American Airlines is paging Mark Twain: reports of my death are greatly exaggerated.
American is seen as giving up on Los Angeles and dismantling its international hub there after deciding to end five routes. That includes all of its flights from Los Angeles to South America, and most of Asia.
But even with these reductions American will still be the largest international U.S. airline in Los Angeles for long-haul flights. And American is keeping more capacity than it’s cutting.
Daily international long-haul seats from U.S. airlines at Los Angeles (based on December 2019)
American will focus on its “strategic hubs,” Chief Revenue Officer Vasu Raja said. Los Angeles has only “domestic strength.”
American will remove about 1,100 daily international seats from Los Angeles as it ends service to two South American cities, Buenos Aires and São Paulo, and three in greater China: Beijing, Hong Kong and Shanghai. American will still fly to those cities but from other U.S. hubs.
In Los Angeles American will retain flights to Auckland, London, Sydney and Tokyo, giving it about 1,700 daily seats based on pre-virus December levels.
That’s more than United’s 1,200 seats and Delta’s 1,000 assuming no changes, although United and Delta will serve more cities than American. American was the first to announce a major international restructure in response to coronavirus. Flights were previously suspended to the five cities, and now will not be resumed.
Travellers flying out of the U.S. from Los Angeles are now likely to be on Delta Air Lines. Last year American was Los Angeles International’s largest airline, carrying just under 2 million international passengers. Delta flew 1.7m and United. 1.1m, according to operator LAWA.
Delta’s large short-haul international network, mostly to Mexico, makes it much bigger overall than American, which is weighted more towards long-haul flying.
Daily international short- and long-haul seats from U.S. airlines at Los Angeles (based on December 2019)
American has called Dallas and Charlotte its most profitable hubs, in part because American accounts for the vast majority of flights there. That allows more of the “unique connectivity” that American says it’s focusing on in this restructure.
No U.S. airline ever claimed dominance of Los Angeles, unlike United in San Francisco or American in Dallas. That challenged the airlines to be the city’s de facto home carrier, which would earn them a revenue advantage, and to have enough domestic flights to enable connections to long-haul services.
Even as the largest international carrier, American had less than 8% international marketshare in Los Angeles.
Those drawbacks for American in Los Angeles become advantages in Seattle.
American plans to start a Shanghai flight from Seattle, benefitting from less competition and stronger connections from new partner Alaska Airlines, which does have a grip on Seattle, unlike U.S. airlines in Los Angeles. The Shanghai flight adds to American’s Seattle-Bangalore launch plans.
American did not struggle to find passengers in Los Angeles. Its Los Angeles-Hong Kong flight even had a higher load factor than its Hong Kong flight out of Dallas, usually seen as American’s strongest hub.
American Airlines passenger load factor on Los Angeles-Asia flights versus Dallas (2019)
But on other routes, Los Angeles lagged compared to American’s Dallas and Miami hubs, although load factors overall were respectable.
American Airlines passenger load factor on Los Angeles-South America flights versus Dallas and Miami (2019)
American had no non-stop competition, local or foreign, on its South American routes from Los Angeles.
On its Asian routes, load factors lagged behind foreign competitors, but only by about two percentage points – unlikely to be enough of a determinant on its own to end the service. On Los Angeles-Shanghai, American slightly out-performed Delta and United.
American Airlines passenger load factor on Los Angeles-Asia flights versus non-stop competitors (2019)
Good load factors suggest the problem was price competition that will get worse under the Covid-19 downturn. U.S. airlines fragmented the market: all three flew from Los Angeles to Shanghai, Sydney and Tokyo. And then there are international airlines that added more competition.
Cooperation with foreign airlines helps. None of the five routes American is cutting in Los Angeles have a joint-venture partner.
But there is a JV partner on all four long-haul destinations American is keeping: Auckland and Sydney in tandem with Qantas, Tokyo with Japan Airlines, and London with a group of airlines including British Airways.
American said it will “leverage partnerships as the foundation of future international growth.”
JVs can improve yields, which are not reflected in load factors. Tokyo Narita has American’s lowest Asian load factor out of Los Angeles, but American has the sales and network strength of Japan Airlines.
Delta from Los Angeles does not have a JV partner on two routes (Shanghai and Tokyo) while United lacks a JV to three destinations (Melbourne, Shanghai and Sydney).
American expects a 25% reduction in long-haul international capacity next summer compared to 2019. It’s already planned a 27% cut in widebody aircraft by retiring A330s and 767s. Offsetting that will be new 787 deliveries.