At American’s Investor Day two months ago, it started to create a justification for its focus on smaller cities using “network superiority” metrics. I wasn’t satisfied with those metrics, so in partnership with Raymond James, I built my own model. Now, it’s been a couple of weeks since presenting that to Raymond James’s clients, and I’m able to share parts of it with you here.
In its presentation, American said that it had network superiority in 59 percent of its markets in 2019, and that had risen to 68 percent by 2024. The data used to come to this metric was cited as:
via Cirium, March 2024; Continental U.S. + short-haul Latin America spokes where American offers most peak day departures and/or most nonstop routes among network carriers
There was a lot I didn’t like about this metric.
- It ignores Southwest entirely. In many mid-size markets, Southwest may not have the international reach but it has a far superior schedule with more nonstop destinations, so it absolutely should be in the conversation.
- It included short-haul Latin America cities. In many of those markets it doesn’t matter. The key in beach-type markets like many of those is which airline dominates in the US origin anyway.
- It didn’t look at the number of flights to each destination, just a total number from each origin.
- It didn’t include hub directionality — meaning American might service LaGuardia, Philly, and Washington/National but that wouldn’t necessarily make it better than Delta serving Salt Lake and Atlanta, because American would really serve only one “direction.”
- This ignores seat capacity entirely.
- It doesn’t look at actual connecting itineraries and destinations beyond the hubs.
All of this could be done fairly easily, so that’s what I built, again using Cirium data just like American did.
I took a look at all non-hub markets in the Continental US (excluding NYC, LA Basin, Atlanta, Dallas, Chicago, Miami, Washington, Denver, SF Bay Area, Houston, Charlotte, Seattle, Phoenix, Boston, Minneapolis, Detroit, Philadelphia, Salt Lake City) that were served by American in either 2019 or 2023. Then I looked at service levels on March 11, which was a Monday in both 2024 and 2019. And what I did I find?
% of Markets with American Superiority
The middle two basically apply American’s methodology to our dataset. The one on the far left uses our own methodology. And you can see that not only does this show American having superiority in far fewer markets, but it shows the gain between 2019 and 2024 to be far less as well.
Keep in mind that this is still an impressively high number. Out of the four big airlines, American has superiority in nearly half the non-hub markets it serves. That is more than anyone else. If you draw that line from New York to LA that I like to talk about, most of those American-superior markets fall south. United has more to the north. And Delta? Well, it just doesn’t have superiority in many places at all.
Markets Where Delta Has Network Superiority – March 2024
This means one of two things (or possibly both). On the one hand, it could mean that Delta just cares about those big, giant hubs where it does have superiority. That is, after all, where the lion’s share of the revenue falls. On the other hand, it could be that Delta just finds network superiority to be less important and can win on other attributes. Either way, Delta knows its market. Really, everyone does. I’ll show you what I mean.
I took an alternate metric to look at superiority in the hubs. Those are the mega-cities where nearly 80 percent of domestic revenue starts or ends. The airlines all have their own hubs where they have superiority, but this is where Delta and United really make their money. After that, I ranked cities by their 2023 domestic revenue.
Network Superiority by Airline by Market Size – March 2024
In the next tier down, that’s where Southwest shines. About 46 percent of total domestic revenues touch those markets, and Southwest owns them. It has also stretched into that next tier down, the 51-100, where about 17 percent of revenue touches. (Note, the revenue share doesn’t add to 100, because revenue can go from a hub city to a small city and count twice.)
It’s in that tier where American really starts to show up, and it continues all the way through the top 200 before we get into janky essential air service markets for the really small guys.
The issue here is that revenue falls off rapidly. If you look at everything from 101 on up, it adds up to less than 10 percent of revenue. American may have superiority in a lot of markets, but they aren’t big ones.
Let me put this in context. American has network superiority in 124 non-hub markets. All of those added up to just shy of $27 billion in revenue in 2023.
But look at Southwest. It’s fair to exclude Southwest’s top 5, because those behave like hubs: Las Vegas, Orlando, Austin, Nashville, and San Diego. But even just looking at the bottom 30 for Southwest, there is more total domestic revenue to be found than in American’s 124.
2023 Total Domestic Revenue for Markets Where Each Airline is Superior
I understand American wants to use its pilot scope clause advantage to flood regional jets on high frequencies in smaller markets to help get more high dollar traffic. The hard part is identifying where exactly that will work.
Obviously American’s fortress hubs aren’t changing. But if you go into markets that are too small, there isn’t enough opportunity to make those regional jets profitable. The key is really to try to go into that 51-100 range which is below the main focus for Delta and United and begins to be markets where Southwest won’t compete.
I’m not sure there’s enough here for American, but I can absolutely understand the desire to try. If you don’t want to (or can’t) compete with the others, then this is the best place to try and make a living.
