American Airlines is the largest carrier serving the US to Brasil market in terms of weekly seats offered.
American Airlines has filed an application with the U.S. Department of Transportation to seek additional rights to fly from the its cornerstone hubs to Brazil. In a press release published this afternoon, American intends to add daily round-trip services from its Chicago and Los Angeles hubs to São Paulo-Guarulhos airport (GRU). If approved, American will have linked all five of its cornerstone hubs with São Paulo, representing its commitment to the important Brasilian market. The only other international market that receives daily nonstop service from all five AA hubs is London Heathrow airport.
American is currently the largest carrier serving the US to Brasil market, offering roughly 23,000 weekly seats and representing 37% of the overall market share between the two countries. American offers daily flights between its Miami, Dallas/Ft. Worth and New York JFK hubs to São Paulo and Rio de Janeiro-Galeão airports, as well as between Miami and Belo Horizonte, Brasilia, Manaus, Recife and Salvador de Bahia.
Brasilian flag carrier TAM is the #2 carrier comprising approximately 30% of the market share, followed by Delta Air Lines, United Airlines, US Airways and Korean Air. TAM is expected to join the oneworld global alliance later this year following its 2012 merger with LAN Airlines to form LATAM Airlines.
Pending approval, American hopes to launch the LAX-GRU service in late 2013 and ORD-GRU service in late 2014. American also announced late last year that it hopes to add service to Curitiba and Porto Alegre from its Miami hub in late 2013 (utilizing a triangular routing) pending on a signed code-share agreement with TAM Airlines.
American will compete against United Airlines on the nonstop flight from Chicago to São Paulo, which UA currently serves daily on a 3-class Boeing 777. Airlines have previously struggled on flights from Chicago to deep South America, as these routes are fairly long-range (5200 – 5600 nm) and often carry lower-yielding traffic. Since North and South America are in relatively similar time zones, higher-yielding business traffic demand overnight flights in each direction to fully-optimize work productivity. As such, airlines have to dedicate two aircraft to a single nonstop routing pair to meet this need, which lowers utilization rate since the plane has to sit on the tarmac all day in between journeys. This, in turn, drives up cost factors, although the hope is to have this offset by high-fares paid on these routes.
Both American and United have previously attempted and exited the Chicago to Buenos Aires nonstop sector several times each without long-term success. Moreover, these routes overfly existing Latin American gateway cities (Dallas, Miami) that are better-suited geographically to route traffic flows.
One key advantage that American can tap into out of Chicago (which it cannot do via its other cornerstone hubs) is that ORD is its primary gateway to Asia, offering nonstop flights to Tokyo (on both American and Japan Air Lines), Beijing (American and soon-to-be codeshare partner Hainan Airlines), Shanghai and Hong Kong (via OneWorld partner Cathay Pacific). Still, the local market isn’t very big. Feed from tier 2 and tier 3 midwest and Canadian cities that are unconnected to AA’s DFW hub may help out Chicago’s business case, but its questionable as to whether all of this will be sufficient.
American will also compete against Korean Air in the Los Angeles to São Paulo market, although Korean only offers 3-weekly frequencies and targets Brasil – Asia traffic on this route, as opposed to strictly Origin and Destination passengers between LA and GRU. Delta Air Lines previously attempted LAX-GRU in the late 2000’s at 3 weekly frequencies, which was a short-lived experiment. An even longer flight at 6,156 miles (according to the Great Circle Mapper), AA will likely struggle to attract high-yielding traffic to sustain this flight profitably year-round. However, similar to in Chicago, LAX is connected to a series of OneWorld partners (Cathay, JAL, Qantas and Malaysia) that may benefit from the feed.
The AA brand is also much stronger in Brasil than Delta’s, and the new ORD/LAX-GRU flights will benefit from feed provided by TAM (once it joins OneWorld). Brasilians also love the Disney brand and Mickey Mouse, judging by the successes of TAM’s routes to Orlando. American will open up access to an entirely new theme park (Disneyland) to Brasilians.
It also remains to be addressed as to whether or not American, pending merger with US Airways, will retain the current nonstop flights inherited from US’ Charlotte hub to Rio de Janeiro and São Paulo. US Airways has been flying from Charlotte to Rio since 2009, and will be receiving its long-awaited landing slot to fly to São Paulo starting on June 8, 2013.
Assuming so, and if the applications are approved, the combined route map will look like this in 2014: