American Airlines will launch seasonal Dallas Fort Worth – Reykjavik service next summer. This is the third non-stop in the market following Wow Air and Icelandair. This is a purely leisure route where two ultra low cost carriers have already entered the market. And both Wow Air and Icelandair offer connections beyond Iceland while American Airlines does not.
British Airways will upgauge Austin – London Heathrow to a 747. Norwegian is entering the Austin – London market, doubling capacity, to the British Airways response is to nearly double their own capacity too.
They’re going old school. This is the kind of airline competitive response we used to see prior to consolidation and ‘capacity discipline’. And it’s what United, Delta, and American claim that Emirates, Etihad, and Qatar do — offer uneconomic capacity — suggesting this is only possible because of government subsidies — ignoring their own shareholder subsidies (from 1979 through 2009 US airlines lost $59 billion on domestic operations) and their own government subsidies (when the Pension Benefit Guaranty Corporation took over United’s pensions they had $9.8 billion in obligations, $6.6 billion of which is guaranteed, and the federal PBGC took over billions in pensions from Delta and US Airways).
When Legend Airlines started offering Dallas Love Field service, so did American Airlines. In 2000 they began flying to Los Angeles four times daily and Chicago O’Hare 5 times daily with Fokker 100s configured with 56 premium seats.
When Legend failed, in part driven out of business by American Airlines lawsuits and in part by low prices that resulted from this new capacity, American withdrew from the Love market.
And it turns out this isn’t illegal. If an airline could make money filling a plane at the prices it sells tickets at, whether or not it fills that plane, it’s not capacity dumping — just bad business judgment. The US airlines fought hard for that interpretation, they forget it when it’s convenient and they’re lobbying the government for protectionism from foreign airlines. But they’d be wise to remember it… since it may come up again.