American Airlines Explains The Future Of LAX And Their New Asia Gateway Airport

Seattle will become the primary American Airlines Asian gateway. American explains that they make money when there’s little competition in the schedule. And they perform poorly when they have to compete against Asian carriers. Here’s the future of the LAX hub, and the airline’s Asia flying.

At an employee question and answer session last week, a recording of which was reviewed by View From The Wing, an LAX-based pilot asked airline President Robert Isom about the carrier’s plans for Los Angeles. Isom turned the question over to Brian Znotins, American’s Vice President of Network Planning who made 5 key points:

  1. American Airlines was losing money on it’s Los Angeles – Asia flying before the pandemic, because these markets were too competitive.

  2. South America doesn’t work for them out of LA, either.

  3. There will still be some long haul – like Sydney, London Heathrow and Tokyo Haneda – where there’s less competition (and joint venture partner hubs).

  4. LA is a profitable domestic hub and they’ll focus on their Airbus A321T cross country flights there. Domestic will substitute for international, with the overall size of the airline remaining about the same there.

  5. Seattle will become their “more predominant Asian gateway.”


American Airlines LAX

Here’s Znotin’s longer explanation,

LA has been a challenge to us to Asia for a number of years. We have faced profitability hurdles because every Asian carrier feels like they need to serve LA so even though we were serving Hong Kong and Beijing and Shanghai prior to the pandemic. They all underperformed for us because every other Asian carrier served those routes as well. And there was far too much capacity in the LA market.

Normally the way you generate profits as American Airlines is that we differentiate ourselves through different schedules, being the only non-stop or one of a few non-stops but in this case we were one of dozens of non-stops.

And so for us what we’ve decided is to scale back LA widebody flying. Shanghai moves to Seattle… Beijing will focus more on Dallas. Hong Kong will focus more on Dallas as well. But then the Sydneys and the Heathrows will remain at LA because those markets aren’t the Asian markets that are overserved.

Then on the narrowbody side we’ll continue to focus on the 321T flying transcons and then we’ve added a number of small [regional jet] routes out of LA to support the hub because LA as a domestic hub does very well for us, as an Asian hub it did not do very well for us. So we really focused on that profitable part on mainline narrowbody and regional with some long haul flying like Sydney and Heathrow in the mix, Tokyo Haneda we’ll have two trips there once the pandemic’s over.

And then going forward we think that’s kind of the run rate size, and we’ll focus with our partner in Seattle on Alaska adding long haul routes like Bangalore and Shanghai out of Seattle once the Chinese bilateral opens up that’s a whole ‘nother ball of wax. And that will be our more predominant Asian gateway going forward instead of LA.

…[South America were] underperforming routes as well to put it plainly. You’re just in the wrong part of the country to serve South America there, from Buenos Aires, you’re not connecting any passengers from across the country, so focusing on DFW and Miami to our Latin America points is a better focus as well. It’s a competitive challenge on the Asian side and a geographic challenge on the Latin side for us.

Isom pointed out the substantial capital investments that American is making at the airport to underscore, though, that they aren’t reducing their commitment to flying from Los Angeles overall. That presence won’t grow, however, because “they don’t make more real estate in LA…there’s no new runways, if gates are redone they’re done for the purpose of replacement.” The airline will “use every available asset” that they have out there.

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. Seattle’s capacity is either constrained or close to it, and is served by every major Asian carrier that is carrying connecting traffic, plus Delta serves the major markets too. How much of a competitive advantage is that compared to the situation at LAX, especially when adjusted for size of market?

  2. LHR is served by AA, BA, Delta, United and Virgin. Can’t get more competitive than that.

    “Normally the way you generate profits as American Airlines is that we differentiate ourselves through different schedules, being the only non-stop or one of a few non-stops but in this case we were one of dozens of non-stops.”

    Gotta love that quote. Heaven forbid they’d compete on the actual product.

  3. and before Los Angeles, it was Chicago to Asia that American couldn’t make work.

    The issue is not Los Angeles – because Delta and United both got substantial revenue premiums to Tokyo and Shanghai (markets where all 3 competed).
    It is also the same reason why American has not been able to make NYC work.

    There is something structurally wrong with American – both its costs and customers’ unwillingness to choose AA when there is an option.

    American can’t make Seattle work because they can’t compete in the local Seattle market with Delta – there are already markets where that has been proven to be the case. All the feed from Alaska won’t fix AA”s inability to compete in the local market whether it be Chicago, Los Angeles, New York or Seattle.

    AA is just playing a game of moving their Asia gateways in hopes that something will work and Seattle will end up just like all of the other markets where they have failed.

  4. Seattle is about funneling Alaskan traffic in the western US plus some originating American traffic into an airport that has four current One World airlines flying into Seattle and four non OW airlines flying to/from Asia. LAX has at least 16 other airlines flying to Asia (admittedly, there were a few on the list I’d never heard of and didn’t know their route service). And LAX is always a cluster.

    I usually think every decision by AA management is hot trash, but I understand at least trying this and seeing how it goes. I try to avoid LAX at all times, unless the R/T fare is under $200.

  5. @Tim – Good points, all. But, given the wreck that is AA @ LAX, I can see why they’d give it a try.

    @ Daniel – You’re also right. The product sucks. Trying to bifurcate and treat coach like Spirit and First like….well, they think like Delta but really like Spirit’s big seat…is tough. Apparently too tough for American. I understand the desire, but then First would have to be worked on to get to Delta standards, service would have to be good…and AA management either thinks that would be too hard and has given up or just sucks/incompetent (I’m going with the latter).

  6. CX managed to fill 3 777s and 1 A350 a day at high yields from New York before Covid, all going to various points in Asia through Hong Kong. Although AA couldn’t compete with CX on product, seems to me AA missed an opportunity to offer nonstop service to many of the cities that CX served via HKG. If CX doesn’t survive or is greatly weakened by Covid, this would seem to be a great opportunity for AA to pick up market share if and when travel returns.

    SEA does seem better than LAX for most to Asia as its at least a much shorter routing than through LAX, being much further north.

    I hope the comment about serving South America through DFW (why?) and MIA doesn’t affect the JFK routes to GRU, EZE or GIG.

  7. AA sometimes is the gang that can’t shoot straight. Alsaka will give them Domestic competition and Delta both domestic & International.

    Why doesn’t AA tray to match the Asian Carriers in terms of seating, entertainment &other in-flight experiences like food & customer service on board & at the gate? This from an AA Million Miler…

  8. Doesn’t this smack of United pulling out of JFK all over again?

    I feel like they’re failing to see the forest for the trees here. Two years from now, Robert Isom is going to be saying how the strength of their schedule is their competitive advantage, and customers don’t want to fly in a premium transcon from JFK to LAX, just to have to connect in SEA again, before heading to Asia.

    I’m going to echo Gary here, but this is about as good an idea on paper as “well, leisure travelers and business travelers can just use two different hubs” or “gutting LAX won’t lead to externalities elsewhere in our system.”

    Come on, American… compete on product. Your hard product is already competitive. Throw in some better catering and service, and you have a winner. But hey… what do I know. Maybe having a separate international gateway AND domestic gateway is just what customers want.

  9. American Airlines is being run by low cost carrier America West they did the same thing to Us airways

  10. Item #4 – “with the overall size of the airline remaining about the same there.” – Where does anyone at American say anything about the airline remaining about the same at Los Angeles?

    American did say “Then on the narrowbody side we’ll continue to focus on the 321T flying transcons and then we’ve added a number of small [regional jet] routes out of LA to support the hub because LA as a domestic hub does very well for us” American also said they aren’t reducing their “committed to flying” from Los Angeles overall. American is committed to flying to over 200 destination, so LAX is not unique in that regard.

    However, there was never any statement about the airline remaining the same (in terms of flights, destinations, or seating capacity). The wording used by Isom was very carefully worded. I think you are inferring some things that weren’t said.

  11. It isn’t only about LA being competitive but rather people rather fly Asian-based carriers when traveling overseas instead of American-based ones. When you compare the products side by side, it’s a clear and easy line to see why. Up your product and the competition will be less difficult to discern.

  12. You know what hub AA has where they won’t have to compete to Asia? MIA. If they fly to Asia from MIA I guarantee you they won’t have competition

  13. Quote “Normally the way you generate profits as American Airlines is that we differentiate ourselves through different schedules, being the only non-stop or one of a few non-stops but in this case we were one of dozens of non-stops.”

    Yes folks we suck so bad we can never compete.Many or most of our customer hate us as we serve dribble for food and beverage and our FA cranky grannies are bitter and irritated when passengers are wanting something like water or food in our fake premium cabins
    Many feel stuck with us because they invested foolishly in our program where we once offered value if nothing else years ago.But now we have many of you painted into a corner
    We will find away ultimately to empty your pockets overcharge and make massive profits whatever it takes as long as we can keep shrinking seats and lavatories and downgrading our hard product as much as possible
    Thank You for being a victim/passenger Your friends @ American Air

  14. It’s not that hard to compete with Asian carriers. Just have a good work ethic and a decent product. In economy, it’s not that hard. In business class, it’s a little more product but not that hard. As far as Asian carriers, there are not that many. American doesn’t have to worry about Garuda or Malaysia, just a handful (Singapore, Cathay Pacific, EVA, ANA, JAL and possibly China Airlines and Korean) that’s all.

  15. The problem isn’t the airports location the problem is the airline. Seattle may not be as competitive at LAX but American isn’t just going to show up at SEA and thing their international routes will start printing money. Before the pandemic SEA was thriving and more Asian carriers had either just launched new nonstop service to SEA, or grew their existing service to SEA and then there was also Delta Airlines which after years of investing in SEA as a major Asia gateway was finally starting to see results. American’s partnership with Alaska isn’t going to be the difference maker and within a few years American will pull their international flights out of SEA.

  16. Jeez. Maybe I’m the only one. If AA has a lay-flat seat for much less, I don’t care about slightly better airline food or higher end champagne. Just want a nice lay flat seat to sleep. If that saves me $2000, I’m good.

  17. AA should just move Asia gateway back to SJC. Then it will be the only ones there.
    Oh, NH has SJC-TYO. Never mind.

  18. How about PHX ? Either to Asia or S America ? PHX seems to be a “lost” hub. HP and US had issues too.

  19. regarding size at LAX, American has been displaced by Delta as the largest airline there. Delta re-added capacity at LAX at a much higher rate during the pandemic and has generated more revenue than American.
    American has given up its leadership position in NYC and Los Angeles over the past 20 years and the JFK-LAX route is just one example of why. American decided years ago to get rid of dozens of seats per flight on the route and operate 110 seat aircraft on the route while Delta added widebody aircraft – B767s – which has allowed Delta to become the largest airline in both the JFK to LAX and SFO route.

    AA has had failed strategies in the most competitive markets – including Chicago – for years. LAX is just the latest and anyone that thinks they will succeed in the Seattle international market is not dealing w/ reality.

  20. Only way to standard out is by providing the best onboard services compare to their shitty all-for-profit style of service and flyers will come. Very simple.

  21. AA will never have a competitive soft product with their unions and penny-pinching management. They should market themselves as the Spirit Airlines to Asia.

  22. They want a hub that won’t need to compete with the Asian carriers, all they need to do is look 6 hours west of LA. PHX has plenty of capacity, more than twice the population of Seattle (and the metro area is about 20% larger), virtually no international flights, and is already a AA hub There is literally nothing here to Asia or SA. So if AA is killing of LAX, then they will make me fly to DFW or SEA, which are both substantially out of the way.

  23. @Chad – that idea or thought us ludicrous. Seattle MSA & Phoenix MSA are somewhat close. The only difference is percentage of Asian population. Seattle hovers at 14%, Phoenix hovers at 3.8%. Making Phoenix a hub for Asia travel would not make too much sense for several reasons. Demand is not really present for Asia in Phoenix, if it is the routes are already served via the collection of airlines at LAX and SFO. Seattle has more purchase power for flights to Asia in comparison with a population to fuel that.

  24. It seems to me that AA is copying what DL had been doing prior to 2014, when they relied on AS to give them domestic feeds for the transpac flights. Soon AA will find out those feeds are simply not enough…. AS controls those feeds for their own domestic flights. AA loses money on transpac, and finds themselves in an odd position in SEA that no room for a third hub carrier.

    We have seen that in 2014 when DL broke their alliance with AS, and built their own house there. And it worked.

    Not this time for AA. @Chad has a point, PHX has some tech traffic to Asia and AA might make it work there.

  25. American Airlines need and must replace Doug Parker and his America West/ US Air cronies, they ran a small airline and they didn’t realized AA was a giant and one of the best among the big three. Parker, and Isom that by the way came from Northwest Airlines and fired all the mechanics there, again I say they need and must replace, clean house all incompetent management and bring AA again to what it once was, A GREAT AIRLINE.

  26. If there was any of the US3 that should have applied LAX as their Pacific gateway, it was AA (with UA dominating SFO, and DL heavily invested at SEA).

    But anyways, scratch all those formerly-fancy mainland China destinations. The new dic[…]tator for life will soon be consolidating his power and leading the fatherland into a new era of self-defeating (un)prosperity, social/ism and “self-reliance”.

  27. @Garyst16 – Not necessarily true. That’s just about right for Hawaii. I think the last US airline that had a real Hawaii hub was Pan Am so the record isn’t very good for big airlines.

  28. @Garyst16 – Fair point. 6 hours (driving) east. 1 hour flying. An airport that is never overcapacity, except in the hottest days of summer. No snow, very little rain. And we’re all connecting anyway, right?

  29. As the PHL Pilots pointed out. There drastically needs a change of management ! If you look at American’s successful history, it was when they promoted from within. PERIOD ! This group of suits just do not have the successful experience of managing what was, A World Class Airline. Their experience is operating large discount regionals!
    That is what they have tried to do with AA. Which has closely destroyed its customer base and it’s well trenched brand. Parker has been trying to be everything but a World Class Supreme Airline . He has NO experience doing this! He rather put $175 -Frontier and Spirit people on a small plane cramped plane, which completely alienated its ” Core Brand ” and customer base. When AA did that in the early 80’s they atleast had the very large capacity of a 747 running back and forth between LAX-JFK. Here is a small example of how unfit they are. One of the first projects when they arrived was to order new uniforms . The first uniform where the cheapest available. It damn near killed employees with the 38 chemicals found in it. Including Formaldehyde. It definitely sent many to the hospital. It took 3 attempts to find a acceptable solution. From the start, it was disaster waiting to happen. The PHX bunch was the result of a secret meeting hosted by U.S. Airways Treasurer Tom Weir at a restaurant in Manhattan. Why this matters is because Mr. Weir is Laura Glading’s cousin. She was the Union President that ran a smoke screen to assist this merger. She quickly went to work for the PHX bunch. If you would like to read more here it is . https://callingonthedoj.wordpress.com

  30. It is not a union issue, they have battled with American management concerning staffing,( overworked, tired) quality of product. The lack of good choices in the premium cabin has been a sore issue. Management thinks a free movie is the answer. Parker and team are incapable of running a premium airline . As a former flight attendant we were willing to deliver product but due cutbacks the most obvious perks disappeared.

  31. Surprised that no one mentioned AMZN. They’re notoriously stingy, so I wouldn’t be surprised if TPAC travel is in coach, even for managers. And AA has cut its premium product. So this seems like a synergy, if one wants to call it that.

  32. If they couldn’t make money in LAX how on earth do they think they can make money in SEA? SEA is a small market to Asia compared to LAX, and SEA has a ton of Asian carrier service not to mention that YVR, where literally every Asian carrier that can, does fly there because they can even reach it with an A330, is right on its doorstep.

  33. As long as Granny FA’s hips keep bumping into my seat as she wanders the aisle, I’ll stick with overseas carriers vs American.

  34. @MB — you’re lucky your Granny FA at least wandered the aisle. Mine just disappear for the entire flight.

  35. @ Chad, you’re right, “all they need to do is look 6 hours west of LA.”
    AA should make HNL their base to Asia.
    It’s too bad PHX is 6 hours East of LA, and no one wants to go there.

  36. My daughter recently flew AA from HNL back home to BWI. She was surprised that it was better than Spirit.

    What American said is right, they should focus on the American market, including North, Central, and South America.

    I don’t fly AA TPAC or TATL, preferring their OW partners.

  37. @dwondermeant, @MB, @Robert, hopefully you all will be on one of my flights soon. Can’t wait to see how much all 3 of you look like Brad Pitt. HA!!! Your Moms and wives must be very proud of you.

  38. I think AA is taking a lot of risk in SEA, but there are clear advantages with AS in OneWorld. International travelers are domestic travelers too, and the overwhelming majority of SEA travelers are AS loyalists who happen to fly Delta because it’s the only game in town. Many Seattleites already consistently pick Alaska’s inferior product over Delta because of the loyalty and mileage plan benefits, I’m sure plenty of these people will jump at the opportunity to earn Alaska miles (and status) flying American. The domestic game is why DL continues to struggle in SEA, and was still unprofitable as a hub for them in 2019. By letting AS handle the domestic stuff, AA can avoid the Achilles heel plaguing Delta and focus on what they think will be a profitable int’l franchise.

  39. I increasingly despair of this airline.

    I remember turning up at JFK and asking for a seat to MAN rather than LHR.

    The poor woman ran two phones and spent 45 minutes trying to figure out how to do it and finally thoroughly embarrassed told me that my $4,900 ticket required a $275 fee to re-route. Clearly they’d just given up and decided to charge me full walk up price for the domestic sector that I wouldn’t be using.

    Neither of us believed it was correct, but she worked so hard on it and I really wanted to go so I thanked her and paid.

    She then told me she was retiring tomorrow and advised me not to even try next time, because nobody else would have a clue what to do.

    Happy as I could be I headed up to the flagship lounge to eat cardboard and drink cheap wine.

    Apparently those were the good times.

  40. AA cannot compete with Asian airlines on services, food and price, period! Asian airlines has young pretty cabin crews and always there to provide excellent services instead of mostly old grumpy AA crews!

  41. @Kenny Goh, oh boy! Another guy that thinks he resembles Brad Pitt! I can guarantee that you’re over 50 because you need glasses or have flown one flight in the last 5 years. Old and grumpy….yes, you are! HAAA!!!

  42. So little context with regard to a route or station being unprofitable:
    (1) LAX-HKG: worked until the extended period of civil unrest, and uncertainty with regard to a potential CCP military response enveloped HKG.
    (2) LAX-PVG: likely a marginal performer during it’s existence. The AA route planners are likely betting the shorter stage length of SEA-PVG will make a difference.
    (3) LAX-PEK: was truly an underperformer and had little short term chance of improvement, even with a nascent China Southern (CZ) tie-up.
    (4) LAX-South America: The launch of both GRU and GIG were in anticipation of the now-dead AA-LA partnership & ATI.

    Finally – without making this response a TL:DR missive, I’d suggest that anyone who follows the airline industry closely in terms of market/route development history and the ancillary factors associated with such, review the history of United Airlines at SFO. A high-cost airline, operating from a high-cost airport, that had (during UA’s development phase there) much overlapping competition – both domestically & internationally. Also, that airport is only slightly better positioned geographically for U.S.-Asia traffic flows.

    Admittedly not quite apples-for-apples, but one should wonder how UA succeeded when it faced similar obstacles from a(nother) west coast gateway.

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