Before the pandemic American Airlines had effectively decided their winning move in New York was not to try to compete. Their operation was smaller than Delta’s and United’s. They tried the strategy of appealing to customers outside of New York who needed to go there, rather than New Yorkers. But they were losing money, they said.
So they were basically focused on flying to partner hubs like London Heathrow as well as on their premium cross country flights to Los Angeles and San Francisco, while mostly squatting on the precious slots they owned – too valuable to walk away from, but no vision for how to use them.
The Northeast Alliance with JetBlue was their bet on how they could grow aggressively. They couldn’t get more takeoff and landing slots at New York JFK or LaGuardia, but the third and fourth largest airlines in the New York market could partner and together be big enough to sell travel to companies, and be relevant to self-directed travelers, in order to compete effectively with Delta and United.
New York was so neglected before the pandemic, that American Airlines Chief Commercial Officer Vasu Raja revealed during the government’s anti-trust trial against the partnership that they actually were forced to give back 7 slots at New York JFK in 2019.
- Slots have to be used 80% of the time, or the airline holding those slots loses them.
- When airlines don’t have plans to use the slots, they’ll often lease them to other airlines for millions of dollars. The right to fly to congested airports, where operations are capped by the government, is valuable.
- But American Airlines messed up and did not realize that they owned these slots. So they were taken away.
"I'm a little bit beside myself," he adds, noting that he's aware that it makes "everyone look a little ridiculous."
— David Slotnick (@David_Slotnick) September 30, 2022
United Airlines CEO Scott Kirby has been beside himself that his airline walked away from New York JFK and they’ve been trying to claw themselves back in for the past few years. Now, since the federal government won’t gift them more takeoff and landing slots, they’re leaving again. They’d have killed to be in American Airlines’ position.
Yet American Airlines lost slots at JFK because the airport was such a low priority before the JetBlue deal – they were running short flights on small regional jets rather than making use of slots, and not even correctly tracking the ones they needed to squat on in order not to lose.
This anecdote underscores two things. First, the airline under US Airways management was not super competent. Second, it lacked any interest or vision for competing effectively in New York, something that anyone reading this blog would have already known. While some have mocked this as the incompetence defense to the anti-trust trial it does underscore the way in which this deal doesn’t marry two fierce competitors, it actually does create one, at least in New York.
American Airlines New York JFK Terminal 8
Ultimately I argued then – and Raja argues now – that the New York market performs well because of signups for the AAdvantage program and co-brand card revenue. New York is one of the most important consumer spending markets in the world, so it’s important for the brand to be relevant in New York since the bulk of airline profit comes from the co-brand at American. It also underlines how, failing to realize this, US Airways management was doing the accounting wrong when evaluating its New York airline operation prior to partnering with JetBlue.
What happened to the seven slots that AA lost?
Meanwhile, let’s talk UA pulling out of JFK…again
The NEA is going to be dissolved and AA is going to be up a creek. AA’s diversion of hub operations from JFK to other cities is like Hitler’s diversion of operations from Moscow to Stalingrad.
Does writing about credit cards and airline miles make you an expert on airline accounting departments and managements? Losing those slots unnecessarily was a dumb move, but with all due respect, I think I’ll place a bit more stock in the opinions of someone who’s actually worked at or managed an airline than a self anointed “expert” in credit cards and miles when it comes to judging the relative competence of airline managements. But when it comes to learning about airline miles and credit cards, you’re one of the go-to sources.
How do you lose track of multi million dollar assets?
Vasu Raja sucks
@ Saying someone sucks is not a take.
@Wanlao’er: totally agreed. I don’t know how AA shifted him from one chief to another. To me that means he is not good at anything. They can promote someone within for much cheaper and get better results.
Gary,
you do realize that other airlines ALSO make money on credit card signups in NYC but they ALSO manage to operate flights and deliver service that people want AND they also use their assets.
Some of us knew the day that Parker won the bidding war with AA labor that AA as a global competitor was finished. America West had no idea what they were getting with USAirways and even less when they got American.
remember that it was Scott Kirby, now CEO at UAL but then in network at USAirways, that couldn’t see the value in one-fourth of the entire number of LGA slots – and traded them away to DL for what essentially became $60 million.
It isn’t a surprise that Kirby, still haunted with nightmares about that deal, tried to get his way back into JFK after United had their own NYC slot mismanagement.
Not only is Delta the only one of the big 3 that has never had the DOT accuse it of underutilizing its NYC slots but Delta has benefitted from the incompetence of not just one but two airlines in teh world’s largest market.
no its common sense, dont need a degree to dissect many of the affairs including airline route management or politics
Hahahaha Hohohoho
I’m always amused when the over confident drop the ball. I have no sympathy for AA in that 6 year we-don’t-know-what-we-brought-with-us-from-USAirways period. Seriously, these were USAir slots and USAir managers took over at AA? What a joke.
Curious what happens to those 7 slots. Don’t hand them to United though.
As for AA, that slogan ‘Going for great’ didn’t last long. It actually should be ‘AA, going for incompetence.’
@Robert – Ah, no….Mohawk, Piedmont, Pacific States & Allegehney were all great airlines; their less ethnic/less regional sounding airline USAir wasn’t as good as the four separate, but FAR better than Kiwi, ValuJet or some other de-reg concoction, like America West. All HP did in 2005 was buy the name & assets. However, you can’t polish a turd, a turd can’t hide in sheep’s clothing & a turd by any other name still smells the same. The “turd” is HP, not US/AA…
@DesertGhost
With all due respect, your apologist take on the management miscues of the post-merger American Airlines verges closely to the Delta worship demonstrated by Tim Dunn (nee World Traveler).
A list of abject failures is too long to list here, but off the top of my head:
(1) Loss of the LATAM partnership
(2) Implementation of Project OASIS without mockups.
(3) Lack of vendor oversight for the seating reconfiguration project during the 2015-2017 timeframe (which, if you recall, led to some portions of the fleet having to undergo four refits – at unnecessary additional millions of dollars in costs.)
(4) The apparent lack of competence demonstrated (reported elsewhere) by Yield Management, with subsequent knock-on affects.
(5) An early-post merger decision to essentially cease corporate sales efforts.
(6) Filing JFK-India schedules without having obtained requisite overflight rights.
Much of this is a result of the blood letting of many L-AA staffers. Individuals in roles possessing valuable institutional knowledge. Individuals that were shown the door because….well….they performed in the L-AA manner.
With regard to the latest “oversight”, (a) seven slots isn’t going to make or break AA’s relative position at JFK. (B) The notion posited by Raja that the slots were “forgotten” about is nonsense.
A few things: First – There is a reconciliation process for the IATA defined slot-controlled airports whereby the local airport authority essentially confers with the slot-holding carrier regarding future slot usage. This process occurs at least twice a year – in advance of, and in conjunction with the start of IATA Summer and IATA Winter scheduling period.
Second – As part of FAA’s oversight of the slottage process, carriers at JFK hold, at the least, monthly meetings where – once again – a review of individual holdings (among other things) is performed. That information is shared between the FAA, individual carriers, and the Port Authority.
Third – The Port Authority has/had a website that detailed individual carrier slot holdings. The holdings were shown in monthly increments, broken down to the number of holdings by hour for arrivals and departures.
No, I don’t buy Raja’s excuse of an explanation.
DesertGhost, perhaps your nom-de-plume is indicative of an affiliation….so be it. I appreciate the obvious wealth of industry knowledge you’ve demonstrated when commenting on various posts here. But, if indeed there is an affiliation, it seems your objectivity is often clouded.
A lot of commenters have lost the plot here. The reality is that AA had basically written off vigorously competing in NY until somebody at the company had the bright idea to partner with JetBlue. The NEA has, obviously and indisputably, made AA and JetBlue much more fearsome competitors in NY (even if they, combined, are still number 3 in the market). They’ve both added lots of seats and routes and, by all accounts, the agreement is a success for them — and for travellers benefiting from more seats and more competition.
The DOJ antitrust lawsuit is therefore absurd. Everyone knows that NY travellers are better off with the NEA than they would be without it. I’m always skeptical that “justice will be served,” but this lawsuit seems like a stone cold loser for the government.
chopsticks,
you like others presume that a comparison between AA’s underutilization of its slots and the NEA is the only valid comparison.
In fact, the accurate comparison is whether the slots could best be used elsewhere in the industry and whether AA and B6 would be better as competitors.
When you, like Gary, artificially limit the proper comparisons that should take place, you will of course come to the wrong conclusion.
The challenge is for the DOJ to prove that AA/B6 under the NEA is NOT the best solution – and not just whether AA/B6 is better than AA’s underutilization of its slots.
AA/B6 could still have a codeshare relationship like AS has with AA and like what NW and CO had for years.
aaway,
your points about AA are valid. I simply encourage you ro actually debate the issues about which you don’t agree rather than debate the poster.
It is actually precisely because my points are accurate that people turn to attacking the messenger.
@Tim Dunn – for an anti-trust trial the question is whether this combination increases consumer benefit compared to the extant alternative. for the question of ideal use of slots, that’s a different matter, there should not be government granted property rights to take off and land (excluding others), slots are anti-competitive subsidies for incumbent carriers, and should be replaced with congestion pricing [while increasing throughput via runways etc and air traffic control modernization]
US AIRWAYS MANAGEMENT SUCKS THEY WERE ALWAYS WITH THE LOOSER MENTALLY UNFORTUNATELY AA DAYS WILL BE NUMBER THANKS TO THIS MORONS