In Closed-Door Meeting, American Airlines Explains Battle To Shut Down JSX Is About Competition (Not Safety)

American Airlines, Southwest, and major unions (especially pilot unions) have lobbied the federal government to put upstart Dallas-based competitor JSX out of business. They want the federal government to change regulations to make the business model that lets JSX fly 30 seat planes out of private terminals, with co-pilots that have fewer than 1,500 hours of flying, illegal.

JSX’s business model is perfectly legal and consistent with 30 years of regulatory practice. There’s also no data, evidence or anecdote suggesting concerns over safety. But that doesn’t stop advocates of the status quo in aviation from lobbying to shut them down.

Nobel laureate economist George Stigler laid out “regulatory capture,” as “the problem of discovering when and why [the biggest companies in an] industry…use the state for its purposes”. While many consumers want regulation to benefit them, regulation usually winds up benefiting incumbent businesses, protecting them from upstart competitors.

After the American Airlines earnings call on Thursday, when senior management met with employees and took their questions, the very last question of the session was about the airline’s campaign to ban JSX. It was striking to me how clear both CEO Robert Isom and the airline’s head of government relations were that this was about shutting down a competitor – commercial concerns – and not a broader concern over ‘safety’ (which has been used publicly as a fig leaf).

When asked the question, CEO Isom joked “Ok we’re picking all the right topics today.” He’d just been pressed on the flight attendants union contract, on reservations and customer service pay, and even Hamas terrorism.

Answer about American’s lobbying campaign, he said that “we will take on all competitors, plain and simple.” But then he went on to explain where that isn’t actually the case – and they prefer to compete by lobbying the government so that they do not have to.

The one place where I do draw an issue with, where the rules aren’t the same. If you don’t have to deal with the same DOT provisions, the same FAA provisions, the same security TSA provisions that’s not fair….

We speak up when we have to. We’ve filed out comments on the review that the FAA is doing. And I’m quite certain that the FAA, the DOT, and TSA will take a look at what’s going on and make sure that no one is advantaged, and no one is allowed to operate outside the guidelines of and the intent and spirit of the rules that they set up. It’s pretty important for us to stand up when we need to.

Nate Gatten, who is American’s Chief Government Affairs Officer, said:

One of these companies actually advertises itself as a travel hack, and this mindset permeates its entire business model which Robert mentioned is really built on having different pilot requirements, having different security requirements, and that’s what we’re trying to head off.

It’s fairly clear that they see this as a commercial dispute, that American Airlines doesn’t think they should have to compete with JSX which operates 30 seat regional jets from Love Field in Dallas. JSX offers a better product, and American would like to put them out of business by turning off the pipeline they have to pilot talent and by banning their use of private terminals.

American talks about it in terms of ‘unfair competition’ – but that’s what anti-trust rules are about (they just lost a big anti-trust case) and the focus there is supposed to be for benefit of the consumer. Instead want regulations that require everything to be the same, just like an old Soviet supermarket with no choices and long lines (their advocacy is that passengers should go to the state commissary and get served the same stale product) which is not what these regulations were designed for.

Flying JSX is like Boris Yeltsin going to a US supermarket and seeing what was possible.

Yeltsin was then a member of the Supreme Soviet of the Soviet Union and one of the co-chairmen of the just-formed pro-reform faction of the Congress of People’s Deputies. And when he experienced Randall’s in Texas he “roamed the aisles..nodding his head in amazement.” He “told his fellow Russians in his entourage that if their people, who often must wait in line for most goods, saw the conditions of U.S. supermarkets, ‘there would be a revolution.'”

American Airlines is afraid that customers will like JSX’s product better and choose to fly them instead. JSX is based out of American’s home city, and on routes where they overlap offers a better experience than American Airlines first class, often for less money. American, of course, could get its own part 135 operating certificate and retrofit its stored Embraer E-140/145 jets with 30 seats. The biggest challenge they’d face is opposition from their pilot union. But it’s essentially what they did when upstart Legend Airlines began flying all-business class jets from Love Field two decades ago, basing their own all-business planes at the airport while suing to put them out of business. As soon as Legend failed, American ceased the service.

While American suggests that their commercial interest at least aligns with safety interests – Nate Gatten says – “we are joined in this view by nearly major aviation union and every significant safety advocate in the country in wanting to take a closer look at this model” – in fact a search of the FAAs regulatory docket doesn’t reveal a single comment from a safety organization supporting the changes that American Airlines wants – and I searched extensively for specific organizations as well as generically for (even astroturf, i.e. made up) organizations with Air Safety, Aviation Safety, Safe and Safety in their name.

If anyone can find one from an actual aviation safety organization making a data-driven common on the docket about part 135 operations, I’d appreciate your sharing it.

Gatten is correct, of course, that there is union solidarity in protecting incumbent carriers from competition. New entrants competing down profits makes gains through collective bargaining at those entrenched airlines harder.

JSX, for its part, was able to mobilize a record number of consumers to comment on a DOT regulation.

There are real aviation safety concerns in the U.S. There have been too many near-misses this year, air traffic control is understaffed and technology lags, and the FAA’s air traffic organization leadership has failed to prioritize things like remote towers that would help.

American Airlines distracting regulators with fake safety concerns is, itself, a threat to air safety.

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. preach it, brother.
    The mouth speaks what is in the heart.
    AA’s unfiltered execs and their less-than-loyal employees that are happy to share internal meetings w/ outsiders show that, as noted, AA vs JSX is a commercial dispute and has nothing to do with safety.
    Hopefully the FAA will weigh that and JSX and Skywest will push the issue and show this evidence as long as is necessary to make that point.

  2. But it’s not competition. JSX and AA operate under fundamentally different rules. Either apply JSX’ rules to AA or vice versa, but pretending JSX isn’t an airline is just lying.

  3. Local Dallasite here- the JSX experience is head and shoulders above AA’s first-class experience, it’s also several hundred dollars cheaper depending on the destination. It also significantly cuts down on the drive time when I fly into crested butte. While they don’t fly everywhere I need, it’s a great alternative when the option is there.

  4. The obvious solution to the “unfair” pilot experience situation is to allow copilots with less than 1500 hours of flight time to fly under part 121.

  5. Things I never thought I would say: “Tim Dunn is 100% correct”

    Sorry for the poke, Tim, it was just irresistible 🙂

  6. So what if it’s about competition?

    JSX is not competing fairly. They pretend they are an on demand charter carrier, but it is clearly a scheduled airline.

    Competition is only fair when it is a level playing field.

  7. American has far more government favors and benefits that JSX cannot match, a gifted portfolio of slots at congested airports, ~ $10 billion in pandemic subsidies, waived anti-trust rules for their partnerships with BA, JAL, Qantas, etc.

    And American isn’t lobbying to end stupid rules, they’re lobbying for more stupid rules to kill a competitor.

    Meanwhile the ONLY THING that stops American from doing exactly what JSX is doing, via a subsidiary, is their own pilots (and constraints that come from voluntarily-imposed agreements).

  8. EVERYONE I KNOW FROM PHOENIX TO COLORADO WANTS TO HAVE JSX FLY INTO RIFLE REGIONAL AIRPORT, EAGLE/VAIL, AND ASPEN AIRPORT FROM PHOENIX. WE HAVE AN AWFUL TIME TRYING TO GET RESERVATIONS TO AND FRO WITHOUT THE BIGGER AIRLINES WANTING US TO FLY IN THE MIDDLE OF THE NIGHT IN ORDER TO REACH OUR COLORADO DESTINATIONS FROM PHOENIX. WE NEED HELP…. WE DO NOT WANT TO SIT IN AIRPORTS ALL DAY AND NIGHT IN ORDER TO GET A FLIGHT, OR FOR INSTANCE, MY NEXT FLIGHT WILL LEAVE GRAND JUNCTION, CO AT 1:25PM, GO TO DENVER, THEN TO L.A., AND ARRIVING IN PHOENIX AT 10PM. THIS IS CRAZY! GO JSX!!!!!!!!

  9. So basically they openly lie!! I wish that service was available where I live, I’d use it everytime.

  10. When threatened, reach for a legislator. I guess this is the American Airlines way. Disappointing, but not unexpected in contemporary management standards.

  11. Today is 10/24. Looking at flying SFO/OAK-LAS (departing Friday, 11/10; returning Sunday, 11/12):

    AA = $698 in First (out of SFO)
    AS = $598-$958 in First (SFO)
    UA = $654-$1,201 in First (SFO)
    JSX = $1,158.00 (OAK)

    This is typical in my experience — JSX is *always* more expensive for future flights (but may be more affordable for last minute bookings); and for a 90 minute flight, who needs First anyway?

    That said, JSX is perfectly legit, and at least AA has finally admitted it’s about competition not safety.

  12. “American, of course, could get its own part 135 operating certificate and retrofit its stored Embraer E-140/145 jets with 30 seats. The biggest challenge they’d face is opposition from their pilot union.”

    Should DoT ultimately rule that no foul was committed by JSX, I fully expect the establishment of “American Connection” / “Eagle Connection” in an attempt to kill JSX. In my view, that would be an unfortunate response since there are many communities that would benefit from being reconnected to the scheduled air transportation network.

    Prior to the merger, legacy American Eagle had a group within network planning that specialized in assessing potential EAS and SCASD markets.

  13. Robert Isom doesn’t care about anything but lining his own pockets and those of AA shareholders – even at the cost of cabbalizing AA’s own employees or tearing down their well being. He’s the worst of the worst. I hope JSX thrives and flies for many years to come.

  14. I haven’t flown JSX, but it sounds great. AA, on the other hand, is miserable in every way these days. They cheap out in every way possible, touting their “route network” as the best part of their product offering, as they try to monopolize as many routes as possible.

  15. I have flown JSX multiple times and I hope that they will be successful in fight against Goliath AA. The flight experience is superior. Whenever possible I fly JSX.

  16. A search of the FAAs regulatory docket doesn’t reveal a single comment from a safety organization supporting the idea that American Airlines distracting regulators with fake safety concerns is, itself, a threat to air safety.

    If you’re going to make a safety claim after complaining that American is using safely claims without evidence, you really need to have evidence of your own. Not anecdotes. Not, “this could theoretically distract a DOT pencil pusher from a more pressing regulatory action.” Evidence.

    Apart from that bit of hopefully inadvertent hypocrisy, you’re right on about AA and JSX.

  17. I have flown jsx out of vegas and yes it is convenient for the passenger,the big airlines don’t care about their passengers unless you have their bank card.its about service and jsx has found a small niche market let them flourish, and big boys get back to better customer service

  18. Man these comments. No, that’s not what they said. I find in ironic that you put the direct quote in and say it means something totally different. What AA said was JSX is a scheduled airline that plays by completely different rules than every other airline must follow so they can operate cheaper. It’s not fair for AA or any other airline and all the airlines are unifying with the same message. They have no problems competing but needs to be on a level playing field. Either way.

  19. What are peoples thought? Can JSX realistically survive this challenge with the Big AA and others?
    Do they have the pull with FAA and the TSA to force JSX out of business?
    I personally would like to work for JSX..!

  20. the most important comment is gary’s:

    “American has far more government favors and benefits that JSX cannot match, a gifted portfolio of slots at congested airports, ~ $10 billion in pandemic subsidies, waived anti-trust rules for their partnerships with BA, JAL, Qantas, etc.”

    The congressional airline bailout passed a week after 9/11 provided cash and loan guarantees up to $15 billion to the majors ( https://edition.cnn.com/2001/US/09/21/rec.congress.airline.deal/ )

    The Hill stated in March ’20:

    “Overall, bailouts for America’s largest legacy network carriers from 2000-2015 added up to nearly $71 billion”. ( https://thehill.com/opinion/finance/488219-lessons-from-9-11-for-the-post-covid-19-airline-industry/ )

    The arrogance and entitlement of the leadership at American and Southwest is now a feature and not a bug.

  21. response from Senator John Cornyn’s office to the recent comment submissions

    +++

    Dear Hagbard:

    Thank you for your recent letter regarding public charter flight operations. I appreciate your comments on this matter.

    In the United States, the Federal Aviation Administration (FAA) has different regulations for public charter flights and scheduled air carrier service. Scheduled air carrier service follows strict regulations and standards, which cover pilot and crew member training, staffing, safety management, and oversight. Public charter flights with 30 or fewer seats are categorized by the U.S. Department of Transportation (DOT) as “on-demand operations,” which allows them to be operated under less complex FAA regulations. In recent years, the number of public charter flights using aircraft with fewer than 30 seats has significantly increased.

    On August 24th, 2023, the FAA released a Notice of Intent to initiate a rulemaking regarding the exceptions for public charter operators. While the FAA plays a crucial role in ensuring the safety, efficiency, and development of the aviation industry in the United States, any new regulation should not create an undue burden on carriers operating as public charters. I strongly support a thriving domestic airline industry that operates safely and efficiently, and I fully acknowledge its pivotal role in our economy.

    As the 118th Congress discusses changes to FAA programs and federal aviation policies, I will keep working to ensure the federal government remains committed to supporting a safe, efficient, and fiscally responsible aviation network accessible to all Americans.

    I appreciate having the opportunity to represent Texas in the United States Senate. Thank you for taking the time to contact me.

    Sincerely,

    JOHN CORNYN
    United States Senator

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