT, STL, MEM or others. There is no one there to defend those and if done right they could get connecting traffic. Icelandair runs a non-stop from MCI seasonally for example. No one else is threatening that route but it also might not be profitable I guess.
Ok, this is a click bait rant. Airlines shift routes all the time. I’m addition, why wouldn’t they compete on a route from their fortress hub? That’s the definition and purpose for having a fortress hub. What you also fail to point out, is that the transition to PHL means they will compete. Stop spouting out nonsense.
This post pretty much sums up everything wrong that you do with your blog. It is noteworthy that AA appears to be shifting its only Iceland flight to PHL from DFW. You should report on this. But is the proper headline about this move a rant about “competitiveness”? Like other industries, the airline business is, um, a business. It wasn’t stupid or “anti-competitive” for AA to defend its largest store (I mean hub) from competition. I mean, that’s what smart businesses do. Now that this threat has passed, AA is recalibrating. It still thinks it can make some money serving Iceland during the tourist season, and the most efficient way for it do this is from PHL. So it’s moving its flight. I think that’s good for both the airline and its customers. No?
Gary is simply pointing out the hypocrisy that these airlines are spewing. They are doing the same thing that they accuse foreign airlines of doing. Just because it’s “legal” doesn’t mean that consumers should put up with it. In fact, these types of actions should be used as evidence against the next mega airline merger that comes up for review.
If these allegations are true, then AA’s action would be illegal under the Sherman act. This would require proving that (1) AA operated the DFW-REK flight at a loss with the intention of foreclosing its competitors and (2) that AA was able to recoup its losses after its competitors drop out of the market.
@chopsticks +1. Really well said.
@chopsticks – they only flew out of dallas because other airlines were doing it, you say that’s what a business does, jeff bezos says it’s the worst thing a business can do.
@chopsticks – Jimmy kind of already said it but yes this is normal behavior, and it sounds like Gary is just pointing out that the airlines cry when foreign competitors do the same thing to them and try to make it illegal.
Tyler Cowen would call it “protectionism for me, but not for thee…”
@ chopsticks It is good for American Airlines, but not so good for the customers who live in the DFW area.
I found it useful to call the big 3 out for the massive hypocrisy. And to those who act like fortress hubs, which rely on government support and in the case of DFW, regulatory curtailment on Dallas Love as a competitor, is just okay, you are just plain gullible.
As a Dallas resident I like the occasional reminders of why flying with American is basically acceding to their monoloplistic behavior. American is increasingly demonstrating that they can only compete where they have little or no competition. The idea of competing on service, product, value are not in their vernacular.
And again, for the upteenth time if you don’t like the blog, don’t read it, or at least have the courtesy to offer constructive criticism rather than rants.
@Gary — Well, if Bezos said that, I’d note that AA has made about as much in profits during Parker’s tenure as Bezos has made for Amazon (although Amazon shareholders have done so much better!). And Amazon does things all the time to protect its core business. It’s Prime membership is a brilliantly “anti-competitive” move (you lock up customers who pay you an annual fee for shipping). It’s really weak sauce to argue that AA has done something wrong here when they’re retaining their foothold in Iceland after banishing their competitors. Their competitors had significant advantages to AA in the Iceland market as they had the ability to offer onward connections. IT didn’t help them. Business has winners and losers. AA won this one. I can’t see how any consumers have been hurt by this, or how AA has done anything wrong. I guess you could argue that AA should have done NOTHING when its competitors invaded their home turf, but I don’t think you’d make it too far as an industry consultant arguing for that strategy.
@chopsticks – AA has made money during Parker’s tenure selling frequent flyer miles, not flying DFW-Reykjavik
@chopsticks Far be it from me to defend Amazon, who by the way is analogous to AA in that cumulatively all the profit they’ve made is from web services rather than their core business of selling stuff. But unlike AA they are relentlessly trying to provide better service, lower prices, more selection etc. In contrast AA’s sole objective was to drive out a competitor and then revert to higher prices and less service. Was it an effective strategy? Absolutely, but so is any form of dumping or predatory pricing and ultimately travelers pay the price. But if you’re okay with lousy service and higher prices, more power to you.
The whole idea of a “fortress hub” is by definition anti-competitive, a cause and effect of monopolistic behavior and conniving regulators and politicians. You do remember the infamous Wright Amendment? At least allow expansion of operations at DAL to improve competition just a little tiny bit to some markets.
American Airlines also did this in Wichita, KS, of all places, when the local business community got fed up with American downgrading its jet aircraft to turboprops. Wichita businesses ponied up a guarantee and got Vanguard to run two jets a day between Wichita and DFW. American responded by putting jets back on the route at discount fares until it had chased Vanguard out. The Clinton Justice Department even investigated this.