American Airlines Dumps Capacity In The Burbank – Phoenix Market To Crush Upstart Carrier Avelo

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.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. If I had to fly to BUR, I would still fly on Avelo. AZA is like 15 minutes away while PHX is almost 45 minutes away if there’s no traffic.

    I wish JSX chose AZA as their airport for PHX. At least there is someone else other than Allegiant at AZA now.

  2. AA will be using their Federal bailout money to subsidize this loosing route. It’s good old crony capitalism.

  3. Yes, how delightful, billions in taxpayer money going to enable American to snuff out competition and preserve the holdings of stockholders. Capitalism at its finest

  4. Yes, how delightful, billions in taxpayer money going to enable American to snuff out competition and preserve the holdings of stockholders. Capitalism at its finest

  5. “Because we’re not going to let customers have another option other than American in and out of here”

    How the heck is Little Dougie not in jail for speaking and acting like a mafia don?

    At the very least, for violating Fait Trade and Anti Monopolistic statutes?

    Seriously, why not?

  6. All network carriers’ bottom lines are in their hubs – they’re going to defend them.

    And exactly why do we need another nickle-and-diming ULCC that will just fly opportunistically by the day on cherry-picked routes? The US3 network carriers might not be our greatest darlings, but at the end of the day, they provide the global connectivity that individuals and businesses need – not just on fancy intercontinental routes, but also by flying to uncountable smaller communities that LCCs would never take an interest in.

  7. Is the public better served now than before the rush to mergers creating but 3 major carriers? If investors want to take their chance on new airlines, fine. But why should a carrier like AA be tolerated to drink from the well of federal subsidies just to throttle the free market?

    Killing competition is nothing new to firms dominant in their industry. Just look at Amtrak and how it has historically throttled the potential for any competition state-financed corridors, despite the fact it can be done at lower cost (to tax payers) at a higher service level.

    Where’s TR and his trust busters when we need them?

  8. Insane… This is not capitalism at it’s best, this is government allowance/practices at it’s best. Never heard of this new company but it just opened in my area. I fly several times a year and think I’ll give them my money and a chance.

  9. Was interested to see Avelo is flying to Phoenix – but as I am 15 mins from PHX and 45 mins from AZA, it won’t be an option for me. We tend to fly SWA on that route, so interesting to see what happens to fares on the route in general.

  10. So basically the Burbank-Phoenix routes are going to be way overserved now. JSX and Southwest already serve that route along with AA (PHX was the 2nd most popular destination out of BUR in 2020). I’m sure that was AA’s plan as it could also hurt Southwest, but given that Avelo is using Mesa Airport, it might be a harder one to compete with directly.

  11. Very nice article, it helped us a lot to explore. I am an entrepreneur by profession and a traveler by heart.

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