American Slashes Domestic, United Cuts International, and Southwest Shuffles

Yesterday, American announced the details of its fall flight cuts and the big surprise to me is how deep New York/LaGuardia flying is going to be cut. Meanwhile, United announced it was pulling out of two fairly large cities, Ft Lauderdale and West Palm Beach, as well as from several international routes. On the flip side, Southwest said it will drop a couple routes but add several as well, mostly in Denver and Florida. Let’s get to it.

American
Let’s start with American since that was much bigger in scope. It appears that Miami comes off unscathed while Dallas/Ft Worth will see 5% of flights go and Chicago/O’Hare will lose more than 12%. That looks good in comparison to St Louis (down 27%) and astoundingly, New York/LaGuardia which will be down 33% from 126 departures a day to only 84.

None of those shock me except for the LaGuardia pulldown. American Cuts Flights at LaGuardiaFor the longest time, airlines have clamped down on congested airport fortresses like LaGuardia and Washington/National, and have not been willing to let slots and gates go. LaGuardia has always been one of those places that you just assumed wouldn’t see massive cuts from the incumbent carriers, because no matter how bad things got, the value of those slots would always be worth it when things got better . . . or at least that WAS conventional wisdom.

This cut tells me that American has decided that nothing is sacred, and that’s a good thing. They can’t continue to lose money on bad flights in the short term just because they might be better in the long run. This is time to make some serious survival decisions and they’re doing it.

Of course, they’re not going to do it quietly. They’ve now petitioned the government to reduce slots at LaGuardia by 20% in the name of improving operations. Yeah, right. In other words, we want to pull down flights but we don’t want to allow anyone to take our place. Hmm, 42 daily flight openings would make a nice little operation for Southwest, huh?

A quick note about the rest of the cuts. Overall, American will mostly be cutting frequencies, but a few cities will see American disappear completely. We already knew about Oakland, Samana (Dominican Republic) and London/Stansted, but now Barranquilla (Colombia), Albany, Providence, Harrisburg, and San Luis Obispo go as well. San Luis Obispo also loses its maintenance base. I’m guessing that may have been where they maintained the now disappearing Saab 340 fleet, which would make sense.

United
Now let’s look at our other route cutter. First, United will pull out of Ft Lauderdale and West Palm Beach. These aren’t small cities, and it’s really amazing that United’s presence has eroded to the point where the airline ends up dropping places like this. United gave up on Florida a few years ago when it became virtually all-Ted. All the decent money around these areas would have fled to other carriers, if it was even at United in the first place. Besides, United could get you to Dulles, but Florida is a New York kind of market. Oh well, I guess they’ll just have to codeshare with US Airways and Continental now.

The bigger cuts for the airline are coming internationally. The recently launched Denver – London/Heathrow and LAX – Frankfurt flights are gone, so is San Francisco to Taipei and Nagoya. There will be some other schedule shifts as well as United prepares to ditch 6 747-400s and to start Dulles – Moscow and Dubai flights. I think the international pain is just beginning.

Southwest
Lastly, (man this post is long), let’s look at Southwest’s announcement today about its fall schedule. Nothing too crazy or surprising here. I mean, they’re beefing up Florida, as any airline would do once summer is over (uh, except United I guess). Oh, and the Denver onslaught continues. Southwest moves into yet another Frontier market – Denver to Orange County – as well as one that isn’t competitive – Denver to Tulsa. Oh, and eleven of the existing Denver markets get increased frequency, including 3 new flights to Chicago/Midway alone. Wow. I guess they had to do something to replace a lot of the long haul frequencies from Midway that are being cut back. And two routes will go away entirely – Oakland to Tucson and Kansas City to Sacramento.

If you’d like to see more detail, here’s the PDF with all of Southwest’s fall schedule changes.

(Original LaGuardia Tower Image from 10cuidados on Flickr)


19 Responses to American Slashes Domestic, United Cuts International, and Southwest Shuffles

  1. Court says:

    American went on a phone blitz over the past several weeks to find anyone who’d be willing to lease those LGA slots. I can tell you things got desperate considering the operators they were contacting.

    My question is whether this will affect the New York slot auction issue and how.

    As for Southwest in Denver, I can’t help but think they’re doing anything they can to finish off that pesky little airline with animals on their tails. The popular apacolyptic theorists seem to think that United might find itself in that unmentionable Chapter between 6 and 8 relatively soon. If there’s a UAL shutdown and Frontier’s still around, they’ll definitely be declared the winners, but I’m still not sold that we’ll see a shutdown of an airline this magnitude.

    However, Southwest really stands little to lose by putting all excess capacity into DEN, which at the very least can be pulled out if Frontier is finally able to fight back or they need the airframes elsewhere.

  2. Justin says:

    It is a big chop for LaGuardia but the thing to know about that airport, however, is that AMR skews heavily to Eagle in those slots. And the flights are to some marginal markets.

  3. A says:

    “United might find itself in that unmentionable Chapter between 6 and 8 relatively soon.”

    I’m not guessing which airline gets there first, but I do think that before the end of the year one of the legacy carriers gets liquidated. A lot of problems would’ve been solved already had United been forced into chapter 7 instead of reorganizing in chpt. 11 a few years back – ditto that for Delta and Northwest.

  4. CF says:

    Court – Every time I’ve mentioned that Southwest’s moves appear to be aimed at killing Frontier, there are a handful of people who come back and say that’s completely wrong and that Frontier was going great. Those have died down since the airline filed Chapter 11. I still think that they’re going to have a heck of a time finding DIP financing.

    Justin – Agreed. Most of those markets were probably being flown because they held slots and they didn’t have a better use for them at the time. I’m glad to see some rational thinking taking over.

  5. Court says:

    CF,

    I’ve noticed that about the Southwest-as-the-Aggressor nay-sayers. For me, it’s obvious Southwest has picked Denver as it’s greatest opportunity for growth (That’s the optimists’ way of saying Southwest has picked Denver as the most probable buffet for a vulture). Any bets there’s a picture of the rockies in Southwest’s strategy department?

  6. Xnuiem says:

    I would assume the DEN-TUL move is aimed at hurting Frontier. Right now, Frontier is the only non-stop discount (other than Sun Country *shudder*) out of DFW/DAL to DEN. AA flies it, but SWA has to make a stop, usually at ABQ, however now, those of us loyal to SWA out of DAL will be able to go to DEN on a bit more direct and shorter layover (if we even change planes) route via TUL.

  7. james says:

    Didn’t see it mentioned in the article but Frontier cut routes and jobs today too:

    http://www.rockymountainnews.com/news/2008/jun/25/bankrupt-frontier-cuts-planes-capacity/

    Not that I’m happy. I don’t think I’ve ever made a “Frontier is doing great” comment but I’ve certainly touted their good service and product. Hopefully they’ll weather the storm and remain on an even field with Southwest. One good thing about having a sole hub is their recognition and base is high and supportive here – but I doubt cutting flights will ring well with customers who already have tickets and have to choose other times/dates to fly.

    james..

  8. Allen says:

    I wouldn’t say Frontier is doing great. But IIRC on the routes where it goes head to head with SWA it was doing alright. I mean, if Frontier was being that hurt on those routes wouldn’t they cut back or drop the route? They can’t really afford those losses at this point.

    I think it’s reasonable to say SWA’s presence isn’t helping Frontier’s situation. I haven’t seen any specific to convince that SWA is hurting Frontier more than UAL in Denver though.

  9. CF says:

    Xnuiem – That’s a good point. I’m sure that’s part of how they can make the route case work for Tulsa. One of the flights is a through flight to Love Field.

    Allen – There are very few routes left that Frontier doesn’t go against Southwest, other than the Lynx routes. It doesn’t matter if Southwest is hurting them more or not. What matters is that investors will look at this and wonder why they’d ever pour money into the airline. Maybe Sean Menke has something up his sleeve, and I hope he does because I like flying the airline.

  10. Ellis says:

    One of the things I can’t get my head around is why United are cutting the international fleet and international services when it seems that the only way for US carriers to make good yields is on international routes. In so many ways, UA used to have a good international network advantage over the other US carriers – at least until Delta found out that there’s money in international.

    Still, compared to many other airlines around the world, UA has an inferior cabin product (granted, its getting better in J class). Maybe it’s a sign that the problems are much bigger and will not be solved just by parking planes and culling routes.

  11. Allen says:

    Do you really think SWA’s moves in Denver is what on investors minds when it comes to Frontier? They’re not more worried about fuel prices? Labor issues? Frontier finding strong non-Denver based routes it’s capable of making money on? UAL deciding to getting into a pissing match on prices with Frontier? Sure, they’re a factor but in the grand scheme of things I wouldn’t say they’re hurting Frontier in Denver any more than they are UAL.

    I wouldn’t describe the difference between Frontier and SWA in Denver as “very few”, either. IIRC even with this Frontier still servers twice as many destinations with about twice as many flights.

    Isn’t SWA’s competition the car?

    But this is just my two-bits worth. No fancy research; just stuff I know from being overly geeky about the airlines. :)

  12. Court says:

    Allen,

    I think Frontier investors are extremely worried about Southwest. High fuel costs are one thing, but Southwest is preventing Frontier from being able to raise prices to accommodate for them. It all comes back to competition and supply and demand.

    Fuel costs are being blamed for so much in this industry, but it’s not the main reason for the industry’s problems. Commoditization and over-capacity are the real culprits that aren’t allowing the carriers to adjust ticket prices to the rise in fuel prices. One of three things will happen to snap back the industry to rationalization. Either a large legacy will go under, fuel prices will drop back into the $2 range, or both.

    If fuel prices drop, the airlines are going to be very hesitant to give back the hard earned price hikes, especially after the huge capacity cuts announced recently. If a legacy goes (United or USAirways?), there’s going to be so much capacity taken out of the market that airlines will once again have pricing control and fares will be able to be raised to meet fuel prices.

    Either way, history will prevail, and the airlines will be making historic amounts of money once again in only a few years. Unless, of course the government props up the feeble airlines again. If that happens, disregard everything I just said.

  13. David SF east bay says:

    I said to people a long time ago that the government needs to go back to setting prices. That will be the only way service comes back into the airline business as when fares were set by the government the airline only had service to set them apart.

    I think the airlines are cutting routes more for the reason of getting rid of employees and no or low profit routes and using fuel prices as the reason. So many routes are flown just because the other “guy” flys it. They all seem to think they must to what everyone else is doing.

    Southwest and Denver is a good example of one airline hurting two airlines at once. Maybe Frontier needs to move. Those old enough to remember years ago when Western was a big player at Denver along with UA and CO, but they realized it was best to move to SLC where they would be alone.

    Oakland is another area Southwest is hurting the other carriers. Not counting Aloha, ATA, and Skybus, AA and CO pulling out of Oakland had to be due WN and their big operation at OAK and Jetblue being #2 at OAK. WN has gotten so big that one can get from the Bay Area to just about anywhere heading east with a one stop using WN, so connections on AA and CO just don’t have as big a draw as it might have been when a “large” carrier served a city.

    I wonder what things will be like a year from now.

  14. The Traveling Optimist says:

    Titanic Trail of Tears:

    Europe – ZRH, GVA, ATH, HAM, TXL, GLA, FCO
    S.Amer – SCL, BOG, PTY, GIG, ASU, MVD, CNF
    Asia – DEL, MNL, GUM, SPN, and HKG – JFK/LAX/DEL/NRT
    S.Pac – BNE, AKL

    Each one, in my mind, represents major opportunities lost or mishandled at the hands of United management. Each of these cities continues even today to be served by at least one US carrier except BNE and CNF. So how do the other carriers make these markets work where the Friendly Skies failed?

    Other US carriers are not without their own high visibility market failures – AA pulled out of Australia twice – it just seems that UA has had far more of them than most. Strangely, all of these failures came from Pan Am cast offs, too. Pan Am made its bones in Latin America, giving birth to several airlines in the region who followed its model. Yet with such a rich history loaded with loyal Pan Am customers, United basically ceded the opportunity to American who inherited a bare bones operation from Eastern who got a fire sale bargain from Braniff!

    Delta got the better routes from Pan Am to Europe but rather than figure out a way to serve the markets they inherited nonstop instead of intra-Europe (ZRH and GLA were the two exceptions), United pretty much just said fuhgeddaboudit, packed up and left.

    In Asia? Wow. They inherited an operational mess that included all-coach L-1011s but actually spent a penny on equipment and facility improvements which, for a while, paid off handsomely. HKG is a shell of its former self and UA is stuck flying nonstops from the US that are becoming too expensive to operate. Their version of the 777 can’t fly ORD-HKG leaving them stuck with the 747s they’re not retiring. Otherwise they would have made the switch long ago.

    Opportunities lost or badly mishandled, from one corner of the world to another. “The numbers don’t work” sounds hollow in the face of US based competition that beat them to the punch and are making the numbers work just fine.

    There was a time in the airline world when no one thought Braniff would fold. Certainly not Eastern. DEFINITELY not Pan Am! Well, why not United?

  15. Bobber says:

    Hi Cranky,

    Any idea when the LHR-DEN gets cut? We’re taking that route at the end of July on the way to OAK (cheaper than SFO). I was never convinced there was a need for more direct flights to DEN from LHR (I think BA has one, unless that is out of LGW). I’m due to make an LHR-GIG trip in November as well, hoping to do so on UA, but is that a likely candidate for the chop as well now?

    Bobber

    p.s. Hope your head has cleared now!

  16. CF says:

    Ellis – It’s true that intl routes have done much better than domestic as of late, but I think we’re about to see a greater international slow down as well. United appears to be the most proactive in dealing with it, for once.

    Allen – I absolutely think SWA’s move in Denver is a major thing on the minds of investors. Southwest does not compete with the car; it carried more domestic passengers than any other airline last year and it’s a massive powerhouse. You can compare route maps from Frontier and Southwest and see that the overlap is tremendous. There are very few cities that Frontier flies where Southwest doesn’t, and they’re mostly small.

    Bobber – The flight doesn’t go away until October 25, so you’re fine. Enjoy your trip.

  17. Kartik says:

    United pulling out of West Palm Beach is not a big deal. Closing an unprofitable and seasonal station. One flight a day I believe they maintained during the summer. Plus the landing fees at PBI are very high for a low yielding station.

    Fort Lauderdale on the other hand, is somewhat shocking. Southwest smells blood in the water @ FLL and I find it little coincidence that all of the new routes announced by WN either touch FLL where UA has quit entirely or DEN, where obviously UA is downsizing.

    Fort Lauderdale is less seasonal than West Palm Beach and does have some business traffic. Also keep in mind American maintains a fairly decent sized station in Fort Lauderdale (largely point to point flights now that San Juan and St Louis are being axed) and Delta has had a long term presence there. Jet Blue, Spirit and Southwest all have 40 plus daily flights so the fact that United would terminate service to an Airport with so many airlines having more than just operations to hub cities is a real indication of where United is headed.

    But then again any airline that had to quit a route from JFK to Heathrow a few years back has trouble beyond simply losing money in a few poorly served stations.

  18. Dan Webb says:

    It will be sad to see AA leave PVD as they were one of the original carriers there – but it’s only 3x ERJ. The extra nonstop to FLL is nice.

    Anyways moving on to David’s comment:

    “I said to people a long time ago that the government needs to go back to setting prices. That will be the only way service comes back into the airline business as when fares were set by the government the airline only had service to set them apart.”

    I think that regulation is the worst thing that can happen to the industry right now. It’s been said again and again that consumers find price and schedule more important than service. Regulation simply provides an artificial rise in fares with no guarantee for an improvement for the consumer. The best way to bring about lower prices and a better product is competition, which is limited in a regulated environment.

    “Oakland is another area Southwest is hurting the other carriers. Not counting Aloha, ATA, and Skybus, AA and CO pulling out of Oakland had to be due WN and their big operation at OAK and Jetblue being #2 at OAK. WN has gotten so big that one can get from the Bay Area to just about anywhere heading east with a one stop using WN, so connections on AA and CO just don’t have as big a draw as it might have been when a “large” carrier served a city.”

    What’s the problem? It is clear that WN and B6 have provided a superior product compared to AA and CO in these markets. The consumers have clearly made a choice in this situation.

  19. Jennifer says:

    I just flew from Dallas to Orange County/John Wayne and back on American, and the experience was actually rather pleasant, for a change. Howsomever, I’m seriously worried about American’s ability to stay solvent. Our flight back was half empty; I had three seats to myself. Granted, this was a Monday evening, but it was a Monday evening after a holiday weekend, and it was a 5pm flight – peak flying time. Gee, maybe if they just RAISED PRICES ACROSS THE BOARD instead of annoying fliers with petty fees, they might send out full planes? I dunno, but between that and the FAA fiasco last spring I think American’s had it. Jen Hereby Predicts they’ll be in bankruptcy before next summer. You heard it here first.

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