How American Airlines Sees New York – and Why They Fail in the Big Apple

American Airlines President Isom told employees on Friday how the airline sees themselves in New York. He began with the obligatory nod to the importance of the city as he naturally should, “JFK is an incredibly important business market. We’re privileged to have the assets we do in terminal 8.”

And he explained that they are looking to serve business customers in New York. That’s a departure from how the airline talked about New York when US Airways first took over. At the time they said they were the airline to bring customers to New York rather than the airline for New Yorkers and they arranged their schedules that way, so that customers could conveniently fly to New York in the morning and fly home from New York in the evening.

Now Isom says,

We orient our schedule, our operation, around that business traveler. We’re never going to be at least today as big as Delta, we’re not going to be as big as United down at Newark. We really have to create a product that’s boutique-like and appeals to our strengths. What are those?

We basically have a shuttle between the two biggest business markets in the world London Heathrow and New York. That is something that we really can build on. The transcons do really really well for us as well, and the transcons not just to Los Angeles and San Francisco but some other points out West as well.


American Airlines Terminal at New York JFK

Key in New York to Isom and American is the Nylon market,

Getting our joint business relationship partner BA co-located both in JFK and us in London Heathrow is incredibly important. It’s really hard to run a joint business when you effectively operate out of two separate terminals.

As we take a look forward in JFK I think there’s going to be an opportunity for further development… being able for us to house our joint business venture partners in a way that really expands our network as well.

Vice President Vasu Raja further explained that New York is all about origin and destination travel, and not connections. He says there’s no path to get bigger, so they have to focus on business customers.

New York isn’t a connectional hub by any means, most all of those flights are entirely filled by people on the non-stops. So JFK-Heathrow, one of our most succesful flights in the system even , is 70-75% full of people going New York – London, and the 20% – 25% that isn’t is typically going beyond London to somewhere else.

In most places that’s a recipe for trouble. In New York we do well in these business markets. ..There’s really no path — we don’t have the slots, the capital, the ability to build a 600 departure hub there. But we do well in business markets and you’re going to see us go hard at those, things like the Kennedy-Heathrow operation which right now is split between us and BA, two different terminals in New York, two different terminals in London, we think there’s a lot of ways we can bring that together, a lot of ways to put really high quality products on the transcons and really get focused on the business customer as much as possible.”

Two key elements of American’s model seem to be:

  1. there are business flights and there are leisure flights and those are separate
  2. they can pick and choose the business flights they want to operate

American may not be in a position to operate a true connecting hub at New York JFK (and CEO Doug Parker sold much of legacy US Airways’ LaGuardia operation to Delta), but they’re pulling out of key business routes like New York JFK – Zurich. They’re focused on London, and that’s a great market, but their New York business customers have to look elsewhere for many business destinations both in the US and abroad.

Meanwhile they think that they can service ‘just business routes’ without realizing that business customers are also leisure customers. When they don’t meet the needs of their business customers wherever those customers want to go, like the Caribbean, those business customers look for another airline. And they become more likely to give that other their (like Delta) their London Heathrow, Los Angeles, and San Francisco business.

And they talk about offering a boutique product but they’re only offering that quality product domestically on Los Angeles and San Francisco and not the “other points out West” that Isom says they want to be competitive in with their New York transcon flights. In fact outside of international and transcon flying American Airlines is actively undergoing a project to make domestic flying worse — and not just for the coach flyer taking out seat back inflight entertainment, reducing the space between seats, and reducing the size of lavatories to squeeze in more seats but also in first class where they’re taking away legroom.

As American shrinks at New York JFK, they lose customers and make existing flights less profitable. Then they shrink some more. Soon enough British Airways will fit inside of American’s terminal 8 at New York JFK and they’ll be able to have the connectivity with their joint business venture partner British Airways that they want — with few connecting flights for BA’s customers to take.

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. If AA wants to cater to business travelers, they’re going to have to do better than JFK-LHR/LAX/SFO. Why did they cut ZRH? What about FRA? It bewilders me that AA doesn’t want to or thinks they can’t compete on JFK-FRA.

  2. My current hub is JFK/LGA and I have been a Platinum on AA for the last 6 years or so. After noticing the cuts AA has made to NY, I have been switching my business over to Delta. I mostly fly paid business/first from JFK to LAX and SFO yet I tend to use my miles for long haul international business class tickets. I refuse to fly on AA domestically (unless on the A321T) because of the horrible decision to densitfy and remove PTV’s. There is no reason for me to keep my loyalty to them if I cannot get non-stops out of the NYC area (no NY’er wants to connect in PHL when we have tons of options here). Yes, SkyMiles isn’t great, though I believe AAdvantage will be devalued again (in the very near future) when PE becomes boookable with miles and they start considering MCE a separate class ( a la Delta does with Economy Comfort). It is sad that they have basically given up in NYC. And yes, I have drank the Delta Kool-Aid. They are overall a much more pleasant experience IMHO even though their prices are consistently higher.

  3. There are essentially no domestic connections from JFK other than SFO, LAX, and CLT (and DCA/MIA to an extent). So that means a west coast flier like me, who would much rather fly transcon via the A321T, typically has to take a secondary connection to make it work.

    Flying into/out of NYC as a whole is no cakewalk, but AA is making it even worse by having most of their domestic connections go out of LGA. This leaves travelers with 3 choices: get yourself from Queens to Brooklyn, take the second connection, or fly another airline.

    AA’s, Isom’s, and Parker’s hubris makes them think that customers are willing to do first two.

  4. Same whackadoodle “reasoning”/logic at an airline where the “braintrust”/‘geniuses’ includes:

    1.) A CEO who blithely ADMITS his new Boeing 737-8 Max (and by extension future “Project Oasis’d” 737-800s) planes are so horrible, he can’t be bothered to fly ‘em;

    2.) the same “Senior Executive” who whines about the lack of competition among airline caterers – and yet, fails to see the stunning irony and hypocrisy that his airline is to passengers, what the caterers he decries are to his airline (poor dear);

    So, is it any surprise their “plan” to succeed at JFK looks a whole lot like the same “plan” that apart from its Northeast Shuttle, saw Legacy US Airways go from a power player at LaGuardia Airport to little more than a spoke for Charlotte (mainline) plus a handful of puddle jumper flights to Philadelphia aboard propeller planes in the years after Dougie & Co., took over control of that airline.

    Indeed, were it not for the sheer lack of any viable competition emerging in the foreseeable future in the airline industry, or their having the good fortune of being “hitched” with British Airways for the incredibly lucrative “NYLon” route, American’s JFK “plan” would be eerily reminiscent of Pan Am or TWA’s in that in not offering a robust schedule, the operation is just “there”.

    However, since there isn’t an American or Delta waiting for desperation sales of slots and route authorities like there was when Pan Am and TWA’s JFK operations bore a striking resemblance to the picture painted by American’s leaders now, barring some sort of dramatic change in the order of things in the airline industry, in the coming years AA’s JFK ops will likely akin to, or as if in ‘suspended animation’ for a while…

    …until the at first slow burning atrophy reaches the tipping point such that the airline finds itself ever further, and ever faster, falling behind the already two predominant players at JFK, Delta and Jetblue, just as Pan Am or TWA did when American and Delta put the squeeze on those two long gone, but at one time the power players at JFK such that as it withers away there in the longer and longer shadows cast by Delta, Jetblue, plus United at Newark…

    …that what happened at LaGuardia for legacy US Airways after Dougie took over, finally happens for the “new” American at JFK.

    And all the more so if, as most expect as the “quid pro quo” for Delta essentially paying nearly half of the $8+ billion to redevelop LaGuardia Airport (likely NY Governor Cuomo’s grandest legacy), the perimeter rule that limits nonstop flights to 1,500 miles or less (except to Denver and except on Saturdays), is lifted altogether, or amended to allow a subset of flights to/from destinations further afield as is done at Washington Reagan National, and then American’s lackluster position/handicap at JFK is that much more compounded as that will surely render the transcons it has now that much less viable as the airline’s position in the local market keeps shrinking until LAX and SFO nonstops at LaGurdia begin in the not too distant (as in BEFORE Governor Cuomo leaves office) future – as they surely will.

    In fact, come to think of it, has American even begun taking that aspect (lifting/amending the perimeter rule at LGA) into consideration when thinking about its future at JFK – or in NYC in general?

    Nobody doubts that the blanket perimeter rule at LGA is going to change once the new terminal redevelopment project comes to life; it’s only a question of when, and by how much (altogether, or modeled on DCA)?

    And once that DOES happen, then where does American fit among the pieces of the jigsaw puzzle that sees “X” quantity of transcons migrate from JFK to LGA, with Delta and JetBlue (who will probably launch its own trans-Atlantic flights in coming years with Airbus A321neoLRs) far better positioned to have sustainable operations at JFK with their already robust list of destinations served, and frequencies (not to mention inflight products) that make either of those airlines far more attractive options than American’s far more limited operations, and much worse product, is?

    I guess we shall see!

  5. As a New Yorker, I simply look at the “001” at the beginning of an AA ticket number and feel nostalgic (even recalling the coach B747 piano bar in early 70s)…. as I now leave NY in a B6 Mint or an SQ business seat. Such a legacy, torched. Life is too short to fly Cactus air! We New Yorkers shrug and move on… it is sad, nevertheless. Oh well.

  6. What I find inexplicable in all this is why AA would tie its fortunes to BA, and indeed, double down on that decision. I just flatly refuse to fly BA internationally any more. Their First Class and service is pitiful, gates out our LHR T3 are as rare as rocking horse sh*t, which, combined with BA’s geriatric fleet is a source of interminable delays. Just makes no sense to me. They’d have been better off with Emirates (sorry).

  7. PHL makes more sense as a gateway than JFK. Less competition and operating costs.

    AA/BA’s JFK-LHR flights don’t attract higher fares than PHL-LHR. Oftentimes, they’re lower.

    You can call AA’s strategy a failure; I call it a capitulation.

  8. I have been doing a lot of intense thinking about, and intense analysis of AA’s operating strategy, pricing, product, loyalty programs, customer service, brand, leadership and intangibles. And in doing so, I have concluded that they SUCK! However, Parker deserves a certificate of participation.

  9. I’ve switched more to Delta flights this year as AA has not provided the schedule needed for a number of my flights. AA has two main advantages: easier upgrades out of NYC than DL or UA and superior product (planes and lounges) on several long haul routes (JFK to SFO, JFK to LAX, JFK to LHR/BCN/etc, etc). As a result, it is hard for me to abandon AA entirely. However, given AA’s schedule weakness, you have to have at least a secondary airline out of NYC.

  10. @Andrew, though it does feel like they are almost on different sides of the planet, especially if it’s raining and the highways are flooding… both airports are in Queens.

  11. The focus on business and not leisure strategy reminds me of the Blackberry strategy – we know how well that worked. As Gary noted, business travelers are leisure travelers.

  12. Quote: “There are essentially no domestic connections from JFK other than SFO, LAX, and CLT (and DCA/MIA to an extent). So that means a west coast flier like me, who would much rather fly transcon via the A321T, typically has to take a secondary connection to make it work.”

    There are more than the ones you mention:: SEA, DFW, LAS, PHL, ORD, PHX, BOS, RDU, BNA, IND, CMH, CLE, ORF, MCO. Granted most are only once a day… but still.

  13. RE: American’s desire to have British Airways move into Terminal 8

    Really not sure where this (wishful) thinking is coming from seeing how British Airways announced last year that it would be investing $65 million to modernize Terminal 7, which is scheduled for completion by the end of this year.

    So, while maybe sometime in the not exactly near future, a time may come when vaguely defined plans to completely redevelop JFK (think: Governor Cuomo’s “vision” complete with pretty renderings of a harmonized, 21st century-like airport seen in cities around the world NOT the USA that passengers might actually want to go to – just a long ways away from having the funding needed to make happen) becomes a reality, the fact remains that BA just plunked down $65 million to keep Terminal 7 alive for what would otherwise seem to suggest at least another 10-15 years there.

    Firstly, of course, there’s the $65 million spent that has to be amortized.

    But, also, there’s the matter of what would happen if BA vacated Terminal 7 and “co-habited” with AA in Terminal 8 as that might open up gates and terminal facilities to newcomers, and hell will freeze over before any surplus/redundant gates are left open for interlopers to take over hoping to play in the Big Boys’ sandbox at JFK.

    No different than Delta hanging onto Terminal 2.

    So, just as Delta is squatting at T2, so too, will BA seek to retain control over T7 to better protect itself (and its partner AA) from cutting loose a sufficient enough quantity of gates and facilities for any new entrant hoping to replicate Jetblue’s success when it begain operating at the now demolished, I.M. Pei designed Terminal 6 that originally was home to National Airlines, and after that TWA’s domestic flights (plus other airlines including some United Airlines flights).

    So, again, not quite understanding where a scenario that has BA walking away from Terminal 7 and moving over to Terminal 8 is envisioned to be happening anytime soon…

    …maybe if there’s a deal brokered by the Port Authority of NY & NJ to use T7 to house interim operations during construction for two of the likeliest projects to happen in coming years:

    1.) Jetblue’s advancing plans to expand, or

    2.) long ago conceived, but yet to actually become firm plans by Terminal One Group Associates (Air France, Japan Airlines, Korean Air and Lufthansa) to expand Terminal 1

    But neither of those proposed/conceptualized plans are finalized yet, and groundbreaking for either project is still a ways away

    In any event, having spent ~2.5 years working on site at JFK Airport on long term consulting assigments for British Airways (during its $220 million revamp at the turn of the century), Terminal One Group Associates, and others (for cargo facilities), I’m a little baffled by complaints about Terminal 7 being a reason to NOT fly BA.

    Oh, sure, I can make a long list discussing why BA sure ain’t what it used to be, and why it might not be worth flying anymore (practically in my sleep!).

    …but surely, and especially when considering it’s JFK we’re discussing, Terminal 7 is NOT the reason why I’d cross BA off my list to fly!

    Yeah, it may not have the many fancy, schmancy, celebrity driven food options like there are on the B/Delta side of Terminal 4 (the 2 Shake Shacks are my favorite there), or the many, varied offerings at Jetblue’s Terminal 5…

    …but, hello, it’s a very small building, with a fraction of the gates found at Terminals 4, 5 or 8, and don’t even get me started on that ~15 mins, nearly a mile long walk to the distant gates my flights on Delta always seem to be at JFK…

    …and since I gave up flying American after a horrible experience at JFK in 2014, I haven’t had to be bothered using the underground tunnel to get to the gates that aren’t even in the same structure as the headhouse.

    Just the same, given the very, very, very, very long walk to some of Delta’s T4 gates, or the certainly much longer walks to gates at either T5 or T8, BA’s cozy, miniature terminal at JFK does have its coziness going for it!

    And with a $65 million refresh, that can’t be half bad 😉

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