At an employee question and answer session with American Airlines leadership this past week American’s Vice President – Planning, Vasu Raja, talked about my post about the airline’s service cuts at New York JFK. (“Today I’ve had a number of emails come in from people about some article that like there’s a … we’re in some downward spiral in New York because we’re cutting JFK – Orlando.”)
I argued that by cutting about two dozen destinations from New York, the airline makes it harder for customers to remain loyal to the airline and makes it harder for sales teams to win corporate business.
American is no longer operating a connecting hub at New York JFK. They’re focused on non-stop business routes from New York.
The key thing here, I think, is that they aren’t working to serve the needs of business customers so that those customers always choose American. For that they’d need to serve Florida markets and the Caribbean (because business travelers are leisure travelers, too) and they’d need to serve the destinations business travelers needed to reach like Frankfurt and Houston and Denver.
When I asked whether their JFK hub (and they still call it a hub, not a focus city) was in a death spiral I wasn’t suggesting they’d serve zero routes out of JFK, or out of New York. After all they have a revenue-sharing joint venture with British Airways and New York – London Heathrow is the biggest revenue route in the world. They offer strong service to their LAX hub, seemingly with demand being driven primarily on the LAX side.
Instead I was suggesting that American had withdrawn from being a player in the New York market, with each retrenchment helping to accelerate the next retrenchment. American can no longer compete for the wallet share of business customers, and is only able to pick up business on a limited set of routes.
As a result customers can’t remain loyal to the carrier and pay a revenue premium to go out of their way to do so, but choose it when they represent the best choice (with their limited schedule or based on price) on a one-off basis.
What’s Left of American’s Shrinking Route Map
Cranky Flier covers American’s retreat from JFK. He points out just how much their European service has been drawn down, leaving only 4 London Heathrow flights, and one each to Barcelona, Madrid, Milan, Paris, and Rome (summer only).
Much of their service is to other hubs, with once-weekly service to a handful of Caribbean destinations along with international service to Antigua, Buenos Aires, Cancun, Punta Cana (summer), Sao Paolo, Bermuda.
Aside from 50 seat regional jets they’re running Boston, and beyond-perimeter flights that they can’t operate from LaGuardia like Austin, San Antonio, Las Vegas, San Diego, San Francisco, Seattle, and less than daily winter service to Vail.
Their small regional operation covers some of their Boston service, along with Nashville, Baltimore, Columbus, Cleveland, Cincinnati, Indianapolis, Norfolk, Philadelphia, Pittsburgh, Raleigh, Montreal and Toronto.
They’ve dropped at least 10 destinations in the Caribbean and Latin America as well as several big US cities and European destinations from their New York route map.
I concluded my piece suggesting they didn’t need a $300 million investment in their terminal 8 to bring British Airways over from terminal 7, they just needed to wait to cut a little more. Cranky Flier ends his, “how much further can American shrink? There might be room for even more partners in the future the way things are going.”
American Explains Their New York Strategy
American is constrained by lack of slots in New York and at Newark by lack of gates (current management sold off much of their LaGuardia operation to Delta while they were running US Airways). So how do they make the most of the assets they have? Their strategy seems to be focusing on a few cherry picked routes, flying to their hubs, and flying to destinations beyond LaGuardia’s perimeter rule from JFK when those destinations themselves are strong American Airlines cities.
At the employee forum last week Raja began explaining the perimeter rule for flights out of New York LaGuardia, and Doug Parker asked, “how far is that perimeter, it’s like just outside Dallas right? Or Denver?” The perimeter rule prohibits flights beyond 1500 miles with exceptions for Saturday service and Denver.
Raja complains that it’s really expensive to build in New York, too, “to build 8 gates at JFK would be like rebuilding Charlotte airport” — except they are not today maximizing use of their JFK gates.
American’s facility at terminal 8 isn’t maxed out. They have planes that sit at gates for a long time. But the airport is slot controlled and American has only about half the slots that Delta has there.
The question is, what do they do with the slots they have? Hub flying is replacing origin-destination flying out of New York JFK. American operates to fewer places. They focus on London Heathrow, Los Angeles, San Francisco, Dallas and smaller cities where they have a major presence.
Vasu Raja points out that while JFK – Orlando is being cut – the change in service that prompted me to write my original post – “we’re growing in JFK to Austin and JFK to San Antonio” and that American is moving all Orlando to LaGuardia since it can be flown from inside the perimeter, while San Antonio and Austin can’t be so they get more service from JFK. Except…
- New York LaGuardia isn’t scheduled to get another Orlando flight. It’s keeping the one that it has, which is badly timed — a single 6:45 a.m. departure, so no after work trips down to Florida from New York. They’re even reducing service to South Florida from LaGuardia, killing West Palm Beach service.
- Eliminating New York JFK – Orlando is not, in fact, making an additional Austin flight possible — that new second flight has already been on the schedule and operating, while Orlando doesn’t disappear for three months.
Oddly Raja suggests they’re putting larger aircraft on New York routes replacing two-class regional jets with Embraer ERJ-190s, planes American has said they’re retiring.
In any case American focuses on ‘niche’ ‘business customers’ using what he called “the best facility in all of New York, the most modern facility in all of New York and we own it” as their comparative advantage.
The Best, Most Modern Facility In New York?
The Best, Most Modern Facility In New York?
He defends hub flying because “our other hubs – Chicago, LA, Dallas, London are some of the biggest markets for business customers out of New York” and explains the airline is “flying into spokes that are really strong for us in our system, places like Wilmington but also Austin and San Antonio” while “on weekends where there’s less business demand fly to really high end leisure places like Jackson Hole.”
American’s much scaled-back international operation is “on our biggest and best airplane the 777 all out of JFK.” And as a result of this strategy “for the first time in 15 years in the company we are profitable in New York international.”
It may be true that they’ve retrenched New York’s international footprint enough to be profitable overall, with about half their service between New York and London. However while “all 777 international” is simple operationally, it means many destinations can’t work.
There are several routes Delta finds success with using non-peak hour 767s. American though wouldn’t be able to make those destinations work even if it were willing to fly Boeing 787-8s given the reduction in business class seats on those planes that are getting sent to Anchorage and Cancun. And cutting so many destinations out of New York has to make it harder for customers to keep flying American, as I hear from them all the time.
American’s Strategy Going Forward
The airline’s strategy may be best understood in CEO Doug Parker’s words from September 2017, that they would ‘never lose money again.’ So it is with New York. They aren’t playing to win New York, or even perhaps to maximize the profits they might make there. But they aren’t losing money, which is a better position than they were in before.
Indeed Raja points out that “we started the JV with British Airways we had a 60% unit revenue deficit to them. As of the end of last year it was 10% and it’s closing all the time.”
Put another way, American views its only winning move in New York is not to play.
Beefing up New York JFK – Dallas Fort Worth and flying as much Heathrow as possible is a strategy. Their 219 peak day takeoff and landing slots aren’t all used for London, Los Angeles, or Dallas. So we’ll see how the rest of them do.
AA wrote off JFK when it stopped flying to Tokyo, even before the merger, and its since been death by 1000 cuts. Cutting Rio de Janeiro was the last straw for me. My million-mile AAdvantage account is in run-off mode, and I’m now a Delta flyer (to the extent I’m anything because I’m now playing the mileage game only with credit cards and happily fly the carrier with the best schedule and fare (which is almost never AA).
His comment about all-777 on TATL out of JFK is utter nonsense. Flights to MAD are always, always on outdated, outmoded, ill-equipped 767s. They are all liAArs, period.
Having flown a few AA flights recently (havent been on AA metal in a very long time) I can honestly say if it didnt say American on the side of the plane, I would have thought I boarded a Spirit flight. Yes its that bad!
If JetBlue should ever start flying wide-bodys, AA will simply walk away, since B6 and DL already have taken most of AAs biz
@Zo – those switch to 772s beginning this summer, same with CDG.
The interesting thing is the breakdown of flights – 97ish flights (including Rio seasonally which is not on his list), with 39 of them to hubs. Add in their JV hubs in LHR and MAD and it is 44, almost half of the flights. Of the remaining 53 flights, 22 are ERJs that, IMO, will be cut pretty heavily over the next 24 months as int’l connecting traffic is moved to PHL. So they are left with 30 flights/day to non-hub, non-RJ cities. That’s not a hub, that’s a focus city.
@Ben I’m interested in your statement that JFK-Rio is going seasonal. My understanding is that it’s not coming back (not coming back on AA that is, while DL will restart service in the Northern Winter). I’d be happy if my understanding were wrong.
@Mak – they said it would return in December 2019 and as of now it is loaded in the schedule. That may (and probably will) change in the future, but for now it is seasonally flown.
AA management is making it clear the type of airline they want to be. JV partners will start to reexamine their agreements. When they do that AA will continue the spiral
How does Parker keep his job? It is time to bring Bob Crandell out of retirement. He was a tough competitor who would never let Jet Blue or Delta push American out of a city. They need a CEO with a backbone!
It’s Sao Paulo, not Sao Paolo (Paolo is an Italian word, and Sao Paulo is a city in Brazil, where they speak Portuguese, not Italian, FYI).
while it’s anecdotal, I know plenty of people in NYC who are still loyal to AA exclusively. Heavy business travelers who pretty much just go to the places AA flies from LGA and JFK. Believe it or not, LA, London, Chicago, Dallas work for a lot of people. Plus the dozens of flights and destinations they fly to from LGA to small cities such as Atlanta, Detroit, Minneapolis, Washington DC (you always seem to completely leave out the fact that they have all this service from LGA). But your anecdotal “there must be Denver and Frankfurt service” always makes it in. Maybe if you were a little more balanced, maybe if you took the time to spell check, maybe if you took some care in writing your posts I’d give them more credibility.
Also, here’s a copy of the AA timetable from 2001, just before 9/11, when they were arguably their strongest:
http://www.departedflights.com/AA070201p76.html
Guess what it shows? 68 mainline flights. Mostly to LAX, LHR, SJU, SFO. No Milan, no Zurich, no Barcelona, no Madrid. LOTS of prop flights to upstate New York and New England cities that no longer make sense and really didn’t back then either. No Narita. So no mythic huge amazing hub that you seem to think existed in the past and that they’ve “walked away” from. Also, you can see the LGA schedule. Way smaller operation than they have there today.
It pays to research and base your statements and whining on facts and true history rather than some mythic imagined past that was never actually that great to begin with.
Some more comments:
1) American’s presence in Europe from NYC was never that large. I think it’s actually the largest it’s ever been. Sure, they operated Frankfurt for one summer and flew to Zurich for a long time. But that was before they started flying to Barcelona and Madrid year round. They never had some huge network at JFK to Europe. It pays to do a little research.
2) They never really did have more than 100 flights in general out of JFK either. Here’s a copy of their schedule at JFK in 2001 – just before 9/11 – when they were arguably at their strongest/ largest: http://www.departedflights.com/AA070201p76.html
They had 67 mainline flights. They did only flew to CDG and LHR in Europe. They did have a lot of flights to San Juan. Most of their flights were on small prop planes to upstate New York and New England cities. They did not fly to Zurich with their own metal. They did not fly to Milan. They did not fly to Spain.
So, before you talk about some mythic AA monolith at JFK it pays to do some research so that you can be credible. Yes, this was pre the new terminal 8 being open. But there never was some huge amazing connecting complex with vast numbers of European flights and others that you seem to suggest.
I’ve given up on AA. I live in DC and work in NYC. AA doesn’t fly out of Dulles except for a couple of crappy regional jet flights to CLT , a couple of flights to LAX and a few to DFW so AA doesn’t offer me anything of substance that I can take more than sporadically . Out of LGA, they run some shuttle flight to DCA but at $450 o/w, I’d rather take the bus. I wish someone would offer some reasonable flights between NY and DC Too bad JetBlue packed up and left.
Rjb – If the flights from DCA to LGA leave from 35X, you can take a bus and fly!
@Jason AA definitely flew JFK-NRT because I used to fly them frequently in the early aughts. Three class 777s, which I remember because I always had the option to fly either JL in J or AA in F (and I almost always preferred JL).
Jason is right – similar to the rose colored view of UA’s presence at JFK. It was broad for only a fleeting moment of a few years.
Fact of the matter is JVs have completely changed the international route game for US airlines and this is one of the results.
@Mak- yes they did. But not in 2001. The American Airlines timetable I linked to above from July 2001 shows they weren’t flying to nrt then. They flew it from around 2003/2004-2011/2012 or so. Then left the route. It’s not some long-standing, decades-long route. I, too, flew it once or twice, back in the day.
@rjb- ever heard of DCA airport? AA has quite the presence there.
Since 2009, I’ve flown segments on AA exactly five times: SFO-DFW-MSY and MSY-LAX-SFO in 2017, and LAX-ABQ (also in 2017). The hops to NOLA, with the plane change, was based solely on flight schedule. (I had to be in NOLA by a certain time, and my preferred airline would have arrived too late in the day.). The LAX-ABQ flight was actually re-routed by Alaska when a flight out of SNA was cancelled, and they rebooked me on an AA flight out of LAX and gave my wife and I food vouchers, plus a voucher from Orange Co. to LA.
Let’s just say I see *no* reason to fly AA ever again…
@ Jason Brabdt- what’s your point? You live in a region- it looks like- where you have a lot of choices. I have friends in LA, nyc, Chicago, for whom AA meets all their needs- schedule, destinations, etc. people making choices based on what is available to them and finding a best fit for their needs, is not a novel concept. Some people choose AA. Some UA. Some DL. Some whatever is cheapest. It depends. Not sure what your comment does or adds to the conversation, other than “ I choose to fly other airlines”, which really doesn’t add any substance to this conversation
AA’s New York strategy is: bringing customers to New York. So I think they will only fly to JFK from their other hubs, and other JFK routes will be dropped. In other words, I think JFK will become just another spoke on AA’s route map.
I used to only fly AA over Atlantic and Pacific. Not any more. Going to Aisa? Why not Cathay or Japan Airways in paid J? Even PE beats AA in terms of seat comfort – I have done that for leisure travel. Perhaps, it is good that AA is cutting JFK flights. Hopefully, Flagship in JFK will be quieter like this afternoon – almost none is here. RIP AA and AAdvantage. Parker should think to change the name of the airline back USAir or, perhaps, AmericaWest. Anyway, this is where this company is going to.
Biggest mistake United made few decades back was shut down its few remaining JFK routes to Europe that it took over from Pan Am when Pan Am disappeared, after United had dropped a few routes already.. New Yorkers wanting to fly United to Europe had to fly to Dulles first on little feeder aircraft.. This is before Contnnental merger when Newark became their NYC hub. Very upsetting for people who wanted to fly United. If one really wants to be a world airline leader, an airline cannot be a world leader unless it services JFK with competitive international routes. RIP AA. Yes Bob Crandall was the best of them all. He knew how to run an airline and would be opposed to this JFK retrenchment..
@Jeff R. United only had ONE route from jfk to Europe. It was to heathrow. That’s it. They never had anything else. Period. They also flew to Tokyo, Buenos Aires and São Paulo. Maybe Caracas too at some point? Plus the lax and Sfo route. That’s it. Not a mistake at all to drop that. They now have something stronger at Newark than they ever had at jfk. Rose colored glasses are nice but they don’t always tell the truth.
@Jeff R- also- what exactly is a “world airline leader?” I’ve wirked in the network planning and corporate strategy groups at some of these airlines and can tell you that the notion of world airline leader is not something that anybody has ever articulated. That’s really only a notion that exists in the armchair ceo world of blogs like these. Profitable, stable, etc are much more commonly used goals.
@greg One has to remember that until Terminal 8 was built, AA was hamstrung by an awful facility and no slots. After the merger with TWA the idea was to get Port Authority to subsidize the new Terminal 8 so that they could have a massive presence at JFK . . . and they did. But in the fullness of time and thanks to the strange antitrust policies of the FAA it became easier and less risky to simply enter into a bunch of “JV” route monopolies and outsource the operational part of the airline to BA, LATAM, and JL. They aren’t giving back any of Port Authorities’ money though.
Why is this a surprise? Doug Parker has made it clear, repeatedly, that he only wants fortress hubs. No way in hell AA is gonna have a fortress hub in NYC, hence Parker’s sale of the LGA assets to Delta. The new AA product simply cannot and will not compete against the other airlines.
Of course Jason will disagree, but “Jason” is Doug Parker’s nom de plume. 🙂
Jason is to defending AA as Henry LAX is to defending UA
At least Mr Raja is consistent. When he abandoned all Asia service from ORD last year ( 3 flights a week to NRT is not “service”; no one can plan an itinerary around that), it marked the inexorable degradation of ORD as a viable hub. Sure, dropping ORD-PVG and ORD- PEK as loss leaders probably looked great to his bosses, but what they fail to take into account is that they are forcing the hand of FFs like myself (EXP, etc.) to jump to UA and DL to get to Asia from the upper Midwest. Hundreds of us are in the process of doing just that this year. The follow-on effect is the demoralization of the ORD employees. To a person, when asked, they are frightened and angry at what AA is doing to their hub.
Oh, but I’m sure the 787s freed up are making a boatload of money flying ORD-CUN.
Thanks for putting words into my mouth guys!! I’m just trying to offer a different viewpoint. Kind of baffling that any such effort is met with hostility and anger.
@Jason — Nice research you’ve provided, and certainly contradicts Gary’s view of an AA “death spiral” at JFK. As I’ve also previously mentioned, no USA airline makes much money at that airport. JetBlue is probably the most successful, and they’re not raking it in. Delta (reportedly) does little more than break even. So what is AA supposed to do? Add routes just because it’s New York? If AA has now modified its JFK routes to finally be profitable there, isn’t that what they SHOULD be doing? And shouldn’t those who don’t have all the facts be a little less strident with their opinions?
Jason
Atlanta, “small city”…………………..really?
@Jason United also has CDG from Jfk for a while as well as sea, iad and Mco. As for AA having the same number of flights as the early 2000s, they’d be even lower were it not for the US Airways takeover. Furthermore, DL and B6 have grown at JFK but why not AA? They did not protect their turf. DL used to not even fly to London, lax/sfo transcons or have a robust Caribbean presence back in the 90s/00s and now they’re strong. If AA management has the balls to defend their turf, they wouldn’t be an afterthought in choice for New Yorkers.
When did you hear they are cutting their seasonal service LGA-PBI? I use this often but it runs dec-May. Please let me know.
AA killing MCO-NYC flights except for that single flight to LGA has made using BA Avios for flights to New York worthless. I know they’re not worried about that but it would be more people on the planes.
As a former AAEP DC flyer, I found it absurdly difficult to get to JFK — few DCA-JFK, no IAD-JFK, AND the DCA-LGA with JFK shuffle is just so much of a nuisance. Moreover, JFK-LHR is not a route I care about, and the number of other European destinations available is slim and not competitively priced. Cool flights to S. America, like JFK-GIG were also trimmed back. The worst was that all of the hub to hub routes intra-us are dominated by EPs, so upgrades became infrequent. On international, I never cleared my SWUs. There’s just not a good reason to fly them.