A Vision for American in Phoenix: Mountains to the World (The Optimistic View)

I wrote about possible doom and gloom for American’s Phoenix hub last week, but today I’m going to put the rose-colored glasses on and look at this in a different way… the way American itself says it views Phoenix.  I spoke with American’s VP of Planning Vasu Raja, and while he did admit that Phoenix will have a changing role at the airline, it’s still going to be an important hub in the future.  So let’s explore what that could mean.

In our conversation, Vasu was blunt about how Phoenix changes in the American network.

What Phoenix was and what Phoenix will be are absolutely different things.  At US Airways it was the primary east-west hub, but you flip to American, [and] the best east-west hub is DFW.  Phoenix is not an east-west hub anymore; it’s there connecting people from the mountains to the world first and foremost.

“Mountains to the world” is a bold statement, and while I don’t think Vasu was meaning for that to be taken literally, it’s definitely an overreach.  Phoenix isn’t a hub that’s going to get anyone “to the world” but it is one that can play a role of regional importance.  For people traveling within the Mountain West or from those areas to places like Hawai’i or Mexico, Phoenix is the best way American can provide service.  Let’s run with this idea further.

Like Salt Lake City… But Also Not

If you think of Phoenix as a regional hub, then you can get a better sense of how it fits in the whole scheme of things.  The closest analog is probably Salt Lake City for Delta.  While Salt Lake’s geography makes it more attractive for a lot of connecting itineraries, Phoenix has huge local demand which makes it more desirable in that sense.  (Of course, Phoenix also has more competition with a large Southwest operation, so that’s another factor.)    That local traffic requires significantly different traffic flows compared to Salt Lake.  So really, it’s not like Salt Lake.

Most notably, Phoenix has a ton of demand going back to the Midwest.  The upper Midwest in particular is full of snowbirds, people who flee to Arizona to escape the soul-crushing cold of an upper Midwest winter.  That means these markets should do well in the winter, but there’s more than that.  People move from these cities permanently, and there’s a lifeline back to the family up north.  There’s just generally a much greater tie between these cities at all times of the year, and that’s good for air service.

So the local market is good with a pipe to the Midwest, but that’s not enough to run a hub.  In American’s network, you have Los Angeles being mostly for local traffic.  Then you have Chicago and Dallas/Ft Worth handling east-west flying for those in the western US.  The sweet spot for Phoenix is everything in between, broader than the “Mountains to the World” moniker might let on.

Draw a line from Chicago to Dallas (let’s call it the Kirby Line) and maybe have it jog a bit to include all of Texas along with Indiana, Michigan, and half of Ohio since those three behave more like other Midwestern cities.  Then any flying solely to the west of that line can remain within the domain of Phoenix, drawing on both local demand and connections.

This idea prompted me to see exactly what was left from Phoenix that flies east of the Kirby Line domestically.  It’s much less than I thought.  Excluding American’s hubs, which would obviously retain service, there are only 8 cities (Atlanta, Baltimore, Boston, Memphis, Newark, Orlando, Pittsburgh, and Tampa) that have nonstops from Phoenix today.  All but Boston (4 daily) and Newark (3 daily) are only served twice a day.

If Phoenix continues to see its opportunities to the east dwindle, then it needs more traffic to keep the hub going.  There are hints at an opportunity there.

The Growth Opportunity

Phoenix was already downsized when American moved its A321s out and brought 737-800s in, but there has been some growth in destinations as well.  In the West, smaller cities like Santa Rosa and Santa Fe have been added.  But more recently the airline has gone a different direction toward smaller markets in the upper Midwest with flights to Madison and Grand Rapids.  I imagine there’s opportunity in more markets like that, and if more of these markets can be added, then that will help offset the losses to the east.

Think of it this way.  Maybe people in Bakersfield will bypass a Phoenix connection for Dallas when they’re heading to the East, but those going to Madison (or Grand Rapids, Santa Fe, Lubbock, Amarillo, etc) can now fill those planes instead.

Beyond that, American has to be betting that having a better presence in the spokes will bring dividends and grow traffic for the airline.  Back to Bakersfield,  American is competing against United’s flights to both San Francisco and Denver.  By adding the new DFW nonstop, American must assume that it will be able to win some of the traffic that’s flying United today.  It will also hope to pull people back who were going to drive to LAX and fly east otherwise.  If that happens, then Phoenix is a happy camper.  It might lose those eastern connections, but it will be able to serve new demand on other routes.  That being said, we should be cautious.  United is growing these markets at the same time American is doing the same, so capacity is going up a lot. That could be bad news.

There is real potential for this to work out well for Phoenix.  Sure, maybe the city’s place as an east-west hub has been replaced by a more regional one, but that’s still a good position to be in.  Even if this “Mountains to the World” strategy doesn’t work out completely, Phoenix should be an important dot on the map for American in the years to come.

If you missed my pessimistic view of Phoenix’s future last week, have a read and then… which view do you side with?  Is Phoenix going to be a strong regional hub or is the writing on the wall for the hub’s disappearance?

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aawayhenry LAXNot ScottiahphxTower18 Recent comment authors
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Milton Silver
Guest

Cranky,
Any chance you do a similar story on the Charlotte hub’s future?

Henry
Guest
Henry

CLT is AA’s most profitable hub next o MIA, and per seat mile the cheapest to operate at, so what on earth are you talking about??

Peter E Mescher
Guest
Peter E Mescher

Assuming AA doesn’t want to give up on the Southeast, CLT will never go away. MIA is a great location for a South American hub (lots of local passenger and cargo traffic), but an awful location for a domestic one. ATL is better than CLT, but if you can’t move in there, CLT is a good place for a hub.

A
Guest

Copy ATL

ChuckMO
Guest
ChuckMO

I don’t think the futures of ATL or CLT are in doubt.

MRY-SMF
Guest
MRY-SMF

Having a Southeast hub (CLT for AA and ATL for DL) is a huge advantage that UA doesn’t have. Yes, there are periods of bad weather but not the kind you get in the Northeast and Mid-Atlantic.

Nick
Guest
Nick

Even if CLT had the 5 runways ATL had, the terminal design won’t allow CLT to be used like ATL fully. With the concourses all running parallel combined with the plane train, ATL is incredibly efficient even if one has to go from T to F. Which allows airlines, specifically Delta, to offer some very short connections almost regardless of gate placement.

AA could definitely add some flights, but ATL is also 9th in metro area population where CLT is 22nd.

Kilroy
Guest
Kilroy

Very much agreed. ATL is incredibly efficient for connections, and even the gate to curb time isn’t bad (not DFW good, of course, but bring able to get from almost every gate to the curb in ~20 minutes is great. The ability to take the MARTA train to the convention center or to some decent parts of Atlanta is a bonus, though I know that MARTA for the airport is often used more by airport employees (or so it seems). Biggest issue I have with ATL is that it can take 20+ minutes to get from the entrance to airport… Read more »

Andy
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Andy

How about MSP (particularly given that DTW is just a short hop away)? I certainly don’t see MSP being a growth target for anyone who’s not DL.

David
Guest
David

on DL front, yes, i’d be curious to see a MSP v. DTW analysis, especially how DTW is impacted by DL’s growth at JFK/LGA.

Nick
Guest
Nick

At the merger, NW had MSP, DTW and MEM. DL had ATL, CVG, and SLC. MEM and CVG have been dehubbed, and the rest are doing seemingly pretty well. MSP and DTW for all of their downsides, they both have long established corporate bases. Michigan has 30 Fortune 500 companies, MSP has 19, where PHX has only 6. So both MSP and DTW have a much higher O/D rate than PHX who has to rely on connections that are slowly being drained away by LAX and DFW. I doubt PHX loses it’s hub status, but I can see it being… Read more »

A
Guest

“Connecting the mountains to the world” is a line only a marketer would come up with. As I commented last week, PHX should be AA’s answer to SLC and DEN, which you somewhat say. I’m reminded of a time flying through PHX on my way to YYC, which was totally out of the way but mountains… Traffic from GRR and MSN both read like a hub & spoke model for all the legacies. Flights to the major hubs and east coast business centers + some seasonal routes to the sunshine state. Curiously neither city has a flight to southern California.… Read more »

Kilroy
Guest
Kilroy

GRR is a good 2 hours or so from DTW, while being within an hour’s drive of much/most of the lower Michigan population between Lake Michigan and Lansing, so a nonstop from there or a decent connecting opportunity with less of a drive could definitely be enticing to many people.

Ron
Guest

“Mountains to the world” is a terrible characterization, given that American serves only three mountain destinations in the northern states from Phoenix (Boise, Redmond/Bend, and Spokane). Phoenix is just too far south to meaningfully serve the mountain north, which is extensively connected through Salt Lake and Denver.

Jonathan
Member

I think Mr. Raja is referring more to southwestern mountain destinations when he says this. Airports such as Flagstaff, Santa Fe, and Durango (CO) all fall into this category; they are small regional airport connected to Phoenix. Boise, Bend, and Spokane are closer to the Pacific Northwest.

DesertGhost
Guest

When America West was formed, Ed Beauvais said the airline would probably go no further east than Kansas City (essentially filling in the hole created by the departure of Republic, inherited from Hughes Airwest – boy am I dating myself). America West’s service east of Chicago was always limited, so nothing has really changed a whole lot. Most of the cities you cited have been served by America West (and US Airways) for years. Fairly soon after the America West / US Airways merger, America West’s flights to Hartford, CT and Raleigh/Durham, NC were discontinued. Nothing is really new. Mergers… Read more »

jaybru
Member
jaybru

Marketing, branding…you just never know!

Like, OK, we’re going to start a new airline and call it…oh, how about Southwest? Crazy!

You just never know, at least I don’t!

Jonathan DeFazio
Member
Jonathan DeFazio

So if AA only wants PHX to be a domestic hub, why are they adding the LHR flight?

DAB
Guest

Your pessimistic case was more convincing to me…

One thing I always wonder, with their southeast situation, why not an MCO hub for UA? As mentioned elsewhere, CLT and ATL aren’t going anywhere…

Kilroy
Guest
Kilroy

Interesting idea, as the Orlando-Kissimmee metro area is ranked 23rd in the US in population, just behind Charlotte.

Does MCO get much business traffic, though? I don’t have the numbers to back it up, but I would assume that the vast majority of MCO travelers are tourists or those starting/ending trips at MCO to visit friends and family (thinking snowbirds, retirees, and their relatives and friends). In other words, I question if there would be enough higher paying pax to make a hub or focus city in MCO profitable for United.

Tower18
Guest
Tower18

Don’t remember the details, but I think MCO is very high on lists of convention volume. As for a hub though, it’s too far south to offer meaningful-enough advantages over what can already be done with IAH and/or IAD. Would it be better for, say, CHS to MSY or something? Sure. But that route is probably already owned by Delta and that would be hard to displace with some MCO connections.

iahphx
Member

What does the competitive landscape look like with WN at PHX? Who has the upper hand in attracting pax: AA or WN? When you look at a map, there simply isn’t that much “need” for AA to have a hub in PHX unless there is enough demand for origin/destination traffic. Logic would suggest WN is very good at attracting that traffic. But maybe their costs are too high these days to give them an edge. Maybe adding some connecting traffic from secondary “Mountain” cities that WN can’t fly to could give AA an edge? Or maybe neither airline has a… Read more »

Not Scott
Guest

CF you drew the Kirby line through a Detroit, not chicago….

henry LAX
Guest

for all the “optimist” or “pessimist” hyperbole, let’s look at where they bet the money : LUS-only, S13 : https://www.airliners.net/forum/viewtopic.php?f=3&t=555089 AA/US W14 : https://www.airliners.net/forum/viewtopic.php?t=566471 AA/US S15 : https://www.airliners.net/forum/viewtopic.php?t=591281 AA S18 : https://www.airliners.net/forum/viewtopic.php?t=1396833 2013 = 293 daily departures, LUS-only, using the W14 pro-rated figure of 21 flts by LAA (extremely coarse estimate), let’s call it 314 pro-rated, give or take 2015 = 304 2018 = 267 If you think this is just “post-merger hub right sizing”, from ’12 to ’18, DFW went from 780(+19) to 810, flat to tiny growth. CLT is 655(+20) –> 672, basically flat pro-rated. As for LAX,… Read more »

aaway
Guest
aaway

I believe the future for PHX will depend in some measure on the future of LAX. The new lease agreement between AA and L.A. World Airports contains a provision whereby AA has to relinquish the American Eagle terminal by, at soonest, 2024. This is a condition for ultimately receiving more gates at T-5. However, LAWA will not permit T-5 to be reconfigured to accommodate the AE operation. Further, LAWA is in agreement with AA (and on record as such) as to seeking a replacement facility “closer” (my edit) to the current AA terminal facilities so that 70+ AE flights can… Read more »