American Airlines is dropping New York LaGuardia to Kansas City for November through March (and possibly beyond). They had been operating two regional jets daily. They are also dropping New York LaGuardia to Houston Intercontinental for November through March (and possibly beyond).
The airline’s LaGuardia departures are down 13% compared to 9 months earlier and that is even as American is getting slots back from JetBlue with the unwinding of the partnership between the two carriers. You’d expect American’s operations in New York to be growing not shrinking.
As a result of air traffic control staffing shortages, which are most acute at NY TRACON, the federal government is allowing airlines to reduce their New York flying without risk of losing slots, which are government-granted property rights to take off and land at an airport to the exclusion of other carriers. But that is not new, it’s only been extended. Without a JetBlue partnership American has no New York strategy. They don’t want to give up valuable monopoly assets. In the past Chief Commercial Officer Vasu Raja has described the airline as ‘not big enough to compete’ in the market, but also ‘too big to walk away’.
- When US Airways management took over at American, they deployed a strategy of using their New York gates and slots not to serve the New York market, but to try to be the preferred carrier in smaller markets for bringing passengers to and from New York.
- Then they pivoted to run a ’boutique operation’ from New York to other key markets – international hubs where they had partners, to their own hubs, and key routes with corporate deals.
Gradually American receded from the New York market, taking advantage of every opportunity not to fly and running inexpensive short distance flights (such as to Baltimore) when they had to operate.
It was the JetBlue deal that gave them a strategy for New York, for the number three and four carriers in the market to team up to be large enough to compete with Delta and United. The Trump administration signed off on the deal (with concessions guaranteeing that supply of seats would grow in the market) but the Biden administration reversed, sued to break it up, and won at the district court level. JetBlue did not appeal, fighting the war to acquire Spirit Airlines over DOJ objections instead.
There’s a theory that American’s drawdown in New York, though, is more than just taking advantage of a reprieve from having to fly – which limits flying out of New York (since other airlines can’t take over their slots) and raises prices.
Spirit Airlines has announced an expansion at New York LaGuardia and perhaps American is leasing slots to Spirit? Which would be ironic since one of the markets that Spirit will operate is LaGuardia to American’s hub at Chicago O’Hare, where the carrier has experienced a significant decline in its competitive position relative to United.
While JetBlue didn’t appeal the Justice Department’s win against its American Airlines partnership, American Airlines filed its appeal on Monday. It would certainly be interesting if JetBlue were to make a deal to acquire Spirit – my theory was they did not appeal as part of a concession to the DOJ to get a Spirit deal done, although word is such talks may have soured. And then an appeals court ruling allowed American and JetBlue to ramp their partnership back up. And whether leasing slots to JetBlue or Spirit, those flights once again become part of a Northeast Alliance.
However my working hypothesis about American’s decision to appeal, even as their partnership with JetBlue is dismantled, focuses on having the courts determine whether JetBlue’s decision to pull out of the deal was ultimately voluntary or government forced – and therefore whether JetBlue owes American a breakup fee.
Just sour grapes. United is big at Newark. Delta is big at JFK but United foolishly dumped JFK and is trying to fix that mistake.
AA should just try to build up LGA
Not the first time American Airlines has exploited slot waivers to reduce service and thus, presumably cut its losses in a market it struggles in. In 2019, with JFK runway renovations underway, AA obtained waivers that allowed it to suspend virtually all of its Eagle flights and some mainline through year-end 2019. The waiver got extended in Q1-2020 and then the pandemic hit and the waivers were extended and applied to all airlines, for obvious reasons.
MCI and IAH are probably markets AA can’t make a dime in, given the competition.
They are absolutely looking to capture the break up fee from B6, and position themselves for an eventual acquisition of JetBlue in a different administration and DoJ landscape. The only way for AA to solve its NY problem is to acquire JetBlue, and it seems the B6/NK merger isn’t going to get the go head from the Biden Administration.
Until then, AA can and should grow LGA and exploit the ATC shortage induced waivers where it can. AA is a strong #2 at LGA and generally always has been.
@ derek — I thought UA had given up on their attempt to return to JFK. I would love to see them return there.
At least Spirit is a nonstop option to EWR from my airport. Their insanely low fares leave way more than enough $$ to cover the extra uber/lyft cost from EWR to Manhattan or Queens. Anything but Delta’s ripoff fares.
If I were AA I would look into trading LGA slots for JFK slots. Cut down LGA to hub flights and strong P2P routes.
If they want to have a shot at being relevant in NYC build up JFK and leverage their strong OW partnerships. AA + OW partners can grow into a 250-300 flights per day operation at JFK but it has to come at the expense of LGA.
This whole split operation is creating inefficiencies and hampering their position. Better to be strong at one airport than being weak in two.
So they keep LGA-TUL but drop MCI? This is odd
You’ve shown no evidence that American has stopped competing in New York. Reducing a schedule isn’t proof that a carrier isn’t competing. One doesn’t automatically follow the other. That’s a “leap of logic”, a conclusion, an opinion, that isn’t supported by the evidence that was presented IMHO.
AA might as well just serve their main hubs from JFK and drop everything else, and turnover Terminal 8 to a more willing player! (Or an idea if no one takes T8 is turn it into a nostalgic AA hotel!)
Just another in a long line of screwups by Gary’s favorite senile geriatric, Joe Biden. It’s obvious that his guiding principle is “do the opposite of what Trump did, even if what he did made sense, because orange man bad”. How’s that working out?
@Luke AA paid for and manages T8. Unless they would be giving up gate space to a partner they can make money off of there is a 0% chance of that happening. It also has three of the nicest lounges at JFK. They have opportunity just need to strike while the iron is hot.
Gary – could you write an article about AA’s decline at ORD? It’s something I’ve noticed though haven’t seen anything on the topic
The FAA’s decision to grant slot exemptions for another year is also a veiled approval for AA to take its time to figure out its NYC strategy.
I don’t think anything that AA or B6 will do can resurrect the NEA which was patently uncompetitive and illegal because of revenue sharing and joint scheduling
AA could easily lease slots to B6 so they could build their own LGA operation but LCCs have proven they don’t do well in legacy carrier hubs unless they have lots of size and B6 simply does not have the financial strength to fight a lengthy battle with DL to gain a profitable size. B6 lost trying to do that in BOS.
If NK wants to acquire slots from AA, that would make the B6 merger even less likely and only complicate the deal; B6 wants to divest NK’s NYC assets to get the merger done but NK might be willing to grow NYC if given enough assets?
neither AA or B6 have shown great strategic forethought so whatever either comes up w/ won’t be a surprise – but that doesn’t mean their strategies will survive.
AA loves to remind everybody that they are the world’s largest airline, and that they run 1000 more flights a day than DL or UA.
So why is the country’s largest airline then allowed to team up with the 5th and 6th largest airlines? It might be good for the NYC market but not for the rest of the country.
David
I frequently take AA’s LGA-IAH for work as a NYC-based EXP. Fares are consistently cheap (across all carriers) given the amount of competition and I have almost never seen either of AA’s two flights go out full on 76-seat RJs. Frequently there have been open seats in FC with empty upgrade lists. I’ve had to fly Delta a few times and they seem to have few problems filling an A220 (and have up-gauged to a -300) x4. United has 8 non-stops a day, mostly mainline (much like AA’s LGA-DFW shuttle).
While I agree AA has no strategy for NYC without the NEA (and arguably that wasn’t a strategy in the first place), this has nothing to do with that. There is simply no way that route is making money, and with the regional pilot shortage this gives them the ability to redeploy to higher yield routes. With the flexibility of the slot wavier, they likely see this is as very low-risk with this very low-yield traffic.
The death by 1000 cuts for us NYC’ers continues.
I believe this AA strategy is done to serve a couple purposes:
1. Not having to utilize slots saves expenses in a market that’s not profitable (Not profitable due to lack of scale and encatchment). Gives them time to sit on the slots for now, and take a wait and see approach.
2. Exemplifies to the court of public opinions that LGA/JFK is better off with two strong competitors rather than just one (delta).
The DOJ’s decision to break up the NEA wasn’t based on what’s best for the marketplace, but rather for political sway. In this highly inflationary period we’re in, anything that reduces competition will be seen as inflationary and problematic for the politics of the Biden administration. Which is why I believe the NK-B6 merger probably won’t happen.
More airline market volatility ahead. With the inflated cost of doing business, the need to capitalize with premium passengers and economies of scale will be required to stay afloat. Small LCC’s will have a hard time as post covid revenge travel dissipates.
T8 isn’t the issue and isn’t up for grabs. AA built it, owns it, and manages it and it gets rent from a dozen airlines using it now, lowering its JFK operational costs considerably (QF, QR, AY, BA, RJ, CX, JL, IB, Level, etc…).
Not sure how swapping out LGA slots for JFK slots, without another DL/US type deal would work and the current DoJ probably wouldn’t allow it. Also, who will trade? Delta can’t be given AA’s LGA slots. It would give them well over 75% of the share there. B6 is too small at LGA so in theory, it could shift some routes from JFK to LGA and sell the JFK slots to AA, but it would just cannibalize their JFK operation. There’s no one else.
AA (and US) never managed NYC properly and are in a bind, because of their own making, and the idiotic layout of NY’s airports, and the total lack of foresight, investment, and imagination in solving the problem for decades because can’t and doesn’t do infrastructure well and under-invests in it. Perpetually. JFK will have gleaming terminals in a few years, but the same airspace and taxiway flow that hampers operations.
@ Mr. Dunn — Funny how you think it is OK for Delta to hog NY/BOS slots, but that no on else can. Delta won’t control an unfair share of NY/BOS slots forever. That is the only reason that they have a bigger share of corporate business in those markets, not because there is anything special about Delta. You undoubtedly know this, so why do you keep going on and on and on about how great Delta is? Remember how great Pan Am was? Remember when Delta filed bankruptcy? THINGS CHANGE.
David,
AA IS the largest US domestic airline by revenue. Delta operates more mainline domestic flights than AA although AA operates more total flights.
Gene,
DL isn’t hogging anything. It is using according to requirements the slots that it acquired. Neither AA or UA have been able to do what DL did – use the slots they gained.
And why is it that it is ok for AA execs to tout how their network IS their product but when I say it about DL – because it is true – you come unglued?
The reality is that DL IS in a position of strength because they have built their schedule in the top corporate travel markets over 20 years while AA has frittered away whatever advantages they once had.
I think what Delta has done in LGA, JFK and BOS is remarkable. They played the long game and they came to win. Building their market share gate by gate and slot by slot.
American/USair has no one to blame for their position but themselves. They gave away what they had to to get their merger through- and now are crying because they can’t team up with a competitor to bail themselves out from their own choices. Heck they lost slots in JFK just because they weren’t paying attention to their own books!
You want market share? COMPETE.
I’m a small player here and I’m gently asking the question. Can WN play in the NYC market? What they have now seems to be doing okay. By all accounts they are holding their own. With that said-Could there be more opportunities for growth.