Last week, American announced a slew of changes in Latin American markets. Some routes were cut while new ones were added, and there were frequency changes as well. This may seem like an ordinary schedule change, but there’s something more to it than that. As Vasu Raja, American’s Vice President of Planning, explained to me in an interview, American is “revisiting some of the fundamentals of Latin America.”
Don’t get too worked up there. This isn’t suggesting that this is just the tip of the iceberg on some enormous, imminent change. Rather, it’s just American finally taking a look at the part of the network that has required the least attention since the merger.
Latin America has been somewhat on auto-pilot, especially compared to the other long haul regions. I kind of envision it like this over the last few years.
Asia, as we all know was a weak spot in the American network, so the airline has poured a ton of resources into developing Los Angeles as an Asian gateway. And in Europe, the airline has to rationalize the pre-merger American and US Airways operations while coordinating with its joint venture partner. In Latin, however, there’s no joint venture partner, pre-merger US Airways had little presence to speak of, and American had a dominant, profitable position. The squeaky wheel gets the grease, and Latin just wasn’t squeaking.
Sure there were some changes needed when the Brazilian economy went into a tailspin, but that was reactive and not strategic. What triggered the airline to act now? Strangely enough, it was Cuba. When Cuba opened up to commercial service, airlines jockeyed for position. American, having its main Latin hub in Miami, was uniquely positioned to take advantage. After some time and a whole lot of changes in the industry, American has Havana generating profits in line with the rest of the Caribbean network, according to Vasu. It sounded like he was somewhat surprised by it, but it shows the importance of being in Miami. South Florida is good in general, but Miami is a very uniquely good spot.
So with that in mind, while American waits for its joint venture with LATAM to be approved, it decided to revisit the Latin American network and take some chances. Some of these new routes may work, and some may not. But all are worth taking a shot. Here’s what’s changing.
- ADD: Dallas/Ft Worth – Cancun (additional flight)
- NEW: Dallas/Ft Worth – Oaxaca
- CANCEL: Dallas/Ft Worth – Quito
- CANCEL: Dallas-Ft Worth – Rio de Janeiro/Galeao
- ADD: Dallas/Ft Worth – San Jose del Cabo (additional flight)
- ADD: Dallas/Ft Worth – Torreon (additional flight)
- NEW: Los Angeles – Buenos Aires/Ezeiza
- DECREASE: Los Angeles – Sao Paulo/Guarulhos (drop from 5 to 4 weekly)
- ADD: Miami – Antigua (additional flight)
- CANCEL: Miami – Belo Horizonte
- ADD: Miami – Caracas (additional flight)
- NEW: Miami – Cordoba (Argentina)
- NEW: Miami – Georgetown (Guyana)
- NEW: Miami – Pereira (Colombia)
- DECREASE: Miami – Rio de Janeiro/Galeao (drop from 7 to 5 weekly)
- DECREASE: Miami – Sao Paulo/Guarulhos (cancel one flight)
Some of these moves are just responding to demand and aren’t really a shift in strategy. (Even the Caracas increase is solely based on demand. American only takes payments in dollars, so it has no currency issues that plagued the airline previously.) But there are a few worth looking at in greater detail.
Brazil Cuts Lead to Opportunity Elsewhere
You’ll notice a fair bit of Brazil getting cut back here. While the Brazilian economy tanked a few years back, it has staged a rally since then. The problem is that Brazil was just over-heated before, and the rebound hasn’t come back anywhere near the lofty heights where it once was. As Vasu says, the “demand environment has changed.” So American looked at its portfolio of Latin flying and decided to whack from the bottom.
Look at Belo Horizonte, for example. That market has consistently lost money, but American continued fly it. Now, the route is gone, and the airplane will be used to fund the new flight to Cordoba. Cordoba is an interesting market for a few reasons. First, it’s a leisure-heavy market with a stronger US-point of sale than other Latin markets. It also apparently has a counter-cyclical high season (northern summer) compared to other deep Latin destinations. Lastly, it is a pain to reach today. The only decent connections are on a Copa narrowbody via Panama, an option via LATAM connecting to a narrowbody redeye from Lima, and Santiago. The most convenient option would seem to be via Buenos Aires, but that generally requires an airport change. For most cities in the US, this means two stops, and for those in the premium cabin, most options are not very nice. So it’s messy, and American thinks it can find a niche.
You can also look at Miami to Sao Paulo. American is cutting its daytime flight heading south so it can use the airplane elsewhere. That market was “an ok flight” when Brazil’s economy was at its peak. Now it’s not. But this could be an opportunity to go with more seasonal service. The things American has experimented with elsewhere in the network haven’t really made it to Latin America yet. This is something I imagine could come back down the road, if only for certain parts of the year or certain days of the week.
Letting Employees Choose Routes
Georgetown, Guyana is a strange market. It’s one that has generally been served from the US by fly-by-night charter operators and not by scheduled airlines. Apparently, American didn’t even have the market on its radar until a pilot sent along some statistics that helped American take a harder look. Falling in line with the Pereira and Cordoba options, Georgetown looked like a developing market that American could make work thanks to the Miami hub. It decided to give it a chance. It helps that this is an A319 market, so it doesn’t require a big and expensive aircraft. If it works, that pilot deserves a thank you.
Bulking Up In LA
Lastly, there’s the new LA – Buenos Aires flight. This will operate three times a week, and the Sao Paulo flight will now drop from 5 to 4 times a week. So there will be one daily flight (with the destination alternating) from LA heading down to deep Latin America. My initial reaction to this was “oh good, American isn’t losing enough money on fancy long haul routes from LA. This should help.” But Vasu says I’m wrong.
Vasu says both the Dallas/Ft Worth and Miami flights to Buenos Aires are doing “really well” and the biggest connecting market over DFW to Buenos Aires is Los Angeles. In that sense (and that sense alone) this is like Austin to London. American’s biggest origin for connections on its Dallas/Ft Worth to London flight was Austin, and now it’s big enough to support its own nonstop.
This isn’t London, of course, but it’s apparently a large business market, which is attractive. Further, there are a lot of markets on the West Coast that American can’t feed into Buenos Aires very well today, and it thinks that’s an opportunity. By starting the LA flight, it can not only serve the local market, but it can free up space on the Dallas/Ft Worth flight for others, and it can open up new connections from the west coast. All that being said, I continue to be skeptical about the entire LA build-up, and this is no exception.
While these moves don’t all appear related, they do have one thing in common. American is paying more attention to Latin America now, and it’s going to be more active at making changes when warranted. If markets like Cordoba and Pereira work, then I imagine we’ll see even more experimentation at making what is already the best Latin American network for a US airline even stronger.
35 comments on “American is “Revisiting Some of the Fundamentals of Latin America””
For Argentina, the whole Ezeiza vs Aeroparque Newbery thing in Buenos Aires sucks. With the exception of a few flights from Santiago, Chile and neighboring countries, if you want to go to anywhere in Argentina outside of Buenos Aires from another country you basically have to make the Argentine equivalent of a schlep from White Plains (I’d say LaGuardia, but I believe HPN may almost be a better comparison in terms of airport land area, location, and the wealth of nearby residents) down to Newark. Not easy, not fun, and not convenient at all, to the point that one might want to consider spending a night in Buenos Aires if the timing of the flights looked a little iffy.
Cordoba is a very nice, mid-sized city (by international standards; it’s the second biggest city in Argentina), with lots of students, a good bit of industry, and some great day trips in the area. It’s pretty centrally located in the country and has a good bit of domestic flights, so depending on the flight times, it may also provide some decent connection opportunities to other destinations like provincial capitals, touristy areas like Bariloche (Argentina’s Lake Tahoe, but with a Swiss mountain village feel), Iguazu, Ushuaia, etc.
For Brett, a follow-up post on the mad rush for slots to Cuba would make for an interesting read. I know that there’s a good bit of political uncertainty with the current administration, and I haven’t dug into the topic much, but my impression as a layman was that the flights to Cuba didn’t turn out to be the El Dorado that airlines had hoped for, and that many airlines were losing money and/or cutting back schedules.
Kilroy – On Cuba, I think that’s right. Many airlines ran away quickly, though some like American in Miami have done well. But there’s not much more to it than that. Airlines just rushed at the idea of getting in while they could and then realized it was a very bad idea in many places.
A fair assessment is that SOME airlines rushed into Cuba expecting riches only to have to pull back but it is most notable that DL and UA never asked for very aggressive schedules and still will grow even with the latest changes. AA was indeed tailor made for Cuba with its MIA hub but the government is not going to tell other carriers they can’t play. FLL has become a very viable alternative to MIA despite the fact that the majority of the passenger base is further from FLL than MIA. DL still is the only carrier that has survived in MIA to Cuba so AA was right that S. Florida is becoming the lion’s share of Cuba flights and traffic; the US government will continue to ensure that other airlines and other gateways have a shot and that is just as right as it would be for other route cases. Ultimately the free market will decide whether rights originate from a route case or Open Skies.
I’m not sure that they rushed in not knowing the risks. There was a *possibility* that US-Cuba would be an enormous market, and if it were, it was very much worth getting in at the beginning. But the cost of flying a few 737s 200-800 miles from ATL or Florida to Cuba (or even 2300 miles from LAX for Alaska) is not exactly astronomical. And if Cuba routes performed at the upper end of the possible envelope, there might not have been a subsequent opportunity to get in. Since there was no data on which to do a market analysis beforehand, I think it was fully worth it for pretty much every airline to throw their hat in the ring and see what sticks; even routes that don’t work out aren’t necessarily a “very bad idea”.
Completely disagree – we just flew in and out of EZE just over a week ago. It was easy. Maybe we just got lucky.
Were you connecting to flights at the other airport, Aeroparque Newbery?
If EZE is the first or last flight on your trip (i.e., if your trip starts or ends in the Buenos Aires metro area), EZE isn’t bad, though it’s in a rough area and public transit between EZE and downtown Buenos Aires isn’t good (just a few bus lines). If you are flying from another country (with one or two exceptions, as noted) to a city in Argentina OTHER than Buenos Aires, you have to catch a cab from EZE to Aeroparque Newbery, however, and that is a royal pain. Again, imagine the inconvenience if White Plains were the only airport in the NYC metro area for domestic flights, and JFK or Newark were the only airport in the NYC metro area for most international flights.
ArBus, the government subsidized shuttle between EZE and AEP (with intermediary stops downtown) begun in 2014, was shut down in February 2018.
Manuel Tienda León, a private bus company still offers service to both airports from downtown (and vice versa) and between both airports.
Ezeiza International EZE to Aeroparque Jorge Newberry AEP
about U$D 12
EZE to Madero (downtown bus terminal)
about U$D 10
AEP to Madero terminal
about U$D 5
http://www.tiendaleon.com/resultados/busqueda/bus/
I think DL used to fly JFK to Georgetown, Guyana. Not sure if it still does. Since B6 doesn’t fly there from JFK, it’s probably not worth flying but the math is much different from MIA, especially considering AA’s feed and the much shorter distance.
We (DL) used to, but stopped awhile ago.
The bottom line is that, in anticipation of a decision regarding a joint venture with Latam covering virtually an entire continent, American is looking for opportunities to reduce its footprint in Latin America where it is too strong right now as well as increase its presence where there are opportunities to do so without raising antitrust concerns.
It is a given that the Dept. of Justice will raise concerns over Latam/AA’s joint size in many markets. They have been able to get by with their large combined size in some markets like Chile because the market is very open for other carriers to start new service. Whether that assurance can be provided for other countries including Brazil remains to be seen – but there is no other US carrier that provides any meaningful competition to American for Latin America flights from S. Florida.
Argentina is benefitting because of their relaxation of visa requirements from Americans; Brazil is adding lower cost e-visas. Latin American governments are realizing they can participate in the growth of air travel by relaxing visa requirements, even if the US does not do the same for their citizens.
It is also not clear what other airlines might do with Open Skies and joint ventures including B6. It is not likely that any other US airline is going to expand in S. Florida in markets where AA’s JVs will serve so that the government imposes restrictions on the AA/Latam JV.
American has indeed printed money in Latin America for years and likely will in the future. The whole point of JVs is to increase competition and service levels. How that plays out for AA/Latam as well as other airlines will become increasingly clear over the next few years. These changes have to be seen in that context.
Are all these changes a net capacity increase or decrease? And does trying to get the joint venture approved after the Qantas rejection play into it? “Hey, look, DOJ, we cant possibly sustain our Brazil operation on our own, so obviously we need the joint venture and there are no antitrust concerns!”
(Oops; DOT, not DOJ.)
For US- S. America (the majority of the changes), AA capacity is down for Dec 2018 vs. Dec 2017. For US-Brazil, AA is down about 23% in terms of seats. JJ and LA are both up but G3 (Gol) – with its new US-Brazil flights have added the most US-Brazil capacity.
AA is and will always be the largest carrier between the US and S. America; the strategy they used for Australia won’t work in Latin America.
Alex – Tim gives some good info, but no, this is definitely not a ploy to get the JV approved like it was with Australia. AA is incredibly strong in Latin markets, and it’s not going to pretend otherwise. This is more about flexing its muscles and trying new things.
I’m surprised they haven’t joined the MSY-CUN market. With Southwest’s entry this year, every large carrier except AA is flying that route weekly during the summer.
Cranky’s use of “Latin” is extremely weird and incorrect when not used in conjunction with “America”
Amo, amas, amat…
Yeah, English-speaking Guyana is definitely not in Latin America…
Thanks!
Neat stuff… some interesting new attempts to be sure… I hope they work! LAX-EZE is a great example of the 787 opening up long thin routes. One aspect of the MIA-Latin America hub that still needs some attention, in my opinion, is broader domestic feed. PDX-MIA and SLC-MIA would open up plenty of new one-stop connections that currently require double-connecting. Not to mention, of course, O&D traffic, especially from PDX (which currently lacks South Florida service entirely).
While any domestic add to MIA would be great, IMO, the O&D to some of those distant cities to Latin America may be very thin and better served over DFW. Or LAX to the “biggies”. Plus, feed to the Caribbean requires a different schedule than deep South America, requiring 2 flights. Not to mention that west of the Rockies, the Caribbean is an afterthought, with the Mexican resorts and Hawaii for that matter much quicker to access.
I wonder if any US carrier might serve San Andres (ADZ) directly. It’s a relatively close and comparatively cheap Caribbean island which is fairly time consuming to reach now. It’s in E175 range from Texas. Could be something similar to Roatan.
SSSSHHHH!!!!
NO ONE VISIT SAN ANDRES. IT IS AWEFUL. HORRIBLE. DO NOT GO. stay very very very very very far away. Google NEGRIL instead. NEGRIL. N E G R I L.
:)
RE: flight to Buenos Aires
I just flew United from Newark to Buenos Aires, also a newly added flight. Both legs of the flight were full. It is not surprising that American has added LAX – EZE. Buenos Aires is the 13th largest metropolitan global economy in the world. The city and surrounding areas are HUGE, with a substantial middle class. The problem has been that the country has oscillated often between strong, weak and despotic leadership, causing big swings in the economy. Macri is an industrialist and businessman who has initiated a lot of pro-business policies, so we are hopeful that the upswing continues.
Agreed. I’m an American who was in Buenos Aires when Macri was running for mayor, and from an outsider’s perspective he really does seem like the best opportunity that Argentina has had in many years to become more modern and less “backward”, for lack of a better way to put it. Remember that Argentina had (and I believe still has) official price controls on staple foods, gas prices, etc, plus super high EXPORT taxes (not just high import tariffs), and so forth… Lots of protectionism there to try to chip away at.
I’m 1/2 Argentinian and I wouldn’t classify the country as having been “backward.” There is a reason why BA has been called the Paris of South America. Having said that, poor leadership has created periods of rampant inflation and an unstable and sometimes dangerous political environment. But it’s always been way ahead of other Latin American countries in terms of literacy rates, educational attainment, etc., although Chile and Uruguay are similar.
Also, I don’t think EZE is in a bad area. It is very close to the premier training ground for elite Argentine futbol players.
cranky do you have the statistics? in # of flights or seats offered…but I would say AA is #1 in latin america by a long shot.. then UA…and last DL…basically IAH ATL ORD JFK CLT can never compete with the fortress hub in MIA
AFAIK, yes, AA is the biggest US airline south of the border. Then again, that’s flights on AA metal. DL has equity stakes in Aeromexico and GOL. So the picture isn’t crystal clear unless you think in dated terms.
Recognize I’m a day late to this one but I take issue with the generic “Latin America” terminology. Lumping everything south of the border into a single region is misleading. The Caribbean is a completely different market than Argentina or Chile. I’d say there are 4 distinct areas: Caribbean, Mexico & Central America, upper S. America and lower S. America.
DL’s equity positions give it some benefits above what other carriers can get with JVs but the two are not the same. DL has had a JV with G3 (Gol) but they do not have a JV (but likely will). The equity position allows DL to have insight into all of the carrier’s operations beyond the JV and in many cases they have board seats, some of which are voting and some of which are non-voting. They also participate in the long-term appreciation of the company’s in which they hold equity but also likely have greater control over those companies’ abilities to develop other relationships.
Joint ventures are what matters regarding sharing revenue and that model which has been well used in Europe for years and to a lesser but still significant extent in Asia/Pacific will likely now be the norm in Latin America within a few years. As long as there is good opportunity for all carriers to expand (and that is generally the case in Latin America) JVs should result in plenty of new consumer choice,
To answer your question with the numbers, here are the largest carriers between the USA and Latin America in both directions for the past year (April 2017 through March 2018) in terms of flights, seats, and ASMs. I deleted the small fry, hence the reason why the numbers given won’t add up to the total at the bottom. From this, it’s clear to see that yes, AA is the dominant carrier in the market with almost 24% of the total ASMs, 25% of the seats, and 23% of the flights. The next highest carrier is UA with 14% of the totals ASMs.
Mkt Al Flights Seats ASMs
4M 1,070 235,400 1,036,937,000
4O 17,134 2,509,578 3,391,135,146
AA 183,862 27,838,608 43,118,404,270
AD 2,352 624,976 2,530,606,418
AM 33,860 4,875,119 7,499,605,836
AR 2,230 692,476 3,249,235,060
AS 13,898 2,311,488 3,296,635,819
AV 22,583 3,628,060 7,165,648,888
B6 85,181 12,772,910 16,240,140,530
BW 7,697 1,185,338 1,981,041,524
CM 20,177 3,083,978 6,013,023,956
DL 82,336 13,400,597 23,584,684,878
F9 6,299 1,343,680 1,938,348,490
JJ 4,739 1,420,457 5,957,847,830
LA 8,000 1,905,864 7,020,103,839
NK 15,411 2,933,638 3,070,900,472
UA 103,953 15,110,854 26,414,086,425
WN 43,909 6,589,355 7,302,615,153
Y4 22,633 3,883,292 5,836,403,837
TOTAL 805,433 112,241,219 182,776,965,982
Thanks for posting this. Surprised the B6 operation is basically the same size as DL. They really capitalized on a lot of opportunity down there, especially when AA pulled out of Puerto Rico.
BWIA flies JFK-GEO and Surinam Airways flies MIA-GEO. I wouldn’t call either “fly by night.”
Also don’t believe Miami-Rio is being cut at all. It is JFK-Rio that is seeing cuts.
When is AA beginning their non-stop AUS/LHR? Or are you referring to their current codeshare with BA?
Gammyjill – American and BA have a joint venture, so any BA flight is the same as an AA flight. They worked together when they developed that flight initially.