American’s Rapid Journey to Dominance in the 1980s (Part 2)


With American having stabilized its positions in LA and New York while continuing to build its presence at Chicago and Dallas/Fort Worth, the airline set its sights on growing its reach. American not only opened three hubs from scratch, but it also made a big move into Latin America with both Miami and San Juan rising in importance. Today, we’ll continue the look at American’s 1980s operation thanks to SkyGo data.

As a reminder, the charts are all laid out the same. The lines show the number of departures by airline while the dots are sized depending upon the number of destinations served by that airline from that location. Now, let’s do this.

We will start with a look at the Latin operation which was sparked by the purchase of Eastern’s Latin network in late 1989.


Miami by Airline (1980-1990)

OAG schedule data via SkyGo

Miami was Eastern country, as anyone who grew up in the area back then will remind you. Eastern was just so much bigger than anyone else in its hometown, that it was hard to imagine another airline stepping in. Sure, there was National, but Pan Am bought that airline in 1980 and proceeded to do very little with it until later in the decade. Air Florida came and went quickly, so it was never a lasting threat. In 1987/1988, Eastern hit the height of its market power.

American was just about nothing in this market, but in the latter half of the decade, it saw Eastern and Pan Am both teetering and started to grow. When it bought Eastern’s Latin America routes in late 1989, that was the end of the competition. Sure, Pan Am was up there in 1990 when it was shedding everything else and hoping Latin America would keep it alive. But we know how that ended. By the end of 1991, Eastern and Pan Am were gone, and American reigned supreme.

San Juan by Airline (1980-1990)

OAG schedule data via SkyGo

San Juan wasn’t much for anyone in 1980. Eastern had the biggest presence of a major airline, but the largest carrier by far was a little prop operator named Prinair flying around the Caribbean. Eventually, Prinair and fellow prop-operator Crown Air both died off. Eastern tried to make a run but American wasn’t far behind for long.

When Eastern’s Latin American routes were sold to American, it not only helped in Miami but also in San Juan. This was the beginning of a strategic hub which American kept going for a long time before finally walking away in 2013.

The Latin network was gelling, but American was concerned that it still wasn’t built to capture north-south flow in the domestic market. After all, it had always been an east-west airline, and its main operations were all at the northern and southern edges of the country. And so it was that American embarked on a journey to add three new hubs that ultimately did not last. But at the time this was a bold idea.


Nashville by Airline (1980-1990)

OAG schedule data via SkyGo

Nashville was more of a backwater than anything else in 1980. Surprisingly, Republic was the airport’s largest carrier, but it was passed by USAir in 1981. By 1985, Delta had become a fast-rising number two. But then in 1986, the American hub was born. That was the same year Southwest started flying to the airport.

American grew this hub fast, and that had the effect of pushing Republic (and later Northwest post-merger) to shrink significantly. USAir did the same, even after acquiring Piedmont. Delta fell into the number two spot by default by the end of the decade, though it had stopped growing. American never really had any competition here, though its efforts in Nashville — which were later abandoned — set the stage for this to become one of Southwest’s biggest and fastest-growing stations.

Raleigh/Durham by Airline (1980-1990)

OAG schedule data via SkyGo

If RDU seems like it came out of left field… it did. Eastern was the largest airline in the market followed by Piedmont, but neither were particularly large. By the middle of the decade, Piedmont did make a move to grow, but it wasn’t until 1985 that American even served this market at all. When it entered, it entered big.

The hub really got going in 1987 as Eastern was continuing to weaken. Piedmont and then acquirer USAir maintained a steady presence, but it wasn’t any match for American’s hub operation which nobody challenged until American itself walked away and Midway tried to fill the gap. Today, it’s a smörgåsbord of airlines fighting it out, but one surprising winner is Breeze which in many months sees RDU as its largest operation.

San Jose by Airline (1980-1990)

OAG schedule data via SkyGo

Unlike RDU, American had served San Jose at the dawn of the decade, but it didn’t have much there. AirCal was the big dog in the market followed closely by PSA. It was mostly regional flying in the west that dominated this airport. Republic was a surprising third… surprising only until you remember that this was a product of the merger with Hughes Airwest.

This hub was not organically grown. American bought AirCal and USAir bought PSA. At the time, it was a two-horse race, but American focused on San Jose while USAir backed away. United had picked up some slack after commuter WestAir began flying under the United Express banner, but nothing competed with American. That hub died, was resurrected by Reno Air, bought again by American, and then finally dismantled for good in the early 2000s. It’s now Southwest territory.


If we zoom out and look at American in 1980 vs 1990, it’s a completely different airline. Sure, the core of New York, Los Angeles, Chicago, and Dallas/Fort Worth are there, but that’s about it. In 1980, the airline’s fifth largest station by departures was St Louis. By 1990, not only had American built its Latin network centered around Miami, but it also established three new hubs in Nashville, Raleigh/Durham, and San Jose for north-south service.

This wasn’t just about the network. American had gone from an airline flying B727s as the backbone of its fleet to newer and efficient MD-80s… airplanes which were flown by cheaper labor on B-scale wages for new hires. It also built a regional network buzzing with feed from small aircraft. During that decade, it created the AAdvantage program, and it became the godfather of modern revenue management.

This was an airline firing on all cylinders. It was an airline with leadership under President Bob Crandall (who also became CEO in 1985) that was unbeaten. Not everything worked, but that was ok. It moved fast, it made bold changes, and it came out transformed as one of the largest and most important airlines in the world by the time 1990 arrived.

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Brett Avatar

35 responses to “American’s Rapid Journey to Dominance in the 1980s (Part 2)”

  1. SEAN Avatar
    SEAN

    It is surprising how many airlines needed to fail in order for AA to grow to the size that it is. That said, it was ahead of the curve as the population center of gravity had been already moving southwestward towards Nashville, DFW & other sunbelt metros.

    1. JT8D Avatar
      JT8D

      The regulated era created an industry of hot-house flowers, all unprepared for the chill winds of competition in the first decade. – actually, it’s better to look at thru 1992, because the chickens came home to roost in a big way in that year.

      Even today, after almost 50 years of deregulation, managements are pretty poor – back then, none of them had a clue how to manage a deregulated airline, and why would they, all their instincts were about how to manage a regulated business, regulations that the govt had specifically designed to ensure airlines survived. They went from protection to no-holds barred competition and almost none of the managements knew how to deal with it.

      It was carnage thru 1992. Pan Am gone. Former trunks like Braniff, Eastern, National, Western either merged or destroyed. Almost all local service carriers gone with the exception of US Air (so, North Central, Southern, Hughes Airwest, original Frontier, Piedmont, Texas International, Ozark), three out of four jet intrastate airlines gone (PSA, AirCal, Air Florida), one of the two jet Alaska carriers gone (Wien Air Alaska), all former all-cargo airlines gone (Seaboard World, Flying Tiger, Airlift), and the biggest of the former supplementals gone (Transamerica, which had an excellent record of profitability pre-deregulation, and Capitol – Overseas National was so scared of deregulation, it voluntarily ceased operations in 1978, and that might not have been the wrong decision – Transamerica lived on until 1986 when it too voluntarily liquidated). Not to mention some of the survivors were clearly seriously damaged – e.g. TWA.

      And that’s just the pre-deregulation carriers.

      To be fair, some of these were taken off the board because they were a success. Piedmont was an unexpected success in the 1980s, going from the second-smallest of the old local service carriers to becoming a big, profitable deal, but we don’t remember that management because US Air took them out to eliminate a threat. This happened shortly after US Air bought PSA and the US Air-Piedmont-PSA combo then went into something like six consecutive years of horrendous loss making. And US Air was almost as successful as Piedmont (but from a larger base) right up until it did that three way merger.

      The Alaska management team made their share of errors (like buying JetAmerica, which, in the end, did little for them but add a half-dozen or so MD-80s to the fleet), but it’s incredible how far they’ve come when you consider that, at the dawn of deregulation, they had 11 aircraft. They were tiny…

      1. ChuckMO Avatar
        ChuckMO

        Texas International deserves an *. TI/Texas Air bought CO and kept the CO name, gave birth to New York Air, bought EA and PE and the CO certificate remains as the one under which UA operates. Convoluted for sure but TI sort of survived.

        1. JT8D Avatar
          JT8D

          But if TI kind of survived, then CO kind of didn’t, right?

          But sure, you could make the argument that Continental after the merger was just TI inside a Continental-sized trench coat.

          1. E175 Respecter Avatar
            E175 Respecter

            Tired: United is actually Continental Airlines

            Wired: United is actually Texas International Airlines

            1. JT8D Avatar
              JT8D

              American is actually America West, since that team took over US Airways, and then took over American.

              But Delta is still Delta.

            2. Iowa Airspace Avatar
              Iowa Airspace

              United is actually TWA since Frank Lorenzo worked there straight out of college in the 1960s before founding Jet Capital *ducks*

      2. ClownDancer Avatar
        ClownDancer

        Well said AI.
        If I was a robot I could not have said it better.

  2. Tom Lechner Avatar
    Tom Lechner

    Great series, and interesting memories. Adding the names of the airlines to the right of each line helps tremendously. Any chance of going back to yesterday’s post and adding that feature?

    1. Brett Avatar

      Tom – That was already done yesterday

  3. Southside Emil Avatar
    Southside Emil

    Did the growth at RDU and BNA affect the demise of Delta’s hubs in MEM and CIN? Just curious.

    1. Brett Avatar

      Southside – Not at all. Northwest’s hub in Memphis and Delta’s hub in Cincinnati died because of their merger. Delta acquired better hubs in MSP and Detroit while Northwest’s Memphis hub was overshadowed by the mighty ATL. Had those airlines remained separate, the hubs may have remained as a way for those airlines to continue to have a presence in those geographies.

  4. JT8D Avatar
    JT8D

    What’s interesting is how you *don’t* see the impact in Miami of Eastern buying Braniff’s South American routes in 1982 – for which it paid almost nothing (Google says it was $11 million). I guess that’s right, because in the early days, there weren’t that many departures per day from Miami to South America. Braniff’s domestic system, which was focused on DFW, didn’t have an east coast presence to back up those routes – Eastern was far better able to feed those routes (it’s another reason why Braniff’s best deregulation move might have been to sell itself to, say, Delta, which could also have fed Braniff’s South American routes).

    Only seven or so years later, Eastern sells its Latin American routes to American for almost $500 million – to be fair, that included assets not directly connected (like slots in NY), but still, despite all the drama that had occurred in the meantime, it appears Eastern had successfully leveraged Braniff’s South American routes.

    1. Arubaman Avatar
      Arubaman

      A reasonable analysis, however, you overlooked THE most salient feature of Eastern’s South American operation. Braniff’s Fifth Freedom Rights conveyed to Eastern, but did not convey to American. Consequently, EAL did not need as many MIA daily departures as AA offers. Eastern’s 149-seat 727s were cross-crossed between and within South America countries. All 12 First Class seats were regularly sold at full fare, guaranteeing profitability. The break-even load factors were ridiculously low. It was an airline within an airline, without the high profile of The Shuttle.

  5. Tim Dunn Avatar
    Tim Dunn

    as with all of life, looking at history is fascinating esp. for those that have been covering the industry for decades. As we near 50 years of US domestic airline deregulation and see that the big 4 are far stronger than any 4 US airlines ever were, it is worth noting how many of AA’s network strategies have not worked even under people that some considered the best in the industry.

    and far more significant for AA now is not its network but its finances and its inability to get revenue high enough to cover its high costs.

    as interesting as a refresher of network and fleet moves by carriers are to see, a comparison of financial trends by carrier would show why the airline industry has evolved as has and will continue to evolve into a tighter and tighter oligopoly.

    1. 1990 Avatar
      1990

      Tim, if American were to learn from its history, it would focus on running a highly reliable, premium operation out of the fortresses it spent the last 40 years building; not over-expand into random markets, like, cough Ulaanbaatar or Nuuk… (yes, throwing shade at your nemesis, just for you, Tim.)

      But, to your point about the ‘oligopoly,’ yeah, this consolidation is simply not ‘good’ for most workers or consumers. But, corporate greed is not inevitable; good management would balance the various stakeholders. American, Delta, and United really should be investing back into their operations, including inflation-protected contracts and adequate frontline staffing for greater reliability.

      (And, of course, as I regularly advocate for elsewhere, actual air passenger rights legislation in the US, like an EU/UK 261, Canada’s APPR, would be good ‘incentives’ to further that goal of operational resilience… keep your schedule, within reason, and never pay a dime…)

      1. Tim Dunn Avatar
        Tim Dunn

        first, you are right that a highly concentrated industry is bad for consumers – and that is true for every industry. It is telling that the US is having hearings on the high cost of watching the NFL and the number of platforms the NFL has sold access across (the same thing is true for other sports but watching the NFL reigns supreme in viewership loyalty) but isn’t addressing consolidation of US airlines.
        Part of that is because US airfares are cheaper on an inflation adjusted basis than they have been in the past and the feds never look down the road as to where anything is heading, only to see a crisis after it is too late to fix.

        as for labor, US airline employees are paid well above average for American labor and the percent of airline expenses that are going to labor has increased post covid – which is squeezing the low cost sector. and, yes, DL led the labor cost increases post covid in part because it undoubtedly saw that as an effective strategy to handicap low cost carriers and it has been right. AA would be a lot more profitable if it hadn’t had to match DL’s labor cost increases, many of which were given to DL’s non-union employees.

        as for consumer protections, the EU is tightening up notification but not compensation so payouts are certain to increase. US airlines that do well in operational metrics have done so as a distinction of their service culture as much or more so than because of the fear of penalties or consumer compensation.
        and the biggest reason for US airline delays and cancellations are weather related and the best way to fix that is to increase the capacity of the US air travel system esp. since personal cars are the only real alternative to commercial airlines for intercity travel in the US.

        1. 1990 Avatar
          1990

          Tim, I appreciate the nuance, but there’s still a difference between expenses going towards labor and a system that treats workers as an *investment* instead of a mere cost to be minimized.

          While some airline employees are indeed paid above the national average, those post-pandemic wage increases are catching up to years of high inflation. Companies cannot rely on cheap labor alone to survive. As history has shown, what usually happens is competitors with deeper pockets come along, pay their people better, and force the rest of the market to match. However, relying on ‘service culture’ to guarantee reliability falls short when management choices strip away operational buffers. Strong unions bargaining for fair, inflation-protected contracts and adequate staffing ensure greater stability.

          Relying on a vague ‘service culture’ to guarantee reliability falls short when management choices strip away operational buffers. We all saw this play out with the CrowdStrike meltdown. Whether it’s weather, pilot scheduling software, or a black swan event, management needs to actually invest in the infrastructure and the people who make things run. And, if they fail, consumers should be better protected by the regulators. It was good that Delta provided some reimbursements for alternative transportation during their meltdown, but that shouldn’t be left to executive ‘noblesse oblige.’ Instead, a baseline of mandatory compensation owed to passengers would provide a better financial incentive for airlines to build a resilient operation.

          That’s why I’m such a fan of frameworks like Canada’s APPR and the EU/UK 261 updates just agreed upon in Brussels. These reforms are far more than mere tightened notifications. While they rightly introduce transparency for hand baggage pricing and ban toxic ‘no-show’ clauses on return tickets, they put real teeth into operational accountability. If an airline cannot offer an alternative rebooking within 3 hours of a disruption, the passenger has the right to book their own way home, with the airline forced to reimburse them up to a 400% cap of the original ticket price. If airlines face a massive financial penalty for leaving people stranded for days, they will very quickly find the capital to properly staff their operations and fix their tech infrastructure.

          Ultimately, I hope the US follows suit and introduces an equivalent federal statutory framework in the future. If our regulators are going to permit a highly consolidated, highly protected oligopoly to dominate domestic skies, then a strict, mandatory passenger bill of rights with real teeth is the only fair social contract left for the American consumer.

          1. Tim Dunn Avatar
            Tim Dunn

            1. US airline employees HAVE BEEN receiving pay increases in excess of inflation; most American workers, even unionized, have not kept up w/ inflation. That is why we have the K shaped economy we have.
            2. The DOT just said that DL met its obligations including for reimbursements in a timely manner per DOT guidelines during the CrowdStrike meltdown

            No airline is going to be able to hold people’s hands during a meltdown; the standard is for people to be refunded if they don’t fly or have to buy tickets on another carrier.

            Specific to today’s discussion, AA has long had the reputation of doing the bare minimum in IROPS which AA has seemed to have more than other airlines. Business customers esp. want reliability but they want quick reimbursement for reasonable business-comparable expenses – ie no Motel 6

  6. Travis Anderson Avatar
    Travis Anderson

    Almost all the credit for this was due to Bob Crandall, head of Marketing before he was CEO. He invented the AAdvantage program, the first FF program while in the marketing job. As a one time airline analyst I would often ask each CEO about their peers. Typical was one who said that Bob was the only creative thinker of all the (then) large airline CEO’s. By inventing off-peak fares he took advantage of People Express’s over-expansion to help them self destruct.

    1. Tim Dunn Avatar
      Tim Dunn

      Crandall was an incredible innovator and yet the rest of the story is that in the decade that followed and into the 2000s, much of that network expansion was undone – esp. opening and then pulling down BNA and RDU and then the failure of SJU which was heavily driven by B6′ growth in the 2000s.

      Further, AA’s downfall in the 2000s was due in part due to poor labor relations which was Crandall’s weak spot.

      It is great to cite someone’s accomplishments but the pluses and minuses including over time have to be considered.

      1. Arubaman Avatar
        Arubaman

        Exactly. The embarrassment of a Flight Attendant strike over Thanksgiving. Pilots going on strike. Pilots carrying CAREER animus over B-scale and 17-year catch-up.
        But the single biggest thing Crandall did to sully himself was being like Lorenzo: He made his employees, not his customers, pay for his planes.

    2. Wildcat Avatar
      Wildcat

      Tim makes a good point that needs some additional background. Crandall was indeed extremely creative in a number of areas beyond marketing and revenue management (let’s not forget how successful AA was with SABRE – both from a revenue generation standpoint but also it’s deployment as such a devastating competitive weapon that DOT had to order SABRE and Apollo to stop biasing the travel agent screen displays). Crandall did also anger the major labor unions, but he was extremely popular with a large percentage of the employee base: the front-line agents stayed non-union, most of the pilots knew that AA’s growth was what put many of them in the left seat so quickly, and his annual “President’s Conferences” held across the country were heavily attended and showed him to be an effective, humorous, if somewhat prickly public speaker.
      But there were other developments at AA under his leadership that didn’t work out so well. For one, his focus on cost-cutting had a long-term impact on the customer experience and ultimately on AA’s image as the premier US-based carrier. As employees, we were incented to come up with cost saving ideas, so you can imagine some of them: take olives off the salads! get rid of spoons! But some did long-term damage. For example, AA used to have one supervisor for approximately 25 flight attendants, which arguably was too high. But they rather quickly took that to a 1:200 ratio, so that most flight attendants never got reviews, rarely got service training, and had no accountability. The many complaints we read about AA service levels can be tied back to this.
      In another case, I would argue that Crandall did a terrible job of succession planning. Throughout the 80’s and into the 90’s, American did extensive recruiting at some of the top US Business schools, and the level of talent these folks brought to the company was impressive. But many of them left, either because they were poached by other carriers or because they saw less-qualified colleagues get promoted. These include Ben Baldanza (who clearly took Crandall’s cost-cuttings ideas to new highs – or lows); Doug Parker, who came back to ultimately run the company, and Craig Kreeger, who had a great career with DL and Virgin. The MBAs who stayed, such as Gerard Arpey and Tom Horton, had few of Crandall’s many gifts of leadership and creativity.

  7. Outer Space Guy Avatar
    Outer Space Guy

    I like the new chart layout! Much clearer! Thank you!

  8. Eric R Avatar
    Eric R

    I think the charts looked better without the labels. Can you remove them?

    jk

  9. Benjy Avatar
    Benjy

    Didn’t Eastern have a hub in Kansas City at one time?

    1. Travis Anderson Avatar
      Travis Anderson

      Several airlines tried KC. All hub attempts failed.

    2. John G Avatar
      John G

      MCI’s terminal layout made it basically impossible. You can’t have a hub where people have to go through TSA to connect or eat.

      1. Kilroy Avatar
        Kilroy

        So glad MCI finally upgraded its terminal a couple years ago.

        The old terminal (not sure which one) looked like it built was straight out of the 1970s, before airport designers had to consider space for security. It had about 30 feet between curb and a partial height opaque glass wall (which you could throw a ball over) on the landside, and about 30 feet between the other side of that glass wall and the ramp on the airside. Space was incredibly tight on both sides of security, especially the airside, even when people weren’t lining up to board, and airside amenities were very limited.

      2. JT8D Avatar
        JT8D

        That’s true, but also, Kansas City is a bit undersized as a metro to support a hub, at least in that part of the country.

    3. Gary Smedle Avatar
      Gary Smedle

      yes. 1984-85. their entry prompted TWA to re-start a mini-hub, one more time. TWA wasn’t going to let an upstart come into its own house. When Eastern’s MCI hub failed, TWA pulled its hub back. After all, there was the still-growing nearby STL hub.

  10. Gregg Wiggins Avatar
    Gregg Wiggins

    It’s interesting that AA has kept that RDU to LHR flight going. (Originally RDU-LGW, when AA flew to both London airports). Years ago I was told, anecdotally and unofficially, that it survives because a major pharmaceutical company has global headquarters in the UK and a US HQ in the “research triangle” of NC and that company guarantees to fill enough business-class seats on every flight that it makes economic sense. I can say from personal experience, again from years ago, that it was frequently empty enough in back to grab a full row of economy seats, raise the armrests, and stretch out for a decent nap.

    1. southbay flier Avatar
      southbay flier

      GSK has a huge presence in London and around Raleigh.

      Delta still flies CVG-CDG even though CVG hasn’t been a hub for well over a decade. They still have enough business travelers that need to go to Paris to keep the flight.

      It doesn’t hurt that LHR is a big One World hub and CDG is big for SkyTeam.

  11. DesertGhost Avatar
    DesertGhost

    One advantage we have in analyzing the past is that we know what happened. The situation 40 years ago is very different from what it is now. Decisions made in the past were made in the context of the times, not in todays environment.

    Howard Cosell used to routinely say, “Hindsight is always 20/20”. But is it? There are times throughout history when smart people have drawn the wrong conclusions from the past.

    One prediction at the time that proved to be correct was when William Seidman, a highly respected economist and Chairman if the FDIC, predicted that a major consequence of airline deregulation would be massive consolidation.

  12. Phllax Avatar
    Phllax

    While this is fascinating, maybe we are due for a post about how they just are operationally failing their published schedule on a daily basis and why the other majors aren’t?

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