American’s Vice President-Planning Explains Killing Chicago – Beijing, Swapping Routes with BA

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.

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. I’m sure the 250 walkup means one way based on a roundtrip. And we see exactly that from DC consistently to China these days.

  2. I’ll just add that I was at the gate next to that Beijing flight at O’Hare last week and with well under an hour til it boarded, I was able to grab a seat at that flight’s gate while waiting for mine. I was shocked at how quiet it was for that flight.

  3. While we have a sizeable Chinese community in STL, I am still shocked to hear of $250 walkups here. That’s status-run pricing right there (if you hit minimum spend of course)

  4. Three flights a day to Beijing from ORD is a lot of capacity, but I don’t believe that the AA flights have been empty. Fares are too low, AA has been lagging in profitability lately compared to its competitors and it would appear to rather focus on DFW and LAX. It’s hard to fathom that those flights are profitable now in this market. AA has a decent product, even with some sub par aspects of the 788 biz class seat, but the flagship lounge is good and the meal service is variable to good. Beyond that, Raja’s statement makes no sense. Is he saying that the customer from STL going to LHR cannot get a seat to ORD because of the other one flying to PEK from STL, and all will be fine by sending the latter to PEK through DFW or LAX and starting seasonal ORD-HNL (where UA will prevail due to more flight choices). Ultimately I see this as a decision by AA to bolster its DFW and LAX profitability to PEK, but that remains to be seen.

  5. The $250 number seems crazy low, but if it is pre-taxes/fees it might make more sense?

  6. Why bother selling STL-PEK so cheaply? Can’t they get connecting traffic to ORD-PEK or LAX-PEK from other cities? The DFW-PEK is consistently filled in J. No idea how Y sells here.

  7. Curious to hear your opinion on how you view AA’s TATL/TPAC network in terms of ease of connectivity and cohesiveness compared to UA/DL.

    I have my opinion and I am curious to hear yours.

    IMHO, from this angle this is partially why AA seems to struggle in maximizing the effectiveness of their oceanic routes.

  8. Usually to Beijing when I see that Price I can justify adding in another $100 – $175 more for Premium Economy. It is great for EQMs and qualify for status as well!

  9. AA should just advertise these low fare longhauls to mileage runners. There should be a sizeable group to fill up those seats.

  10. At 9:43 Raja suggests BA will put a A380 on LHR-MIA, so this is a swap and upgrade

  11. And there you have your indication about how AA has an incentive to cut back on (historically) “SAAver” type of award space on AA metal and push customers onto BA metal with fuel surcharges.

  12. Just stop trying to figure out what airline people say. It makes your head hurt, and it’s not from thinking too hard.

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