The Best Slide I’ve Seen Showing American/US Airways Merger Benefits to Mid-Size Cities

Last week, US Airways had its sixth annual leadership conference for every manager and above in the airline’s system. Each day for four days, a few hundred managers gathered to get the scoop from top management, and I was able to attend on the third day, Wednesday, courtesy of the airline.

Most of the presentations were the same as what we saw at media day a week earlier, but there were some differences. Most notably, the tone was different. Senior leadership was visibly more relaxed, especially during the Q&A session when they were often found playfully roasting each other. There were members of the American leadership team in the room each day, and they must have been completely bewildered by something that I couldn’t even imagine being done at American today.

But in addition to the difference in tone, this event had more slides that what we saw at media day. They took more time to talk through much of the rationale for the merger and the benefits it would bring. My favorite slide of the day was this one:

Network Connectivity

It was last March when I wrote about Jamie Baker’s discussion about the importance of an American/US Airways merger to “small to moderate East Coast cities.” But I think this slide shows it best.

All of these cities lie east of American’s big hubs in Dallas and Chicago. If you’re a resident of these cities, that makes heading west easy. But what if you need to go east? Some of these cities have limited service to Miami in order to connect to South America, but it’s not realistic to use that service to connect throughout the east coast. On this list, only Cincinnati has a flight to New York, but that’s a single daily flight to JFK meant to connect to Europe. It’s in the middle of the day and won’t work on a business schedule.

On the flip side, US Airways serves all these cities from its hubs in the east. (I’m not sure when they officially started calling Washington/National a hub, but we saw that mentioned multiple times at the events over the last couple weeks.) You can connect up and down the east coast and into Europe with ease. But you can’t go west. None of these cities have enough demand to support a flight to the only US Airways hub in the west, Phoenix.

When you bring the two networks together, you gain the ability to get people in all these cities (and there are plenty more not mentioned here) wherever they need to go. That allows the combined airline to compete with Delta and United, both of which can already go both ways from these cities.

Why does that matter? Well, it means the new American will be more competitive for corporate contracts in those cities. By providing a legitimate third option to United and Delta, it should increase competition in those place. That bleeds over into leisure demand as well. If people become loyal American fliers for work, it increases the likelihood of them choosing American for leisure. That’s particularly true if the AAdvantage program remains structured well and continues to draw people to it in droves.

(Visited 178 times, 1 visits today)

Get Posts via Email When They Go Live or in a Weekly Digest

Leave a Reply

48 Comments on "The Best Slide I’ve Seen Showing American/US Airways Merger Benefits to Mid-Size Cities"

avatar
Sort by:   newest | oldest | most voted
Gary Leff
Guest

“On the flip side, US Airways serves all these cities from its hubs in the east. .. You can connect up and down the east coast and into Europe with ease. But you can?t go west. ”

I’m confused. When did Philadelphia and Charlotte stop offering Westbound connecting options?

qmwolfe
Member

I am pretty sure that is a rhetorical question. But I will take the bait. I am pretty sure Cranky is talking about efficiency and want flyers want. Most people do not want to hop a flight east, connect, and then cover the same ground heading back west. If that is the only option, sure, people will do that. But, if they have choices to fly UA or DL without going back east first, the majority of people will. Plus the trips will be a lot shorter in time.

Jim M
Guest

Hmmmm. Seems like a lot of lines coming from some fairly small markets. I’ll take the under on this map in 5 or so years. I’ll also take the under on 7 (seven!) hubs that continue into the future.

SEAN
Guest

I’ll take your under on the first part, but disagree on the hub situation despite JFK, PHL, DCA & CLT esentially in a row as they all serve different market segments.

Ron
Guest

Well, the old US Airways listed 7 “hubs” on the East Coast alone: Boston, La Guardia, Philadelphia, Pittsburgh, Baltimore, Washington-National, and Charlotte.

qmwolfe
Member

I don’t think 7 is too many either. UA and DL have that many or more and are doing pretty good.

derek.a.stewart
Member

Good stuff. What do you think about a city like PWM, that is served ORD by UA. Do you think new US/AA adds service to ORD ? I assume service to like DFW nonstop is a little bit of a dream. Some of these eastern cities are not served by AA and rely on ORD service from UA.

Bill from DC
Guest

My guess is that PHL, DCA and CLT are enough for USAA connections from Portland, especially since ORD is already served by UA.

My other guess is that when USAA decides to start new service from spokes, whether to ORD or otherwise, they will look for new “monopoly” runs that are not currently serviced by any airline instead of matching existing service on a competitor (unless it’s a real gold mine of a run).

DesertGhost
Guest

I can see the new American adding service from cities like Providence, R.I. and Manchester N.H. to Chicago. Both probably have a decent base of current US Airways customers and are probably large enough to warrant new service. But the airlines probably hve a better handle on this than I do.

DesertGhost
Guest

To finish my point, I don’t know how big Portland, Maine is. But if it’s a big enough market, it may see service to Chicago. Don’t forget, United is losing the US Airways customer base with the merger, which may have an impact. It should be interesting to see what changes come about in any event.

Ben G
Guest

What do you think will happen with the very small cities like HVN and SWF that are serviced entirely by small regional aircraft, particularly the Dash 8-100/200? Especially with that fleet starting to reach EOL?

MeanMeosh
Guest
“That?s particularly true if the AAdvantage program remains structured well and continues to draw people to it in droves.” This is but one loyal AA flyer’s opinion, but that, I think, is going to be the key to the whole merger for a lot of legacy AA folks, and one I hope that Doug Parker understands (that and avoiding a major meltdown period after systems integration). AA has certainly had many faults over the past few years, but AAdvantage has generally been regarded as an excellent program, and is a big reason why people stick with the airline. It’s a… Read more »
David SF eastbay
Member

At least RDU failed for AA years ago, so they don’t have to have the hard feelings of shutting it down after the merger in favor of bigger CLT.

I wonder if any of those CLT points will move/be added to MIA for better Caribbean/Latin American service since MIA is way ahead of CLT in those areas.

Bill from DC
Guest

Yeah but that’s all MIA provides. CLT can still give many of these cities one stop service with reasonable connections to much of the US.

MIA, like SEA, is definitely minimized as a connecting hub by being a geographic outlier. Even within FL, especially at the smaller airports, very few travellers connect via MIA relative to ATL and CLT and, when they do, it is usually to the Caribbean or Latin America. If people in FL won’t connect in MIA to destinations other than those, who will?

Oliver
Guest

An example of “a picture says more than a thousand words”. Good find, Cranky!

Nick Barnard
Member

I’m curious if there will be some rationalization. Does DAY need connectivity to/through ORD, DFW, PHL, DCA, and CLT? I know DAY used to be Piedmont’s hub but that was long long ago (with a concourse that is still closed, and will be torn down this year.) but that doesn’t mean it should be served like a hub anymore. :-p

Perhaps the ORD flights get a capacity trim as they flow more traffic over DCA and PHL? I’m sure there will be some upgaging and flight cutting..

Bill from DC
Guest
I think you’re right, most spokes will need rationalization, whether via destinations or frequency. Let’s look at each of these in this instance (DAY). ORD and DFW may each have enough O&D traffic to support themselves and each is a logical choice for westbound connecting traffic. If both runs are not profitable or near break even on a standalone basis, I would guess DFW would be cut; however, that might result in increased frequency to ORD. DCA is slot controlled and all service is approved by DOT so few, if any, of the flights to DCA will be changed because… Read more »
jboekhoud
Member

Rationalization was my first thought as well.

I was surprised to learn YOW has service to PHL, DCA, and CLT. DCA obviously makes sense for O/D traffic, but can there really be that many people from Ottawa wanting to fly US to/through CLT or PHL? Perhaps USAA should replace One of them with JFK. Surely that would get more traffic, especially since the only current competition to NYC is regional service to LGA and EWR.

Flyinryan
Guest

I wonder what their internal slides say of places like AZO, FWA, and TOL where AA only has a presence to ORD (FWA does have DFW). I’m curious to see if they see any opportunities to fly an eastern hub and can make it work.

Bill from DC
Guest

That’s a really interesting point and IMO a few of these barely-utilized spokes might present a handful of opportunities for service to a former US hub that would not have been worthwhile previously. The cost of opening and operating a station is already accounted for so the incremental cost of adding new service is significantly less. Of course, the other side of the coin is that these stations could simply disappear from the USAA map. Definitely worth compiling a list of stations like these and keeping an eye on them.

Nick
Guest
Great graphic! Now I’d like to see a similar depiction for the west half of the country. What would east-west flows look like for LAX/PHX/DFW/ORD for AA & US? When you compare traffic flows in the West, UA is solid with DEN/SFO/LAX; DL looks pretty good with SLC, its international routes from SEA/PDX/LAX with AS providing regional feed. AA/US looks a bit thin with just the PHX hub and trying to ramp up LAX. On a side note, interesting how AA wants to yet again boost LAX, when both it and US squandered opportunities in the west coast market: AA… Read more »
Bill from DC
Guest

All good points but remember that LAX service by all airlines not named UA and WN has vacillated pretty frequently over the years. DL has tried hub/focus city service on numerous occasions. I think USAA will actually have more LAX service than DL does currently and, don’t forget, many of the same west coast AS feeds for DL also codeshare for AA.

Alex Hill
Member

AA alone is much bigger than DL at LAX. AA is only a hair behind UA in mainline enplanements now, and AAUS will be the largest carrier there. It’s Delta that’s vacillated hugely, and even in a current large upward swing, they only have 13% of the traffic, compared to 19% each for UA and AA.

http://www.transtats.bts.gov/airports.asp?pn=1&Airport=LAX&carrier=FACTS

ghlewis
Member
What I’d really like to see is some decent service on the West Coast. Does anyone have any idea of how nice it would be to have an alternative to Southwest? Since AA bought and trashed both AirCal and Reno Air, and Delta trashed PSA, we have NOT had a decent alternative to SWA. I fly 60 times a year, and would love to have someone serve the CA and West other than SWA. Does 24 hour call-in and no seat assignments bug anyone other than me on SWA? 3-5 flights a day from SFO/OAK/SJC to LAX/BUR or SNA would… Read more »
David SF eastbay
Member

Glen, DL didn’t trash PSA, USAir did. So between the ‘new’ AA/US they wiped out AirCal, RenoAir, PSA, plus the SJC hub AA was building up years ago. Now I wonder if secretly they now wish they had not done that. While times were different back then, WN chased them out of the west once they started to build up their north/south west coast service. Guess they feel the same now and will stick with east/west and north/south east coast markets where they have a good chance of competing better.

Bill from DC
Guest

Wasn’t the AA SJC hub/focus city a vestigial remainder of RenoAir as well?

arcticbull
Guest

Yeah I was thinking exactly the same thing about YOW. At the moment AA only flies to YOW 3x daily, 6:40AM, 1:25PM and 6:30PM. The last flight is too late to make 99% of connections (including any flights onward to SFO). I seriously considered switching to AA but the lack of any flights leaving Ottawa after 1:30PM is a deal-breaker for me.

Now, though, they’re going from 3x daily to 7x daily. Makes them a whole lot more enticing…

DesertGhost
Guest

This enhanced connectivity is apparently where many or the revenue “synergies” will come from.

From what I’ve read, American’s financial problems were more about revenue than costs. US Airways compensated for its revenue deficiencies through lower costs. And American was apparently following that same path.

But together, the new airline has more revenue generating potential, and can pay its people better. At least that seems to be the plan.

I still wonder if there aren’t too many employees. But with the impending retirements, it may not be as big a problem as some pundits envision.

Jim
Guest

Cranky, this slide looks great, but what makes you so sure that the combined airline will keep all these flights? As we saw with the DL/NW merger, small and mid-size cities don’t need service to all the hubs and will slowly start to lose some of them. For example, Louisville is shown on the chart as having service to 6 of the hubs. I’m pretty confident that isn’t going to be the case for very long after the merger goes through.

Alex Hill
Member

“I?m not sure when they officially started calling Washington/National a hub, but we saw that mentioned multiple times at the events over the last couple weeks.”

It was with the merger announcement. All the merger-related publicity has listed DCA as one of the hubs of the combined airline. I don’t think I’d seen it listed as a hub for US alone before the merger announcement.

Shane
Guest

I don’t remember exactly when or have the reference, but I think US started calling DCA a hub just after the slot swap with Delta.

esw
Member

Shane is correct, I believe…

davidp627
Member
I just returned from CLT on USAIR and their in flight magazine refers to DCA as a hub. CLT, it is a great airport and has a very efficient USAIR hub operation. I am in management consulting and get an inside view of where business travel is strong. CLT is a very corporate market with a lot of business travelers. I think it survives and potentially even thrives, post merger. It is a great southeastern alternative to ATL. As for MIA, it is a different animal. It is almost like JFK in that it is so strong internationally, with enough… Read more »
Bill from DC
Guest

It’s true, CLT is a great hub airport. People in SE spoke cities generally prefer connecting using CLT as opposed to ATL unless they are slaves to SkyPesos (and I predict there will be a lot fewer of those as time passes).

wpDiscuz