American Airlines CEO: Our Executives are Talking More About India

About a month ago I wrote that despite speculation I don’t believe American Airlines will fly to India for four reasons,

  1. Fares are too low adding capacity pushes fares down even further. India routes don’t offer the revenue premium American will want to invest in.

  2. Even Delta hasn’t made its India announcement yet. And Delta is more likely to be able to make it work than American. Although of course Delta partner Jet Airwaisy, in India, is struggling.

  3. American lacks a partner in India for connecting traffic. That makes it tougher to fill the plane, and will force even more discounting.

  4. American has shied away from ultra long haul routes. Where they’ve launched long haul flying they’ve had partners, for instance Hong Kong much of the traffic connects onward on Cathay Pacific, and their Australia/New Zealand flights are supported by a pending joint venture with Qantas.


    Gateway of India, Mumbai

    These are the same reasons, by the way, that I’m skeptical about rumors of American launching Los Angeles – Manila.

    At a Crew News session this past week a pilot asked CEO Doug Parker about rumored India (and South Africa) service. And arker acknowledges India is a route that American “continue[s] to look at” but then he explains “India’s tough because of the Middle East carriers carry so much of that stuff pretty efficiently over the Middle East with a one-stop connection.”

    Parker then stammered, remembering the party line, “subsidized..umm… subsidized airlines that don’t care about making money.” Nevermind of course that Emirates is profitable, while American Airlines loses money flying and only shows a profit from selling frequent flyer miles to banks.

    He says “there’s certainly enough demand for the United States to India for us to be flying there, the problem is the pricing. So we keep looking at it and indeed I have heard the team talk more about it. That’s as much as I know.” (Emphasis mine.)

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. And I talk about meeting Kate Upton for a weekend getaway. I’d say the odds of either happening are about the same.

  2. The idea that Emirates is “profitable” (as that term is generally understood in business parlance) while American Airlines is not, is probably the dumbest thing you have ever stated in your blog. It’s simply an absolute falsehood. Emirates, while the most financially “successful” Middle Eastern airline, is still heavily subsidized by its government. I challenge you to find one person in the airline industry (who doesn’t work for Emirates) who will agree that Emirates actually makes real money.

    Your own post alludes to this absurdity. You state that AA avoids ultra long haul flights. There’s a reason why a for-profit airline does this: ultra long haul flying is known in the industry to be the least profitable. Especially when you do it on very large aircraft. Yet this is basically all that Emirates does — and from a small city to boot. Meanwhile, it’s immediate neighbors — all with tiny location populations — are all doing the exact same thing. Are you not the LEAST bit intellectually curious as to how this model somehow “works” in the Middle East but doesn’t work in the rest of the world? There’s some crazy magic where A380s are unprofitable in the entire world but when you put them in the Middle East and compete against several other massively oversized competitors they become “profitable”? In what universe does that occur?

    .

  3. IMHO, reluctance of US legacy carriers to plunge into the Indian market seem to stem from nothing else but fear of competition that is offering better product and service at reasonable price and their position of not being able to offer better value prop in comparison.

    Traffic from East Coast to India is well catered by Emirates and Qatar, whilst from West Coast significant portion of India bound traffic is channeled through SIngapore and Cathay. When one travels on SFO-SIN or many of these US routes to SIN hub, bulk of the traffic constitute transit passengers headed to India. There is no doubt whatsoever on amount of traffic, both for family travel and business travel from Mumbai, Delhi, Bangalore, Chennai, Hyderabad to multiple parts of US. It is well known as to how Emirates has exploited this segment to boost their biz.There is significant business and corporate travel as well wherein ticket prices are quite high many a time.

    So this excuse of poor price yield seems to be more smoke screen for not being able to have effective solution to counter established competition that offers superior service and AA and UA know they cannot do equivalent job themselves!

  4. While a local partner would certainly help (I don’t see any obvious candidates at the moment), one very big problem with AA’s old schedule was their arrival time in Delhi. It was too late for any connection. My final destination was a mere 45-min hop away, but I always had to find a hotel and overnight in Delhi. So I hope they would fly again but also operate at sensible hours.

  5. If AA wants to get a revenue premium, maybe they should consider doing something that would make their experience more valuable for the average consumer rather than less valuable. OTOH while the race to the bottom continues, they’re doing great!

  6. @chopsticks The fact that Emirates has a bagillion A380’s flying to f’ing Timbuktu should tell you how “independent” they are of the UAE.

  7. United has managed to make India work. It has daily service from Newark to both Delhi and Mumbai, and is launching a third service, SFO-DEL, later this year.

    And UA is getting next to no help from Air India, its Star “partner”, but frenemy. UA’s India domestic connections are onto Jet and Vistara. So if UA can, I don’t see why AA or DL can’t make it work.

    The only thing negatively affecting UA’s India services right now is geopolitical; the closure of Pakistan airspace, which has added a refueling stop at FRA/MUC when returning to the US.

  8. With Jet going up shit creek at the speed of light, UA needs to go all in on Vistara or start dealing with Air India more for their connection options.

  9. @PR “IMHO, reluctance of US legacy carriers to plunge into the Indian market seem to stem from nothing else but fear of competition that is offering better product and service at reasonable price and their position of not being able to offer better value prop in comparison.”

    You’re essentially correct, but it’s not “fear.” Look, the Middle East airlines offer an excellent value proposition for consumers. They provide good service in coach, and excellent service up front, at a massively subsidized price. While this is absurdly unfair to the people who own and work for other for-profit airlines, it’s not a problem for consumers. As long as you don’t think too hard about it, you should buy what they’re selling.

    But until these subsidies end, there’s not much the major USA airlines can do about India service. You currently have crazy stuff like Qatar’s flight to PHL. Think about this insanity: Doha’s population is under a million, it doesn’t have a particularly vibrant business community (that would buy first class seats) and it has a nonstop flight to Philly. This flight is thousands of miles further than any other flight from PHL. There are many large cities in America that don’t have nonstop service to PHL, much less any cities in Asia, South America, Australia, Africa, etc. And AA has a huge and significantly profitable hub at PHL. If Qatar and Emirates and Etihad and Turkish weren’t flying all over America with good service at subsidized prices, AAL MIGHT be able to make an India route work from PHL. It could possibly connect enough USA traffic to India. But given all this subsidized competition (the Mideast is a good place to connect to India) I don’t see how this service could possibly ever be profitable. So it’s not “fear” — it’s common sense.

  10. Chopsticks – So, if you’re going to trumpet the annoyingly tired bull$hit narrative on it’s the ME3’s fault the US3 chooses to suck so much you should also throw in the myriad airlines in China that the gov’t subsidizes the living hell out of their routes. You can regularly buy sub $2500 RT biz fares to Asia out of LAX it’s just not in vogue to criticize China when there is the big bad scary Arabs we can pick on. Btw how many other airlines are either gov’t held or subsidized (including all the benefits each US3 received via bankruptcy)? Alitalia…. oh, lol, Air India? Aren’t they being bailed out left, right and center???? America should be crying foul that India is stopping their expansion into India!!

  11. @Nick — Just because China airlines are subsidized and offer below cost fares doesn’t mean the situation in the Middle East isn’t worse. Yes, it’s hard to make money flying to China. Which is why airlines that are trying to make money — like AA — are reducing service there. But the amount of subsidies being offered to Chines airlines is a small fraction to what’s going on in the Middle East. The Chinese aren’t trying to make Guangzhou a hub to fly to all corners of the globe. And Guangzhou itself has 13 million (Doha has fewer than a million). The Chinese expectations and bankroll are smaller, so the damage they do is smaller. Two wrongs don’t make a right, but the anti-competitive situation in the Middle East is at least 5x as bad, and deserves 5x as much attention and criticism.

  12. @chopsticks
    Where is the data points for these conclusions? How can you state so definitively the Chinese airlines are less subsidized? As you just pointed out their population base is way bigger yet they cannot command a higher fare?

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