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:
- there are business flights and there are leisure flights and those are separate
- 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.