AA makes significant winter cuts to TATL network

WorldTraveler

Corn Field
Dec 5, 2003
21,709
10,662
AA will soon be loading cuts to its TATL system for the winter.

Although the number of markets with reductions is twice as large as what is listed here, these markets represent larger reductions in capacity than AA's system average and/or are heavily competitive markets where AA will offer less capacity than their competitors.


AA JFK-BHX
AA JFK-CDG
AA JFK-MXP
AA JFK-ZRH
AA LAX-LHR
AA MIA-MXP
AA ORD-CDG
AA PHL-FCO
AA PHL-LHR

notable markets include JFK to MXP and ZRH as well as ORD-CDG which AA will operate as few as half of the days during some months. Further, AA will not serve FCO from any of its hubs during part of the winter.
 
  • Thread Starter
  • Thread starter
  • Banned
  • #4
correct... around the world and domestically.

The difference this year is that the currency imbalance (strong dollar compared to most global currencies) has highlighted that certain capacity cannot be maintained because US point of sale traffic is much weaker in the US and there isn't enough foreign point of sale traffic that is coming to the US.

Further, AA and US are still harmonizing their networks - this is the first year that AA/US will have a single revenue mgmt. and res system for their TATL network which allows synergies from the merger to be achieved.

Although AA was able to maintain some int'l capacity last year because it had significantly lower fuel prices than its competitors who had hedge losses, that will not be the case this year. All 3 US players will be competing on a much more similar cost basis.

Finally, some markets like MXP are markets that the ME3 have entered from the US and their presence is impacting financial performance in the winter.

Thus, there are some unique factors which are influencing some of these markets more than in the past.

I don't think any US carrier has given capacity or RASM guidance by quarter for 2016 so these changes as well as others that are highlighted might or might not be the sum of or separate from other actions.
 
WorldTraveler said:
Finally, some markets like MXP are markets that the ME3 have entered from the US and their presence is impacting financial performance in the winter.
 
What other market(s) between the USA and EU have the ME3 entered besides EK's lone MXP-JFK route?
 
  • Thread Starter
  • Thread starter
  • Banned
  • #6
I'll have to double check but I believe QR is in a market or two... perhaps an LHR market.

They generally are not in much of the US-Europe market but MXP-JFK became something of a lightning rod in the US3-ME3 debate because it extended ME3 presence to US3-EU3 markets.

remember that AA also reduced MXP-JFK in the past in favor of starting MXP-MIA. Given that JFK is a highly competitive market, it is more significant that AA is not flying it every day on its own or with a partner even though Italy is highly seasonal.

Also, it appears that AA has reduced JFK-ZRH to lower levels than have been seen in the past. Additional competitive capacity has entered that market.
 
Not quite sure why you have LAX-LHR on this list. They are running two trips today (136 and 108) and that seems pretty consistent throughout the schedule.

Also what the fuel hedge losses other carriers may or may not have had no bearing on decisions AA makes on their route. They simply base it on demand the profitably within their own network.
 
Don't hold your breath.
You should have seen the fury on the DL board where the ATL-DXB (now a seasonal route too) was discussed before the mods deleted posts.
You do realize speaking ill of DL is blasphemy ... ... ... :p
 
  • Thread Starter
  • Thread starter
  • Banned
  • #10
These are SEASONAL reductions just as other carriers do elsewhere on their networks.

Fuel hedges are involved with what is scheduled because AA had a significant fuel cost advantage for about 9 months compared to other carriers. AA was able to keep some capacity in its network that other carriers would have had to cancel given that AA had a cost advantage. AA in fact has underperformed the industry on RASM performance and yet posted profitability as good as or better than its peers.
Now that bad fuel hedges have largely been written down at the other 2 global US carriers, it will be more important than ever for all 3 carriers to fly only what drives revenues because cost differences between the 3 have been diminished to the basic structural differences that the carriers have between themselves apart from fuel.
 
Everyone here knows the hedge gap between AA and its competitors narrowing is your version of message board porn right now, but any gap there has zero, zilch to do with a seasonal reduction that every carrier will or has already implemented. Yes it would have cost AA less to break even last year than UA or DL all else being equal, but they wouldn't make the reduction if the competitors break even was higher, lower, or equal to AA. That's because AA would have the same profit regardless of what DL or UA had. Obviously this year something is different. It's most likely demand related. Old AA wouldn't run less than daily flights. New AA L-US leadership is much better with capacity discipline.
 
  • Thread Starter
  • Thread starter
  • Banned
  • #12
and with all due respect, current AA's no hedging policy came from US as did generally higher RASM growth - which is precisely what other airlines have found happens when they more closely align supply with demand which is what seasonal and day of week cancellations do.

and yes, AA absolutely was able to carry some capacity on its network over the past year because of lower fuel prices which also coincided with a merged but not optimized network that didn't have a single res and revenue mgmt. system.

AA will have a single res system but not a fuel cost advantage later this year so it will be playing a much more similar game to what DL and UA are playing. It's noteworthy that WN says that still have over $1B in bad fuel hedges on their books that carry out for up to several years.

AA couldn't have asked for a nicer gift in lower fuel prices and the lack of hedges during the merger transition period, esp. as Latin America was tanking. Parker is taking home multi-million dollar stock gains every month as a result.

You are correct that a new paradigm has arrived that AA will not operate the same basic two season schedule it once did.

It takes a lot of changes to the way AA is operated in order to get all of the benefits from it but it does mean that AA will be a lot more like DL and UA with its worldwide schedule.

The cost may well be that AA will have a minimal presence in some markets for a couple months of the year and may not even serve some of them at all.

As the AA-US merger moves into the next phase, there will be more alike in the way the big 3 are operated than there has been for a very long time and revenue will indeed be a bigger determinant of profits.
 
None of these cuts are new.
 
MIAMXP will operate at greater frequency/capacity this winter than last winter.
 
JFKBHX is a brand-new route that launched in May.
 
AA also did not serve Rome whatsoever last year, roughly for part of February/March.
 
LAXLHR is not being reduced.
 
Reductions on the JFKCDG/etc. routes are in line with last year.
 
Stick to making up facts about Delta, you are better at that. 
 
  • Thread Starter
  • Thread starter
  • Banned
  • #14
Somehow you have forgotten that AA is now the product of AA AND US and there are absolutely reductions in the combined carrier's network compared to what was flown since the merger.

There are absolutely reductions in AA's schedule not only from the peak season which AA has flown including for BHX which is a new market but also on a year over year basis for existing markets.

I would suggest before writing your defense that you actually pull up published schedules and compare them.

A 15% reduction in seats in a market even for a month is not "in line" with what was flown last year.

for the first quarter, AA's total capacity change for JFK(combined AA/US) is less than the addition of the capacity added with JFK-BHX - which simply means that AA is adding a couple new markets including adding back CCS and the previously announced JFK-SFO and ORD additions that together offset the reductions in other AA markets including LAX, LHR, and VCP which are AA's top 3 reductions from JFK.

and there are still markets on the list that are reductions from the peak summer schedules.
 
  • Thread Starter
  • Thread starter
  • Banned
  • #15
Just looking at JFK, AA's addition of JFK-BHX alone - which MAH noted is a new market - accounts for more seats than the total net change in the combined AA/US seat count from JFK for the first quarter.

ON a combined AA/US basis, AA has reduced net seats from its EXISTING markets.
 
Back
Top