American Airlines Group is expanding its international route profile in Asia and Latin America following a succedsful FY2014 where the carrier earned $4.2 billion USD, excluding special items, a 115% increase over the prior year.
Following last fall’s service announcement to commence daily nonstop flights between Dallas/Ft. Worth and Beijing, American received approval last week from relevant U.S. and Chinese authorities to commence the route on May 7, 2015 with the following schedule:
AA89 DFW 1040 PEK 1415 +1
AA88 PEK 1625 DFW 1700
This will effectively round out the last phase of growth from American’s Dallas/Ft. Worth hub to Asia, as the carrier will soon offer six daily flights to five markets: Tokyo Narita (2 daily) and a single daily flight to Hong Kong, Shanghai, Seoul and Beijing. Elsewhere in its transpacific network, American also flies between its Los Angeles hub and Tokyo Narita and Shanghai, and between its Chicago O’Hare hub and Tokyo Narita, Shanghai and Beijing. American also has a joint venture agreement with Japan Airlines that permits revenue sharing on JAL-operated flights to numerous other markets in the U.S.
American has not only lagged its primary competitors United and Delta on growth in the Pacific region, but also has struggled in years past to attract yield-rich traffic to fill its Asian flights. A large reason for this was due to receiving poor landing slot timings on its routes from Chicago O’Hare to mainland China routes and a former New York JFK to Tokyo Haneda operation, which, up until recently, represented a large concentration of AA’s overall transpacific network. Now, with improved landing slot timings on its Chicago – China routes, and balancing out the network with new route pairings from its DFW hub, overall performance in Asia has improved. American also dropped its highly unprofitable New York JFK – Haneda flight in 2013, but is now seeking to recommence service to Tokyo Haneda from its Los Angeles hub in 2015.
On the earnings call from earlier this week, American Airlines President Scott Kirby remarked that new service to Asia typically takes a few years to become profitable, but given the current level of fuel prices, the carrier expects all of its Asian routes to be profitable in 2015.
Mr. Kirby also mentioned that while growth from DFW has likely concluded in the interim period, the carrier expects to looking for and pursuing opportunities out of its LAX hub. In the intermediary, American is focused on securing access to Haneda airport, and with four 787 deliveries slated for 2015, there is likely ample growth opportunity for expanding its Asian presence out of LAX.
The Dallas to Beijing flight is timed perfectly to connect to and from DFW’s Latin American network, which includes service to Bogota, Lima, Santiago, Buenos Aires and Sao Paulo. Moreover, with American re-configuring its 777-200ER series aircraft from a 3-class cabin layout to a 2-class cabin layout, with the elimination of First Class, the flight will likely derive the proper yield mixes to be sustainable over the long run.
Growth in Latin America
American will also add six new routes to Latin America, including two each from its Los Angeles, Dallas/Ft. Worth and Miami hubs.
Effective June 6, 2015, American will launch Saturday-only service from Dallas/Ft. Worth to Grand Cayman and Managua, Nicaragua, utilizing a 737-800 and Airbus A319, respectively. On the same ate, American will also launch Saturday and Sunday-only service from LAX to Belize, utilizing a 737-800.
Effective June 4, 2015, American will launch daily service from LAX to Guadalajara utilizing an Airbus A319. On the same date, American will launch daily service from Miami to Baranquilla, Colombia and a 6-weekly service from Miami to Monterrey, Mexico.
American’s Latin American network is effectively balanced out among all five of its “cornerstone” hubs at DFW, LAX, Miami, Chicago O’Hare and New York JFK, although Miami is by and large its most robust Latin American gateway. From DFW airport, its Latin American focus is heavily concentrated on transborder Mexican markets, as well as major points in Central America, the Caribbean and South America.
Outside of Mexico and South America, American flies nonstop from Dallas/Ft. Worth to Belize, Guatemala City, Liberia, Montego Bay, Nassau, Panama City, San Jose, San Salvador and operates seasonally to Providenciales. American competes against Sun Country Airlines, Spirit Airlines, Cayman Airways, AeroMexico and Avianca on its routes to Latin America.
From Los Angeles, American solely flies to San Jose del Cabo and Sao Paulo at present, whereas Delta flies to a broader range of markets. Delta offers nonstop service to Belize, Cancun, Guadalajara, Guatemala City, Ixtapa, Leon, Manzanillo, Mazatlan, Puerto Vallarta, San Jose, San Salvador, Liberia (seasonal) and Managua (seasonal). Its other primary competitor at LAX, United, has slimmed down its LAX-South America pairings over recent years to Cancun and SanJose del Cabo.
American is starting to finally catch-up after a decade of inertia
The new American is not out of the woods by any means, but it is largely making up for years of lost time when leadership failed to plan for its future from a fleet and network perspective. Five years ago, routes like DFW-Managua and DFW-Beijing would have deemed near imposssible to sustain given American’s cost structure, but times have changed and so has its vision.