In American Airlines weekly employee podcast Vasu Raja, Vice President of Planning for the airline, explains Chicago O’Hare as a connecting hub and their decision to cut Beijing flying.
He says they are profitable on “every flight Chicago – West” though presumably here that means domestic. Of course routes should be profitable in the current environment even with fuel prices nudging up.
And they’ve tried a number of Chicago international routes – Delhi, Helsinki, Moscow, Frankfurt, Beijing – that they’ve killed.
One of their biggest markets on the Beijing flight is St. Louis to Beijing and there are $250 walkup fares in the market, compared to St. Louis to London at “$1600 or $1700” and Honolulu “were we to fly it, soon we will, $500.” They’re not covering the cost of fuel on their Chicago – Beijing flight.
American Airlines Boeing 787-8 in Chicago
But then he says something non-sensical. He says “we put the Chicago network in a degraded state” by offering the Beijing flight because “if we carry a passenger from St. Louis to Beijing we are in effect underselling ourselves, we could have otherwise sold them to Heathrow.”
I think what he means to say is that on a full St. Louis – Chicago flight they might give up their ability to carry a different passenger out of St. Louis who is going onward to London. It’s not that the Beijing passenger is going to go to London on American Airlines instead.
Certainly they expect Honolulu to do better than Beijing (and burn less aircraft time) considering how badly Beijing is doing.
American Airlines Aircraft in Chicago
Raja also explains swapping transatlantic service with their joint venture partner British Airways.
- American is moving a Boeing 777-300ER from Miami – London to Dallas – London
- British Airways is putting a Boeing 747 on Miami – London, and downgauging Dallas – London from a 747 to a 777
He says Miami was the hub that did the best at absorbing higher fuel prices in the first quarter. He explains matching capacity to markets to earn profits not market share. One example is cutting routes that lsoe money, and adding profitable destinations — bizarrely he mentions their move into Dallas – Reykjavik.
While they “take all of the revenue that we generate between AA and IAG and we put it in a big pot and we basically split it based on the seat mile capacity that we have” they want to take British Airways capacity and bring it into Miami where it’s profitable. Moving supply around the system is something that got short shrift while the airline was distracted from bankruptcy and merger integration, but now we should see more of this.
He mentions that American might “go and start a route from Heathrow to hubs that don’t have it for a season” in addition to doing more to get “nimble with our partners.”
Reading between the lines we might see more surprising seasonal transatlantic routes, and more swapping of capacity between American and British Airways. They might want less capacity on a route like Washington Dulles – London that has 2 daily British Airways 747s today. British Airways has 777s and 787s, to be sure, but the 787s need engine checks and are committed elsewhere. An American 787 might make sense there.