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.