American’s Asia Strategy Centers on Dallas/Ft Worth

I talked a lot about Delta’s and United’s Asia strategies last week, but I didn’t touch on American’s. That’s kind of funny since American was the one that announced some big moves cementing Dallas/Ft Worth as the heart of its Asian strategy. So let’s discuss.

American, which already flies twice a day from Dallas to Tokyo/Narita and once a day on a new flight to Seoul/Incheon, will add a daily flight to Hong Kong and one to Shanghai. That’s quite the Asian operation for a place in the middle of the continent. But it makes a lot of sense considering American’s route network.

American Dallas Asia

United has San Francisco and Delta is building Seattle, so that leaves American as the lone member of the big three without a real west coast hub. Oh sure, it’s tried to build LA into one, but that’s a lost cause. The reality is that LA has a ton of service from a lot of different airlines, and any attempt to dominate will be turned back by the other players.

To see what I mean from an international perspective, you need to look no further than Shanghai. Until a few years ago, China Eastern was the only airline serving that market from LA. China Eastern isn’t exactly known as a leader in customer experience, but it had a partnership with American and the flight was a consistent presence in the market. China Eastern decided to become buddies with Delta instead about the same time American applied for its own flight to Shanghai. United, not wanting to lose ground, immediately followed. The end result was three daily flights, all horrendous losers. United has downgauged to a 787, which helps, but it’s still rough.

From Seattle, Delta was determined to serve the 5 biggest Asian markets in Tokyo, Shanghai, Beijing, Seoul, and Hong Kong. American would be foolish to try the same from LA. It serves Tokyo and, as discussed, Shanghai. But the rest already have multiple daily flights from the home carriers.

So what’s American to do? Well, look for the market in the airline’s network that has the best opportunity. And that’s Dallas/Ft Worth. Up until recently, there was one big problem in this market… American couldn’t come to a deal with its pilots to fly these routes.

Back in 2006 when American tried to apply for the Dallas-Beijing route, it had to back out. Since that route fell into the “ultra long haul” category, American had to get a separate agreement with its pilots to fly it. The two groups couldn’t agree on a deal, so it never happened. It was in bankruptcy that American’s pilot contract got a thorough thrashing, and one of the changes enabled these longer routes to come online. That’s why we’re seeing an Asia expansion now. And Dallas is a good place to try it.

Think about a place like Hong Kong. American doesn’t serve it today, though it does codeshare with partner Cathay Pacific. That relationship is a traditional codesharing deal and I’m assuming there isn’t much interest in a joint venture or it would have been attempted by now. But it’s not like American wants to really compete massively against the giant that is Cathay either. And Cathay is quite a monster.

Besides having a fantastic customer experience, it has a lot of seats on a lot of flights into the US. In fact, Cathay just announced it would begin its fourth daily flight from LA to Hong Kong. That’s four flights every freakin’ day on that ultra-long route.

So American could try the LA-Hong Kong route, but it would get destroyed. It wouldn’t make much sense. It could try Chicago but it has stiff competition there as well. United flies it daily and Cathay is upping its flights to 10 per week next summer. New York is no better, and well, Miami is impossibly long. Dallas is the only option American has. Fortunately, it’s a good one.

Dallas is an increasingly large hub of business, and it sees no flights to Hong Kong today. It can also provide connections to a lot of places around the Midwest and South that don’t have single stop connections today. Look no further than joint venture-partner Qantas to see how that works. Qantas abandoned San Francisco and decided to run a flight to Dallas instead. It’s such a long flight that a stop in Brisbane is required on the westbound trip, but it’s apparently worth it. Qantas has already expanded the service.

That all sounds good, but there’s an even bigger benefit when it comes to Asia flying… Latin America.

Flying from Asia to Latin America is really far and requires stopping somewhere. To give you an idea, connecting the two financial capitals of Hong Kong and Sao Paulo would require flying more than 9,700 nautical miles. You know the longest route in the world today, Newark to Singapore? That’s 1,500 nm shorter. So you need to stop somewhere. And today, the options aren’t great. But Dallas provides a real opportunity to make for simple connections between Hong Kong and Latin America.

The only thing preventing this route from being a tremendous success is probably that it requires a real airplane investment. American is putting a 777-300ER on the route. That’s an expensive airplane and there needs to be good revenue to make it work. I’d say it has a shot.

In Shanghai, the picture is a bit muddier. American already serves it from LA, but maybe the airline will euthanize that route (it would be a mercy-killing) so that it can focus on one with the potential for profit. I’d say ultimately Shanghai is bound to be a great market, but it may just not be there yet. We’ll see.

With these, American is left with Beijing as the only one of the top 5 Asian markets not being served from Dallas, and that may happen eventually… assuming management continues this strategy going forward.

I’d be remiss if I didn’t at least touch on what the US Airways merger might mean here. While I think the US Airways combination would mean better options to Asia from the western US, I don’t think that would mean Dallas-Asia flying would go away. But what about those in the west? That’s where the combined American/US Airways could make changes.

I still expect we’d see a Phoenix – Tokyo flight operated either by an American or Japan Air Lines 787 pretty quickly. Connecting the two hubs of joint venture partners would make perfect sense. And maybe over time, the Phoenix hub would be able to support flights beyond, but that may not be anytime soon.

American has to serve Asia and has to come up with the right strategy. At this point, Dallas is probably the airline’s best option. It’s also a good one.

[Original California coast picture via Shutterstock]

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