To Nobody's Surprise, American Partners With Gol and Beefs Up Miami

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This morning, American is announcing that it is going to begin codesharing with Gol down in Brazil. On top of that, it’s adding more flights in Miami to bulk up. If this news surprises you, you should really get out more often. The Gol deal was an obvious partnering that was just a matter of time, and American has needed to build up Miami for awhile now. Though many will paint this as the coupling of two spurned lovers, it’s actually not a bad plan. And the growth in Miami… well that’s just overdue.

When Delta swooped in and took LATAM away from American as a partner, that left two jilted lovers. American was left without its long-time Latin American partner. Gol, meanwhile, now had to find a buyer for the stake that Delta owned in the airline. With Delta and LATAM firmly locked together, Gol and American had to evaluate their options.

American was already the strongest US airline to South America by far, but losing LATAM had the potential to prevent American from getting to important secondary destinations. It also hurt American’s ability to attract origin traffic in South America that was loyal to LATAM. This Gol agreement will help in both ways.

At first, American will slap its code on 53 flights going to 20 new destinations mostly in Brazil. I dove into the ARC/BSP settlement data from Diio by Cirium to figure out what this would actually add.

First, I looked at the top destinations in Brazil from the US by number of passengers (though I’m not showing those numbers, just trying to show scale). I eliminated the ones that American already serves and the ones with fewer than 5 passenger day. Then I highlighted the ones that American will be able to serve via the Gol codeshare. Here’s that map:

ARC/BSP Settlement data via Diio by Cirium

When American and LATAM broke up, that left American with 13 partner destinations in Brazil plus one in Argentina that it could no longer serve. Now it’s adding those back and more. On top of that, American will get Asuncion in Paraguay.

While the total passenger numbers may not end up being huge — I don’t know much about what connectivity will look like, but this isn’t an equity relationship and I doubt there will be any kind of schedule coordination — this is still important for American to have these dots on the map.

The next step is to enter into a frequent flier partnership, and that comes soon. When that happens, it will help with the other issue. Those who are Gol loyalists will have more incentive to fly on American when they go to the US. I don’t know how much traffic that will generate, but again it’s something. All of these little drips can turn into something significant on the aggregate. And it’ll help sustain more service between the US and Brazil on American aircraft.

That’s why the bigger news to note here, if not as flashy, is American’s decision to wake up and start building up Miami. To be fair, this is entirely reactive and that’s frustrating. But it’s better to be reactive than not do anything at all. That may not be an inspiring slogan, but well, we’ll take what we can get.

Right after LATAM defected to Delta, American announced it would add more flying from Miami to Lima, Santiago, and Sao Paulo. Now, American says it will add a second flight from Miami to Rio. Presumably this was a flight that might have been marginal before, but now with the Gol codeshare — Gol has more than 70 flights a day in Rio — it may be worth a shot. There is also, however, some feed coming from the other end.

The other part of this reactive behavior is American building up Miami domestically. Considering Delta’s announcement that it would bulk up flights from Miami, you won’t be surprised to hear that American is doing the same. Here’s what coming:

  • Boston goes from 7x to 8x daily
  • Houston/Intercontinental goes from 5x to 6x daily
  • Nashville goes from 3x to 4x daily
  • Orlando goes from 7x to 12x daily
  • Raleigh/Durham goes from 3x to 5x daily
  • Tampa goes from 6x to 8x daily

Shocker, right? Those last three markets are the ones that Delta is entering. (American left Salt Lake off its list.) Look at Orlando. That goes from 7 to TWELVE flights daily. That is a big market worth fighting for that’s very clearly going to be a battleground. Let the brawl begin.

But the first three… those are clearly where American thinks Delta may want to go next. Boston and Nashville are both focus cities to differing extents for Delta. And Houston is just a city with strong demand to Brazil. Even if it is a United hub, American knows that it can take a lot of Latin American traffic that Delta might have an eye on. This does look like a shot across the bow warning Delta to tread carefully.

With any luck this is just the beginning of a real Miami growth strategy. American spent years arguing Miami and Ft Lauderdale weren’t the same while JetBlue and Spirit built up with impunity. Now that Miami itself is being threatened on both domestic and international fronts, the giant may have finally woken itself up.

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30 comments on “To Nobody's Surprise, American Partners With Gol and Beefs Up Miami

  1. Slightly off topic… with the build up of flights in Miami by AA & DL, there’s no mention of the extreme high landing fees there that will cut into the profitability of those carriers. Or has the growth been high enough at that airport over all so that is no longer an issue.

    1. SEAN – Miami’s cost per enplanement is high, but it’s far better than predicted back when it was thought it would surge above $30. It’s around $19 to $20 right now which, while high, is only particularly bad for short, low fare services. The fact that Frontier is in there suggests that the fares are high enough to support it.

    2. Yes, MIA is high, but it isn’t as bad as people thought it would be, and not so crazy as to make flying unprofitable.

      By comparison, FLL is about $7.50 per passenger.

      LOWEST cost airports (FAA Large and Medium hub classifications):
      BUR = $2.09
      ATL = $2.61
      CLT = $3.58
      SLC = $4.17
      MSY = $4.31
      PBI = $4.70
      CVG = $4.71
      TPA = $4.89
      PHX = $6.26
      MKE = $6.42

      HIGHEST:
      EWR = $26.17
      JFK = $25.41
      SFO = $20.63
      LGA = $19.33
      MIA = $19.20
      ORD = $17.87
      LAX = $16.75
      IAD = $16.53
      PHL = $16.04
      SJU = $14.99

      CPE = the total costs charged to all airlines (less any rebates) / total enplanements. So as service is added, the CPE will decrease. While MIA is high relative to the rest of Florida and its closest competing airports (FLL, PBI, RSW), in the scheme of large hub airports, it isn’t drastically higher than others.

      1. Airlines w/ hubs at airports w/ large international operations can support higher CPEs because of the higher international fares. Of course local domestic passengers pay a higher price and airlines have to absorb the higher costs for connecting passengers.

        Delta’s growth at MIA will likely lead to a lower CPE which MIA is happy to see.

        Airlines with hubs at airports like ORD which have a high percentage of domestic connecting passengers are much more impacted by high CPEs.

      2. Out of curiosity, how do the ultra low fare airlines operate out of these high CPE airports? Like if Frontier has to pay $19.20 to MIA for every pax, I would think they’d go broke with all their $39 fares. No? At PHL (CPE $16.04), where Frontier is establishing a fairly large operation, they routinely offer sub-$50 fares. How does this make sense?

        1. iahphx – Well, those CPE aren’t charged as flat CPE fees as far as I know, so there are ways to reduce costs. I mean, you cram a lot more people in a plane and then the landing fees go down on a per person basis. Plus, it may be a $50 fare, but remember, they get a lot in ancillaries. I still thought it was nuts, but when American gives you a high fare canopy in Miami, it gives an LCC an entry opportunity.

          1. Thanks. I think you’re right that airlines can lower their own CPE. As far as I understand it, airports don’t actually charge by the “enplanement.” They charge by the aircraft (a landing fee) and they charge for gates and terminal space. So Frontier should pay a little lower CPE than American, at least if their load factor is equivalent. Of course, if an airport charges high landing fees and rent, it’s still going to be an expensive place for a budget airline to operate. That Frontier attempts to do this at high cost airports while offering fares so much lower than any other airline (including Spirit) makes me wonder about their business strategy and financial viability.

  2. About 9 million more passengers a year fly through MIA than FLL. It is also the clear choice for the non LCC international carriers. And even ULCCs like Frontier are adding flights. Any difference in fees must be made up by fares that the carriers command there.

  3. Hi!

    Most people don’t care, but what excites me about this deal is that Gol uses Navitaire for their PSS and American is obviously still hosted on a legacy GDS.

    It’s no small feat to get the legacy tech to play nice with the new tech. I can’t imagine the amount of time that must have been spent first in legal, but then in Pricing/RM/IT/Schedule/Distribution to get this to the point of going live.

  4. I’m kinda surprised that there’s no additional DFW capacity increases. I get the overdue Miami buildup certainly. Just surprised that AA isn’t pushing DFW for the traffic that’s not on the east coast (like houston).

    1. Houston is a tough market because United is already so strong there, with direct flights to major destinations and one-stop partner itineraries to secondary ones. MIA has huge O/D traffic to serve – much bigger more so than DFW. Also, Delta isn’t attacking them at DFW (for now!) so they’re probably more focused on putting out the MIA fire first.

  5. AA dumps capacity to try to push Delta out but will dilute AA’s own fares. DL clearly knows where it will get high value passengers and take from AA. Considering AA’s CASM is 10% higher than DL’s, AA’s move will ensure that MIA falls further down the hub profitability list.

  6. lets see what the next chess move is…will AA talk COPA into joining one world? copa has a conflict with grupo Avianca/star alliance…

    1. Wouldn’t be a great fit. AA wants to maintain MIA as a scissor hub for flights to South America, while Copa wants to grow PTY into a larger scissor hub, so their goals are in conflict.

      There’s also very little demand for 2-stop itineraries if 1-stop itineraries are available, so it’s not clear that there would be many routes where even a codeshare would be worthwhile.

  7. “Boston and Nashville are both focus cities to differing extents for Delta.”

    Pedantic note, but Delta now considers Boston a full-fledged hub: https://news.delta.com/corporate-stats-and-facts

    Nashville is an interesting case: Delta publicly referred to it as a focus city in 2016, but hasn’t introduced any flights that aren’t to their hubs or other focus cities, except for seasonal flights to Orlando and Cancun.

    If “has flights to destinations that aren’t hubs or focus cities” is the criteria for focus city, then CVG and RDU are the only unambiguous focus cities, although both MCO and CUN could be considered “seasonal focus cities”. It seems like MIA is on the path to be year-round focus city #3.

    Everyone keeps expecting Delta to build up AUS, BNA, and SJC, but so far they have just increased how many hubs and focus cities they serve, and increased frequency and seats on those flights. All the LCCs seem to be investing heavily in AUS and BNA, so it’s possible Delta just sees less competitive growth opportunities elsewhere.

    I’d be surprised if DL adds an MIA-BNA flight within the next year, but I wouldn’t be surprised to see MIA-CVG.

    1. What makes you say DL considers BOS a full-fledged hub? Their list doesn’t distinguish between “hubs” and “key markets”, which I think is a synonym for focus cities BOS is in that list, but I think it’s more reasonably described as a key market than a hub

      Not that the distinction really means anything

    2. I don’t think Delta has ever given a definition for a focus city other than a city where they intend to grow but plenty of people have attached their own definitions.

      Delta has been growing faster in AUS, BNA and SJC than for its network overall. In AUS and BNA, DL is the fastest growing airline this quarter based on published schedules. In SJC, DL is the largest of the big 3 and only WN is growing faster in SJC.
      BNA is severely gate constrained for all carriers. AA and DL are neck in neck in trying to upgauge flights to increase capacity.
      ULCCs have added capacity to cities like BNA because they are gaining access under federal laws that require access for new carriers to an airport.

      DL does call Boston a hub now and DL has told its pilots that BOS is on track to become a pilot base again. DL is also talking about a Florida pilot base where it currently has none. MCO is DL’s 10th largest city based on seats and the largest city that is not a hub or focus city. DL is larger at MCO than it is at RDU.

      IND is not a focus city but has some of the same characteristics of existing focus cities including transatlantic service.

      Labels aren’t everything.

      MIA will likely become an effective focus city whether DL calls it one or not.

      AA’s addition of capacity in MIA isn’t likely to do anything to change DL’s plans.

      1. Interestingly, DL’s growth in AUS has basically all been due to flying bigger planes, rather than increasing either frequency or destination count, for the last bit. ATL has been all-A321 for a bit now I believe, JFK has 321s mixed in when as I recall they didn’t have anything larger than a 320 on the route last May, and MSP went from 717s to 319s. On one hand, 38 flights per day is no mean feat when your competitors have hubs in-state and you don’t. But judging by point-to-point service, AUS is closer to a focus city for AA than for DL. And maybe if I keep saying this DL will use the gate space they have to add some point-to-point service.

        1. yes, Delta is growing each of AUS, BNA and SJC by increasing gauge – and adding more capacity as a percentage than every other carrier.

          AUS is unique in that DL is the only carrier among the big 4 that does not have a Texas hub so the other 3 should have an advantage.

          Remember that RDU was a former AA hub and WN was larger than DL; both have not lost the reality that DL has managed to grow to become the largest carrier at RDU. DL’s growth at BOS and SEA has come at the expense of AA, UA and WN.

          WN and more recently AA have responded to DL’s focus city announcements by growing their capacity in those markets but as I noted above, DL is still the largest of the big 3 at SJC and AA and DL are neck in neck at BNA with little gate space for anyone except new carriers to grow.

          Remember also that KLM added AUS-AMS service; given that the route is part of DL’s joint venture, it is DL growth; since KL is a new carrier, they received new international carrier incentives. DL is supposedly talking to BNA about starting its own service to Europe so growth is coming to its focus cities even with all that DL has on its plate – continuing to grow BOS and SEA plus its core hubs and existing focus cities of CVG and RDU and its not yet focus cities like MIA.

          What DL labels each city is much less important than the fact that it is growing in multiple places across its network including with growth that is coming at the expense of AA, UA and WN – which is what has happened at RDU, BOS and SEA and NYC at least for AA.

          AA is going to fight back to protect MIA. They might be able to grow their market share or make it harder for DL but AA”s CASM right now is about 10% higher than DL’s. These are all new markets for DL, meaning DL has a better chance of pulling new higher quality revenue onto its network while AA is more likely to be just incrementally adding lower fare passengers since AA should already be carrying the highest fare passengers in the market. DL has grown in other markets competitive with AA because customers have shown that they want an alternative to AA both from a service level but also because DL will be able to win some corporate business that AA has carried on its own without competition.

          It will be interesting to watch this all play out but the last five years shows that Delta has gained more in key American and United markets than the other way around.

          1. Delta’s willingness to expand beyond its hubs and do significant amounts of non-hub flying is a significant differentiator vs. AA and UA. It’s hard to imagine AA or UA growing any non-hub destination to the size of DL’s operation in BOS, but it’s not hard to imagine that in 5-10 years DL will have 4 or 5 markets that have grown to the size of their current operation in BOS.

  8. The Miami – Orlando/ Tampa/ Raleigh routes sound very much like Hawaiian’s daily inter-island shuttles, or even the New York-DC shuttles. Lots of short flights, but not necessarily lots of aircraft. I’d be curious to know how many planes they will actually use for the 12, 8 or 5 flights per day (assuming they are all round trip), and what kinds of planes they actually are.

    Also, considering the total increase in flights to/from all six cities, what service, is any, is American cutting elsewhere, to free up those aircraft?

    1. Well, they are cutting BWI – PHX for one. Maybe PHX bears the brunt and those planes are sent to MIA?

    2. MCO on DL is E75s. On AA it’s mainline, with a mix of 319/738/757. When I checked July schedules this morning I was seeing some 7M8 in there, at least according to Google Flights.

      MIA-MCO is gonna be a brutal market for yields for a bit. DL is already selling $97 round-trips despite MIA’s high costs. AA could theoretically fill their planes with connecting traffic, but MCO has nonstops to everywhere domestic already, so AA’s yields are going to be absolute trash.

  9. From an Oct. 21, 2019 press release: “The new flights were announced at Logan International Airport as Delta, which recently designated Boston as its newest hub, officially assumed operations at all gates in Logan’s Terminal A, making the airline the terminal’s sole operator for the first time since the facility opened in 2005.”

    https://news.delta.com/roll-boston-delta-adds-new-rome-service-celebrates-all-terminal-gate-operations-logan-airport

    Seems like it’s a pretty recent change, and BOS is admittedly their smallest hub by a significant margin (1/2 the passengers and employee count of SEA). I think the “hub” designation is a recognition of the fact that they’re not just focusing on O/D traffic, but also using it as a gateway for flights to Europe, on both Delta and its TATL JV partners.

    1. Woops this was supposed to be a reply to Alex Hill on the “Is Boston a hub” question up-thread. Ah well – won’t duplicate it.

  10. Woops this was supposed to be a reply to Alex Hill on the “Is Boston a hub” question up-thread. Ah well – won’t duplicate it.

  11. You missed some other additions. Delta is boosting MIA to LGA, MSP, DTW and ATL by one flight each. AA is also boosting AUS by one flight and JFK by three(!) flights.

    Also, Delta already added Miami-Boston in December.

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