With international markets looking weaker for a variety of reasons, the US legacy carriers have turned their focus inward to domestic markets where fewer airlines and less capacity growth makes for a very attractive situation. United in particular, under the steady hand of its new President, has made it clear that it is going into the domestic market again in a big way. Last week it announced a slew of new flights, and now American is fighting back. This isn’t about a big hub like LA or Chicago, however, as fights often are. It’s about Champaign and Appleton. Or Charlottesville and Greenville. Is it insane? Oh heck yeah. But for the first time in a long time, smaller markets are getting some love. Enjoy that while you can.
It was only a couple weeks ago that former American and now United President Scott Kirby began United’s public push to build up its domestic presence. The airline rolled out dozens of new flights, several on entirely new routes. These new routes were clearly pulled from the American Airlines playbook that Scott was operating under until he headed north to Chicago last year.
In Chicago in particular, United announced it would enter Charlottesville (Virginia), Champaign (Illinois), Columbia (Missouri), Reno/Tahoe, Rochester (Minnesota), and Spokane. Tucson went year-round from winter-only before. This was about United stretching its domestic network to build up its hub, and it’s no coincidence that with the exception of Spokane, American already flew every one of these routes with no nonstop competition. Scott had seen the power of good, small connecting markets at American (and US Airways before that), and he wanted to get some of that goodness into the United network. With this move, American will become instantly less profitable in these markets. Scott is no dummy. He must have believed there to be room for another player in these market. But the question quickly became… how would American punch back?
American could have focused on competing in these markets or it could go back to old-school airline behavior and start throwing firebombs at United, hurting everyone’s profits along the way. American chose the latter. (To be clear, the former isn’t necessarily a great option either.)
Starting in July, American will launch nonstops from Chicago to Appleton (Wisconsin), Birmingham (Alabama), Boise, Colorado Springs, Greensboro (North Carolina), and Greenville (South Carolina). Why? Because United happens to be the monopoly nonstop carrier in each of these markets today.
Just in case this move wasn’t clear enough, American also announced it would start Dallas/Ft Worth-Spokane. It might not fly there head-to-head with United out of Chicago, but it can still serve some of the same connecting passengers over Dallas.
Does this make sense? Nope. I can’t imagine any of these markets would have started at United had Scott not been there to poke his old company in the eye. These are all small markets, markets that probably performed fairly well without much competition. But now, having another airline competing for a piece of a relatively small pie isn’t likely to bode well. It’ll get even worse if they start escalating further.
I’d like to think that I’m wrong and that this is a well-reasoned competitive response with real profit potential. But I can’t. Instead, this seems like an old-timey airline brawl where they punch and kick each other until in the end, they both knock each other out and everyone is worse off.
On the one hand, I can’t say I blame American for wanting to show Scott that it won’t let him do anything he wants without a fight. But on the other hand, if this fight spins out of control, then it could end up being a Pyrrhic victory.
