American Airlines has 9 hubs: Dallas Fort-Worth, Chicago O’Hare, Charlotte, Phoenix, Los Angeles, Miami, Philadelphia, New York JFK, and Washington National. Given recent service changes perhaps they should drop New York JFK and add Boston.
American’s Confused New York JFK Strategy
American Airlines refers to New York JFK as a hub, however they’ve had a love-hate relationship with the New York market. US Airways management sold much of their position at New York LaGuardia to Delta for cash and slots at Washington National. And ever since they took over American they’ve been in search of a strategy.
- In 2014 they talked about bringing customers to New York rather than timing schedules to meet the needs of New Yorkers. We saw a growth in flights from places like Richmond, with flights timed for Richmond customers to fly to New York in the morning and return home at the end of the day.
- They shifted to talking about New York as a ’boutique business’ market, suggesting that there are business routes they can productively serve without trying to meet the needs of all New York business customers (or meet the leisure needs of New York business travelers).
Towards that end they’ve invested in Flagship check-in, they’ve opened a Flagship lounge with Flagship dining, and they’ve grown the footprint of the Flagship lounge by taking over one of two Admirals Clubs. They’ve trumpted an ‘all 777’ transatlantic and South America route network, which limits them to destinations that can be profitably served by their largest aircraft.
American Airlines Has Retrenched At JFK
A year ago I wrote about a New York JFK death spiral at American and talked to their head of planning Vasu Raja coming away with the conclusion that they viewed their winning move as not to play.
Since then American has reduced service at New York JFK markedly.
- Over the summer they reduced their schedule, attributing this to a runway closure at the airport. (Neither Delta nor JetBlue pulled down their schedules in similar fashion.)
- Then they attributed a reduction in New York JFK service to the grounding of the Boeing 737 MAX (of course they simply cut the flights they view as least profitable and least strategic).
American has slots to operate about 108 flights a day at New York JFK. This week they were operating about 76 flights, or 70% of their allowable total.
Boston Is Seeing Big Growth
The airline announced a ramp up in service at Boston on Tuesday to Raleigh, Wilmington, N.C., and Indianapolis – pointedly on Delta earnings day. That comes after earlier additions to service like London, Cancun and Key West.
Boston is currently a Delta focus city. Austin, Boston, and San Jose are Delta focus cities as well and American recently announced Austin – Boston and Austin – San Jose service. This is all notable because it’s a huge departure from US Airways management strategy of rarely flying any flights that do not touch a hub.
With the new service American will operate 106 daily flights to 19 destinations from Boston Logan airport. That’s the potential size of their New York JFK operation, and 50% larger than the currently scheduled number of flights at JFK.
American has de-emphasized connections at New York JFK in their focus on ’boutique business routes’ from the city. They don’t appear to see as connecting flow as what defines a hub (Washington National is largely an origin and destination market as well). With more flights out of Boston, at what point does Boston Logan become an American Airlines hub?
Without the number of widebodies New York sees, of course, Boston isn’t yet surpassing New York JFK’s passenger count for the airline. However, like New York, Boston is a major city for American’s partner carriers like British Airways, Cathay Pacific, Iberia, and Japan Airlines.
What Kind Of Competitive Response Will We See For American’s Boston Growth?
Delta’s strength in Boston has been short routes with weaker load factors but high fares, with flights to the Midwest and Carolinas. American is coming after those routes and potentially precipitating a fare war. It will be interesting to see what Delta does in response, such as putting Airbus A220s on bread and butter short American routes that do not touch their own hubs. Will JetBlue add service at Boston as a response?
Airline executives have suggested for years that ‘this time is different’ and they won’t engage each other this way (which is why American will never lose money again).