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First Glimpse of American’s New York Strategy Shows Less Focus on New Yorkers

We had our first look into the new American’s schedule planning strategy last week when the airline announced how it would deal with its newly-reduced slot holdings at Washington/National and New York/LaGuardia. Slight refresher: As part of the settlement with the Department of Justice, American had to give up slots at both airports for the merger to go through. Now we know American’s plans for those airports. While much focus has been on what’s happening in Washington, I find the moves in New York to be far more interesting.

American Post Merger New York Moves

The merger-related bloodshed at LaGuardia was far less than at National. American had to give up only 17 slot pairs, 5 of which were already leased out. That means it only had to cut 12 flights a day. That shouldn’t have been hard considering American and US Airways already had overlap on routes like LaGuardia to Charlotte. But American’s planners didn’t go with the easy scheduling move and instead did something interesting. They’ve shifted away from catering to New Yorkers.

While United focuses on building the biggest single airport hub in the NYC area at Newark and Delta works to grow its double-hub at LaGuardia and JFK, American seems to have found a different way to use its precious slots. It’s going to target those who are coming to New York.

First, the airline opted to kill three routes entirely from LaGuardia. Gone are Cleveland, Minneapolis, and Atlanta. If you read my post last week, you might agree that the ability to get 5 award seats at the last minute post-snowstorm on that Minneapolis route might have been a clue it wasn’t doing so well.

These three markets are clearly places an airline would fly if it was trying to cater to those in New York. They’re good business cities with a fair amount of business traffic. But people in Minneapolis and Atlanta aren’t going to ditch Delta and those in Cleveland are highly unlikely to leave United to become American loyalists. Those flights were clearly put into place because American thought people in New York needed them.

Now, look at the list of cities that will be getting service after the shuffle is complete. We don’t know frequencies (though I do expect cuts in other markets will be needed to fund this), but we do know that there will be some kind of service from LaGuardia to Charlottesville (VA), Dayton, Greensboro, Knoxville, Little Rock, Louisville, Norfolk, Richmond, Roanoke, and Wilmington (NC). Do these sound like the most important business destinations for New Yorkers? No. But New York is an important destination for people in these cities. And that appears to be the reason for this shift.

Keep in mind that the new American has a lot of insight into what works and what doesn’t. After all, US Airways flew all of these routes (minus Little Rock and Knoxville) until recently when it swapped slots with Delta to get a bigger holding at Washington/National. US Airways made that swap because it knew it could make more money in Washington, but that doesn’t mean all those routes out of New York were bad. I can only assume that these were the best of the markets that US Airways killed before.

This is almost like Northwest’s old “Heartland” strategy to dominate cities in the upper Midwest. But instead American is doing this in cities in the South (with a little Midwest sprinkled in). These are all cities where the new American carries a quarter of the traffic or more. But before the merger, American and US Airways couldn’t independently serve all the needs of people in those cities. Now they can.

Look at a place like Dayton. US Airways serves Charlotte, Philly, and Washington/National. That’s great for people heading east and south but pretty worthless for those heading west and north. American, however, serves Chicago and Dallas. Combined, that makes for a very powerful network that can get people wherever they need to go.

But today if people in Dayton want to fly nonstop to New York, they have a couple flights a day on United Express to Newark or one a day to LaGuardia on Delta. Looking at data for the 12 months ending June 2012, American and US Airways, even without a nonstop flight, still carried more than 20 percent of the traffic in that market. With a nonstop flight, American can get more of that traffic and probably get more of the total business from those in Dayton.

On the other hand, there are markets like Wilmington. That’s a small market that American left after a brief attempt at Chicago service. But US Airways carries two-thirds of the traffic in that city with flights to Charlotte, Philly, and Washington/National. It’s the dominant carrier with Delta as the other real competition. And even though the new American is dominant, Delta gets the lion’s share of New York traffic because it has a nonstop. And New York is a big destination for people in Wilmington. With a New York nonstop of its own, American can take back a lot of Delta’s traffic.

We could do this for each market, but the idea is the same even if the market dynamics are all a bit different: American can add a flight from each city into New York and then be better able to compete for corporate accounts in those cities. (Little Rock is a bit different. It loses Washington/National service because of the slot losses there, so this New York flight may almost be like an apology.)

I had always assumed that American would want to shrink New York after the merger, but this could very well prove to be a better use of the slots. It’s certainly more creative, and they should already know what will work well.

[Original photo via pio3 / Shutterstock.com]

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