American Airlines has already retaliated against Burbank, California-based upstart airline Avelo founded by former Allegiant President and United CFO Andrew Levy which begins flying April 28.
BUR-PHX was scheduled with 4 American Airlines CRJ-900s from July to infinity as of last week, now they have 5 A319s in place starting this Fall. This is an increase from 1,764 to 4,480 seats per week, +154%. Avelo added 1,295 seats per week BUR-AZA, so AA’s response was more than double what Avelo did.
American Airlines Airbus A319
With the introduction of Avelo into the Burbank – Phoenix metro area market, it probably makes sense for American to fly fewer seats, not more seats. This is going to push down prices for everyone. Avelo has lower costs than American, so they can squeeze by on lower fares. But American is a much larger airline, and losses on the route won’t be material to the overall financial health of the airline which already carries $50 billion in debt.
This strategy is nothing new. When Icelandair and Wow Air launched service from Dallas – Fort Worth to Reykjavik, Iceland those flights were joined by an American Airlines flight, too. American didn’t actually believe they could make money on the route, so when Icelandair and Wow Air pulled out American did also. American was willing to lose money to prevent customers from flying another airline, and to drive those carriers out of the market.
In 2018 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.
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.
By the way, this interpretation – that US airlines rely on – means they were being totally disingenuous when arguing for protectionism against Emirates, Etihad, and Qatar.