Former American Airlines CEO Doug Parker, when he was CEO of US Airways, sold off most of his slots and gates at New York LaGuardia to Delta. Parker didn’t like to focus on competitive markets. This allowed Delta to push forward with a strategy to ‘win New York.’
When US Airways took over American, they inherited a position in New York that they’ve described as “too small to win, too big to quit.” Delta had grown in New York, American hadn’t, and United was safely ensconced at Newark, having inherited that from their merger with Continental.
So American tried to change up its strategy multiple times.
- Around 2014 they began to focus on bringing people to New York rather than serving New Yorkers, timing flights to serve New York business day trips.
- Then they shifted into a focus on a ’boutique operation’ where they flew to their own hubs, partner hubs, and squatted on slots. They didn’t have enough flights to generate loyalty or sell big corporate deals (except in other large American markets, bringing those customers to New York) and weren’t in a position to earn a revenue premium for their flights despite high costs.
- Finally they considered leasing out their slots to JetBlue, packing up and going home from much of their New York position, and finally settled on the Northeast Alliance that together with JetBlue gave them the scale to compete. But after the federal government signed off on the deal (at the end of the Trump administration) they sued to stop it (Biden administration) and a district court judge agreed. JetBlue decided not to appeal, to focus on its acquisition of Spirit Airlines.
Now American Airlines is taking back slots in New York, unwinding their alliance with JetBlue. They had ‘allocated markets’ between the two airlines, something specifically that the judge called out as anti-competitive. One of those markets was New York – Boston. American retired their ‘Northeast Shuttle’ product and moved New York LaGuardia – Boston flying over to JetBlue.
Without the Northeast Alliance, it’s not yet clear what American’s strategy will be. They had no plan to be a competitor before the JetBlue partnership, so the judge’s ruling doesn’t ‘restore a competitor’ in the market it strengthens the hand of dominant competitors Delta and United. However we’re beginning to see some moves.
- American is moving their New York JFK – Doha flight to Philadelphia. They say this isn’t because of the unwinding of the Northeast Alliance, but that’s not credible. They couldn’t reduce departing seats in New York or they’d lose slots under their deal with the Department of Transportation that had approved the alliance. And they’d focused on New York to the exclusion of Philadelphia (with limited planes and pilots and attention) because of the Northeast Alliance. With that deal done, their focus shifts back to Philadelphia. (Although this flight generated most of its traffic on the U.S. side from the New York area, and Philadelphia will mostly mean double connections to final passenger destinations.)
- They’re restoring some limited service between New York LaGuardia and Boston.
American Airlines is bringing back its Boston (BOS) to New York LaGuardia (LGA) route.
Flights start October 29 with four daily Airbus A319 flights.
American dropped BOS-LGA in January 2022 and gave it to JetBlue. Now with the termination of the partnership, AA is resuming it. pic.twitter.com/6Ifyv4TOZ2
— Ishrion Aviation (@IshrionA) August 6, 2023
Before the pandemic American basically squatted on slots, flying as little as possible without giving up their New York assets. More domestic short flights and less international long haul from New York could be a move back in that direction. Hopefully not – hopefully they’ve learned an important lesson they’ve articulated over the past two years.
Four and five years ago I laid out the position that American Airlines was doing the math on New York wrong. Their flights, carrying passengers, might not be making money on their own. But they needed to include co-brand credit card revenue in the calculation – spend from the New York market, and spend foregone by not having enough of a presence to be relevant to New Yorkers.
At the time American had responsibility for credit card revenue split from responsibility for flight revenue. Now all revenue reports up to Vasu Raja, and Raja has seen how the AAdvantage program grows in New York with the airline’s relevance and has spoken to it.