Last week a Chicago-based flight attendant asked American’s President Robert Isom about “the rumor that we’re going to lose all of our Asia flying” from O’Hare.
American has announced the end to their Chicago – Beijing service and in June shared with employees that their Chicago – Tokyo and Chicago to Shanghai flights are challenged “in much the same way” as Chicago – Beijing. In fact, an American Airlines executive said he’d “love to tell [American’s employees] that Chicago – Beijing was the worst of our Chicago – Asia markets but it’s not the only one.” And he shared that “it’s hard to see how” American’s Asia flights from Chicago are on a path to profitability.
Isom didn’t say no, Chicago won’t lose Asia service. Instead he explained how he sees American’s hubs.
- New York “We don’t fly to everywhere, but we’re really good at transcons and we’re really good at fly to London Heathrow and serving the business customer. And we’re not going to be everything to everybody in a place like New York.”
- Washington National “We have a limited number of operations and we make the best of it. And it’s a position that’s incredibly important to us.”
- Dallas Fort-Worth “It’s a big connecting complex .. can serve every place.”
American Boeing 787-8 in Chicago
Nevermind that they’ve scaled back from important business destinations in New York like Zurich, will drop Denver, and fly to key business markets with regional jets while competitors fly mainline (and since business travelers also travel for leisure, it’s notable that key leisure destinations are lacking from New York as well). This is Isom’s model for how he thinks about the hubs.
In Chicago he sees competition from Southwest at Midway and United’s larger at O’Hare than American. He says “it’s a great connecting domestic operation, and when we can operate into some of our partners hubs like London Heathrow or into Tokyo where we have a JV it can work. But when you ask Chicago.. to carry the weight on its own in terms of origin and destination traffic it becomes a lot harder.”
American Airlines Chicago O’Hare
Isom highlights that American lacks a joint venture partner in China, “so the point of sale traffic that we get from Asia is not as much as other carriers have because of their long experience.” Their China Southern investment hasn’t given much, it seems and of course they don’t fly to China Southern’s largest base in Guangzhou.
American Airlines took Chicago – Beijing because “that was the first slot that we had a chance to get to.” He continues, “it was never the ideal transit spot because of the connecting ability of Chicago.” He cites “tens of millions if not hundreds of millions” of dollars in cumulative losses flying Chicago – Beijing.
That’s why American needs to focus on “know[ing] why we do what we do” and “in the case of Chicago I know that even though we will lose Asia service, and we’re taking a look to make sure we’re right size with other Asia traffic and also European traffic as well.”
American’s Vice President – Planning Vasu Raja added “the core of Chicago is an extremely profitable hub” because of connecting traffic in the Midwest and flying to partner hubs. “The only hubs that are more profitable than that are indeed Dallas and Charlotte.” However “the drags on Chicago are indeed Chicago to Asia flying.”