How American Airlines Pilots Took Down The Austin Focus City

American Airlines has been operating a significant focus city in Austin. Before the pandemic American Airlines flew to 8 destinations. This week they’ll fly to 36.

Austin has been the fastest or second fastest-growing airport in the country for several years running. American’s growth, combined with growth of other airlines, has meant that fares are down and some flights aren’t getting filled. Air service has grown even faster than demand.

And the airport is at maximum capacity. It won’t see a net increase in gates until the 2030s. American has been squatting on real estate, but losing money in Austin. The terminal gets packed at peak times now, though!

Over the weekend American eliminated a lot of destinations from Austin: including seasonal service and some flights that were already known to be on the chopping block. The schedule load included the elimination of Albuquerque; Bozeman; Cincinnati; Cozumel; Aspen; El Paso; Washington Dulles; Jacksonville; Liberia, Costa Rica; Montego Bay; Kansas City; Memphis; Nassau; Oklahoma City; Punta Canada; Puerto Vallarta; Ft. Myers; Sacramento; Tampa; Tulsa; and Destin-Fort Walton Beach.

The operation has been heavily regional jet-focused to many destinations. American Airlines has had regional carriers operating more than their mainline pilot union contract allows (“scope”), as first reported by JonNYC.

However it wasn’t clear to me how American was violating the scope clause of its pilot contract. They’re allowed to have regional jets constituting up to 40% of their mainline narrowbody fleet. Retirements of Boeing 757 and Embraer E-190 fleets reduced the size of the mainline narrowbody fleet, limiting the number of 66+ seat regional jets. In the past they’ve operated Embraer E-175s with 65 seats instead of 76 seats to maintain compliance as well as parking regional jets. But they’ve been on top of this!

However aviation watchdog JonNYC points out that there’s more to scope than limits on the number of planes operated by regional carriers.

  • The scope clause doesn’t just limit total regional flying. It also requires regional flying to be in service of mainline. American has to locate the vast majority (85%) of regional flying at hubs so that these planes feed the ones mainline pilots fly.

  • Under their pilot contract, American isn’t permitted to do what they did in Austin, which is set up a significant point-to-point operation that isn’t being flown by Allied Pilots Association members.

Austin can’t support mainline flying to the regional jet destinations they’re cutting. There are also a couple of unprofitable mainline flights being cut, but it’s almost all regional flying that’s being eliminated. They went from running two Airbus A319s a day from Austin to Washington Dulles and have been down to a single regional Embraer E-175.

The airline is required under its pilot deal to have 85% of its regional flying in and out of hubs (defined as the legacy American Airlines hubs, plus airports where they operate 100 or more flights). Austin isn’t a 100-plus flight city. American runs a peak of 78 flights (low 50s on Saturdays, 60s on Tuesday and Wednesday). They don’t have the gate space for more than that, and even if they did that would likely mean more losses. So Austin regional flying to non-hub cities falls under the pilot contract 15% of total regional flying cap.

American isn’t allowed to build an operation which doesn’t support mainline pilot union jobs, and given passenger demand and gate limitations in Austin that means they aren’t allowed to build an Austin focus city as they’ve been doing. So they’re pulling it down. It wasn’t making money on a narrow basis (passenger revenue exceeding cost), but they’ll open up space for other airlines to grow. No doubt they’ll also be paying compensation to American pilots for the privilege.

Ironically of course this rule keeps American from building up a city using regional jets to the point that it can support more mainline flying.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. others suggested that scope was the actual reason which is not surprising. and it didn’t take Jon to tell us that AA wasn’t making money on most of the routes; fares (published and DOT flown data) showed that.

    The question is still where AA will redeploy its resources and who will move in, if anyone.

    If AA wasn’t making money and most of the routes that are being cut weren’t profitable, it isn’t likely someone else is going to jump in and do the same thing.

    AUS might just be a little less crowded for the near future.

  2. Did American have a copy of the pilot contract? . They agreed to the contract. They should have known going in this was an issue.

  3. As Tim pointed out, publicly available data shows Austin’s traffic bubble popped. You could connect over AUS sometimes as cheapest option east coast to LAS, as low as $80 each way. I find the AUS airport unpleasant and crowded. The South Terminal debacle is also baffling.

    Shame on American for losing sight of contractual requirements.

  4. I had no idea pilot contracts had this kind of control. Did this also affect the unraveling of BOS 15+ years ago or was that all due to profitability? It was not a hub but had 30+ destinations at one time.

  5. NedsKid
    The AA pilot contract was signed after they built up AUS. Chances are that AUS was an issue in the pilot negotiations and AA knew they would have to dismantle it but had a certain amount of time to comply.
    It is interesting that Delta heavily uses its large RJs in point to point operations plus the BE hubs and more and more mainline in its core hubs but AA pilots want it the other way around

  6. What a stupid provision to include in any CBA. Literially the defination of letting the inmates run the asylum. They both deserve each other while the public suffers.

  7. Leave to Leff to distort the facts in order to write an anti-union rant. What is this nonsense at the end? “but they’ll open up space for other airlines to grow. No doubt they’ll also be paying compensation to American pilots for the privilege.”

  8. @Bob – “What is this nonsense at the end? “but they’ll open up space for other airlines to grow. No doubt they’ll also be paying compensation to American pilots for the privilege.””

    Simple. Fewer American flights out of common use gates means other carriers can move in and add flights. And AA will likely be paying out compensation for violating their pilot contract. What is hard to understand (or anti-union) about that?

    Moreover American Airlines has agreed to these terms, and apparently did not attempt to renegotiate them even as they significantly raised pilot wages. This is management failing by allowing their business to be micro-managed in a way that both harms the company and likely in the long-term harms pilots, too.

  9. In terms of airline traffic, which one of these “lifestyle,” “sunbelt” cities do you think has the best long term propsects?

    Nashville
    Austin
    Tampa

    There have been varying attempts to build up all of these cities. Any others I’m missing? Phoenix, Las Vegas, Denver, Salt Lake have proven to have staying power, so I am excluding them.

  10. What’s with the hatred towards Pilots and how much they make? Did you once apply and were turned down?

    A more accurate title to this would have been “Austin dismantled: How American Airlines didn’t abide by the contract they signed with the Pilots Union and got caught.”

  11. It’s unfortunate. A company treats its workforce like dispensable resources and the employees via unions in turn sees the company as something they need to dominate for its sole benefit. Recession inevitably hits and they all go belly up or beg for a bailout from those (the customers) that had nothing to do with their drama. Meanwhile, service to those same customers is a very very distant tertiary concern for the company and the employees/unions.

  12. Ugh, to retype thanks to AA WiFi…

    Tim, thank for the info on the contract. Didn’t know that piece and makes sense. But it gave AA an out from some unprofitable flying so maybe they see it as a win in this case?

    Delta’s RJ use is more along the lines of what I would think of as traditional. Point to point on key thin routes or where for competitive reasons need to be for the customer (like 4x daily CLT LGA/JFK/BOS). And feeding into primarily mainline hubs from small markets (that probably command a revenue premium) and frequency to secondary/tertiary markets through the day between the mainline morning/late afternoon flights timed for business peak (like a FAY or CHA). RJ hubs usually all run into the same problem: lack of seats to connect to unless the hub is in a high demand market. I don’t think DL would do something like a CVG again (Comair pilots made themselves too expensive, and DTW was a better hub).

    I would guess the limits around RJ flying also have the impact of what mainline crews would perceive as better quality lines returning to base more often versus bouncing around city to city. They’d work for Southwest if they wanted to do that.

    Will be curious to see the next move in AUS… if the LCC drawback in service the last few years was due to a poor market or competition from AA and others in the basic economy space.

  13. Why are pilots making decisions on how to manage an airline? Shouldn’t pilots do the flying and management figure out how to generate profit? This language seems counter productive and probably part of the reason they are 30b in debt.

  14. Sounds like they were unprofitable in AUS but are blaming labor. We’ve seen this trick before.

    Remember who’s been moving to Austin — the people who couldn’t make it in other higher cost areas. If they were sitting on extra disposable income to spend on discretionary items like travel, they wouldn’t have moved to Texas in the first place.

  15. Jim,
    Same reason the new Southwest flight attendant contract apparently includes language that there’s not a penalty for no showing during an IROP? Seems counterintuitive. Maybe there is something buried in there that benefits the company far more that it was worth giving this up?

  16. Another piece of this, many of those routes were already served by Southwest and AA can’t compete on value for vacation routes (free bags). SW also has better schedules for many of these. Look at the Tampa route and compare.

  17. Abit crazy to think when management gave pilots huge raises this contract they didnt modify language so they can continue to operate at cities like AUS without running afoul of the contract. Contracts are supposed to be give and take. Seems management didnt get much in return for the cash they offered.

  18. @Tim Dunn. Not sure who came up with some of the city pairs for AUS. How much daily demand is there to Nassau or Sarasota? I am not in revenue management, be even I scratch my head with some of these flights.

  19. American’s scope clause limits the total number of regional jets to 75% of mainline narrowbodies not 40% as the author writes. And small RJs are defined as those with 65 or fewer seats. The 40% limitation applies to the number of regional jets with 66 to 76 seats. As many here have opined, scope was probably not the prime reason for the cutbacks. The fact that Delta and American’s pilots have negotiated different scope limitations isn’t a crime, as some have implied.

  20. I agree, Brian.
    It appears AA was trying to create some markets that were unique and gain an advantage in addition to matching WN and other carriers but many of the routes were too thin in addition to whatever labor issues exist

    I suspect that AA knew by the time the pilots started complaining that the economics of all these AUS RJs didn’t work so they didn’t bother fighting for it even though they might have acted at the negotiating table that they wanted something in return

  21. AA pilot here. I 100% agree that this labor agreement is inefficient and is getting in the way of making good business decisions, in this case putting the right equipment on a given route.

    I believe the culprit is managements insistence on utilizing subcontracted labor from regional airlines. The relationship will never be as fruitful as it once was 20 years ago. Today, regional are expensive and the relationship is complicated by scope agreements.

    Why not have mainline fly the E175’s in house? You could pay 175 pilots the same hourly rate as their regional partners pay, but without the crazy bonuses. Pilots would appreciate having a seniority number with mainline and you’d be able to operate the far more efficient E2 version!

  22. WN can make money with a 100% 737 (“mainline”) operation with bags that fly free while AA can’t?

    Wow, AA is truly in a sea of trouble.

  23. The scope restriction on non-hub flying predates the AUS hublet by many years. There were no changes to the scope provisions in the recent AA pilot contract, so the company was in violation of the agreement from the time they started the RJ buildup in Austin.

    For those who take issue with such restrictions, I would only say this: A contract is worthless if it doesn’t protect the employee’s job. Even a $1000/hour pay rate is terrible if the company can just have someone else do your job anyway. What people are looking at as restrictions are actually exceptions that allow the company freedom to do things that would otherwise violate the contract.

    The contract starts off with this statement:

    “All flying performed by or on behalf of the Company or an Affiliate shall be performed by pilots on the American Airlines Pilots Seniority List in accordance with the terms and conditions of this Agreement. . .”

    The pilots have generously allowed exceptions to this agreement that allow the company to outsource certain pilot jobs under certain conditions and restrictions. Without the clause in question, the company wouldn’t be allowed to have any regional flying outsourced, so it is actually providing the company additional freedom/flexibility, rather than limiting the company.

    All that said, there is absolutely nothing stopping American from flying as many RJs as they want, in any markets they want… The only limit is how many of those can be flown by pilots who don’t work for American Airlines.

  24. You fail to highlight American Eagle has never been profitable as an entity. Their aircraft and seat configuration is limited , and their acquiring new aircraft must have seat configurations of the same level.
    If the scope clause wasnt in affect, AA would turn the entire mainline operation in Eagle.
    After 9/11 , They gutted the F100 mainline operation which was a comfortable, aircraft and finally they had gained the advantage of availability of parts.
    Only to dump a majority of the ORD short haul route to Eagle.
    It was a major loss of jobs at mainline and a blow to the marketing brand AA had in ORD.
    They found that downgrading to Eagle and less trained Pilots, they canceled their flights during inclement weather more often than UA mainline who kept their mainline flights operating .
    Ground staff who had put in as much as 35+ years with a station and company lost their AA mainline designation. And was forced to accept a transfer to Eagle at 40% less pay or transfer to another station or leave
    What an idiotic decision by AA.
    I didnt realize the AUS operation was so inflated with Eagle.
    AA has a way to position a route to say there isnt any growth and they exit it
    Well, when you have limited commuter/regional aircraft that is severely limited in seat capacity, of course there is no growth.
    But if they were to add mainline flights, there is always potential to grow the market.
    AA sabotages their markets with a very short term mentality instead of looking at all the ways to compete in the market place and grow. They want a market to make money immediately instead of working at it.
    Unfortunately that is the USAIR mentality we are faced with right now.
    They dont know how to compete.
    So laser focused at being near the top at D0/14 numbers, they have lost their focus on not waiting just a few extra minutes for connecting passengers and still have the very worst DOT standing of all carriers for delayed and mishandled baggage after spending many millions of dollars on a bew baggage tracking system.
    As an employee that goes above and beyond every day with passengers while my work group is being micromanaged to the point of being harrassed, mangers and VPs are not being held accountable to the same.
    So Gary, I applaude you when you bring up certain issues , you cant blame the pilots for AUS.
    They are only protecting AA mainline, their jobs and mine.
    You are only seeing it as an outsider although you get your AA info internally from someone.
    I read a lot of airline blogs these days who just announce industry news without their personal attacks
    .yes AA has some issues, just report facts without rehashing negative info from years ago. You are negative. and especially AA bashing..not that they dont deserve it at times
    Sorry you lost your Concierge Key Status… but didnt deserve it the last round
    Your writings have to raise your bllod pressure.
    You are sounding so TMZ.
    I continue to read your blog , with eye rolling, but much less.
    Regards

  25. @Brian W – “A bit crazy to think when management gave pilots huge raises this contract they didnt modify language….without running afoul of the contract. Contracts are supposed to be give and take.

    @NetsKid – “….Maybe there is something buried in there that benefits the company far more that it was worth giving this up?”

    Without making this a TL:DR response, I can craft a response to the above quotes with enough context to understand the arc of how AA/APA and scope got to the now.

    The AA/APA scope clause was a concession that AMR agreed to in order to obtain its first batch of regional jets in the late 90s. In the lead up – circa early 90s – there had been much rhetoric emanating from AMR Corp. on possibly using AMR Eagle carriers as leverage (outsourcing) against APA. The scope clause was incorporated into the AA/APA contract of 1998.

    In 2001, AMR – via the TW buyout/merger – attempted to circumvent the scope clause by coding the STL regional carriers under the former American Connection (AX) code. APA successfully sued AMR for the breach, with the presiding judge essentially grandfathering APA scope as long as APA remains the negotiating representative for AA pilots. This is in part why ALPA has not been successful in its attempts to supplant APA at AA.

  26. That last sentence is key. If they identify a city with growth potential, they can’t nurture it with RJ’s to grow presence and brand in the city. Meaning, the carrier will look the same in 10 years as it does today. This crushes any creativity when trying to grow the route map.

  27. Let’s not forget that American can fly AS MANY RJs AS THEY WANT, to ANY CITY PAIR THEY WANT… as long as they are flown by American Airlines pilots.

    Scope language defines the scope of covered work, and exceptions that are permitted by the American pilots.

    American can exceed those limits all day long… as long as American pilots are at the controls.

    The idea is to protect union jobs… not to give the company permission to outsource whatever they choose to the lowest bidder.

  28. @FurloughedAgain – “American can fly AS MANY RJs AS THEY WANT, to ANY CITY PAIR THEY WANT… as long as they are flown by American Airlines pilots.”

    Paying a mainline pilot amortized across 180 passenger is one thing. Paying that same pilot amortized across 50 or 70 passengers is entirely uneconomic. So, sure, the pilot agreement allows the airline to commit financial suicide.

    But even that’s not quite right. They’d need to negotiate pay rates for the relevant aircraft with their union. IIRC rates aren’t set in the current contract for anything smaller than an E-190. But I did not go back and verify this.

  29. Austin has really outgrown its airport. That’s going to be an increasing problem, and not one the government in Austin is capable of fixing.

  30. Yeah, it has nothing to do with the cooling travel market to AUS. It’s those awful pilots! Next thing you know, Gary will be telling everyone the AA pilots are responsible for Virgin Atlantic cutting their service to AUS?

    @Gary – when you make comments like “AA will likely be paying out compensation for violating their pilot contract.”, please reference the specific contract section which governs this statement. If you can’t, it undermines your credibility as an authority on the topic.

    This article equates to little more than instigative tabloid trash rooted in hearsay and conjecture.

  31. Opportunity for Delta if they’re serious about a Texas hub. They should big-bang it and offer to build their own dedicated terminal with 20+ gates.

  32. It didn’t take long for you to publish a hit-piece blaming pilots after AA announced the pullback in Austin; AA can always count on you! Vasu call you up on the bat phone personally? RJ’s lose money. Austin is a money loser. The end. This labor hit piece is just trying to tell the public who is losing lift and upset about the loss of service, that it’s the evil union’s fault and not economics. Sorry to remind passengers but airlines are in the business for making profits. The money is not right in Austin, so AA say’s “peace out!” and you’re here to carry the message of blame the pilots. Great reporting! LoL Oldest trick in the book; Blame labor.

  33. Gary Leff says…” This is management failing by allowing their business to be micro-managed in a way that both harms the company and likely in the long-term harms pilots, too.”

    The original scope clause from the 80’s said “all flying”. So the exceptions are carve outs to that original one sentence.

    The pay increases gained only got AA pilots back to pre 9/11/2001 inflation rates, Technically there is NO pay raise.

    Finally all AA has to do is to combine the wholly owned regionals into the mainline. One seniority list. It will offer combined synergy’s unattainable in the current contract. Remove 4 regional management teams, right size the fleet. Better utilization of ALL aircraft ALL pilots across ALL routes.

    PS Currently Regional Pilots make more money per passenger than mainline due to necessary wage adjustments due to a pilot shortage.

  34. @Wayne – comparing wages to pre-9/11 is silly especially given the large number of pilots who weren’t flying back then. And regional pilots making more per passenger ALREADY than mainline proves my point…

  35. It’s only “silly” because it doesn’t fit your narrative. But it is factual. Pilots are only on the same line vis a vis inflation from 9/11/2001.

    And there’s are 5 less airlines flying than 2001with major mergers. And fuel prices are less than in 2001. So why can’t AA make money in Austin?

    AA tried and it just wasn’t working. Same as RDU Same as BNA same as SJC. Same as STL. Some cities just don’t have enough O and D traffic to support a hub. It’s nobody’s “fault”.

    It’s not a crime to be good to oneself. Your “blame the pilot” mantra has worn thin over the decades.

  36. So Gary..I’m confused. An unprofitable situation has led to American downsizing AUS. Yet it’s the AA pilot’s “greed” that led to Austin’s downsizing?
    How are they supposed to upgauge an unprofitable operation? AA is hesitant to upguage anything., let alone a money losing operation. So the AA pilots are to blame because the RJ operation in AUS hasn’t panned out. Got it.

  37. Don’t hold your breath waiting for an apology, Gary…your reference doesn’t mention anything about compensating pilots for pulling out of Austin. Thank you for confirming this is nothing more than sensationalized rubbish trying to get a rise out of readers.

    Free advice: Stay in your swim lane and focus on different frequent flyer programs.

    Good day.

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