MIAMI — The day of reckoning has come for American Airlines and its divestiture requirements. The carrier announced planned service changes from the two most affected airports, Washington Reagan National and New York LaGuardia late on Wednesday. The changes were part of a deal cut with the Department of Justice that enabled a merger with US Airways to go through in December of 2013.
Changes at Washington Reagan National Airport
American was required to divest 52 slot pairs at Reagan, a tidy sum. The carrier announced the following destinations will no longer receive service:
– Augusta, GA (AGS)
– Detroit, MI (DTW)
– Fayetteville, NC (FAY)
– Fort Walton Beach, FL (VPS)
– Islip, NY (ISP)
– Jacksonville, NC (OAJ)
– Little Rock, AR (LIT)
– Minneapolis, MN (MSP)
– Montreal, Canada (YUL)
– Myrtle Beach, SC (MYR)
– Nassau, Bahamas (NAS)
– Omaha, NE (OMA)
– Pensacola, FL (PNS)
– San Diego, CA (SAN)
– Savannah, GA (SAV)
– Tallahassee, FL (TLH)
– Wilmington, NC (ILM)
In addition, Fort Myers, FL (RSW) will now see seasonal service. All had previously received daily, year round service.
Firm termination dates are still to be determined. American says the actual dates will be announced after the sale of DCA slots. The carrier notes that each airport above is served via another of the combined carrier’s eight hubs.
American also announced that they will shift US Airways’ Reagan-San Diego flight to DCA-LAX, becoming their second daily nonstop connecting Reagan and Los Angeles.
One item of note is that Reagan National operates under a perimeter restriction, barring flights longer than 1,250 statute miles, with some exceptions. The Department of Transportation allows specific carriers to operate up to twenty daily nonstop flights beyond perimeter; the combined carrier currently operates beyond-perimeter flights to Los Angeles (1x daily), Phoenix (3x daily), Las Vegas (1x daily), and San Diego (1x daily). While certain beyond-perimeter slots are tied to specific destinations (the current Los Angeles, Phoenix, and Las Vegas ones all are), the San Diego slot can be transitioned to any city, though the carrier has to give the DOJ sufficient notice, hence the transition from San Diego to Los Angeles.
Of all the destinations being removed from the current portfolio at Reagan, only four (Detroit, Minneapolis, San Diego, and Montreal) could be considered “large” cities. Detroit and Minneapolis are Delta strongholds anyway, while Montreal likely does not work without the boost of former Star Alliance partner Air Canada at its third largest hub. And of course the San Diego slot is being moved.
The remainder of the destinations are all small cities, which, if one takes the most cynical view of the moves, is a brilliant political move by the new American. The one thing that American and US Airways executives consistently said during the negotiation and lawsuit process was that small cities would lose service if the merged carrier was forced to divest Reagan slots. And they followed through on that, making abundantly clear down to the wording of the press release that these cities are losing their Reagan link due to the DOJ’s actions. Now associated congressmen will have to explain the loss of service to constituents as Southwest and JetBlue pour capacity into major markets like Florida and Chicago.
Changes at New York’s LaGuardia Airport
American is required to divest 17 slot pairs at LaGuardia Airport, resulting in discontinued service to Atlanta, GA (ATL); Cleveland, OH (CLE); and Minneapolis, MN (MSP). Once again, the termination dates for these services have not yet been determined.
However, as a result of the merger, reorganization, and slot divesture, American will begin new service to ten communities beginning April 1, 2014. These new services are bookable as of January 26, so it’s a net positive for service at LaGuardia. There are new flights between LaGuardia and the following cities:
– Charlottesville, VA (CHO)
– Dayton, OH (DAY)
– Greensboro, NC (GSO)
– Knoxville, TN (TYS)
– Little Rock, AR (LIT)
– Louisville, KY (SDF)
– Norfolk, VA (ORF)
– Richmond, VA (RIC)
– Roanoke, VA (ROA)
– Wilmington, NC (ILM)
The reorganization of La Guardia slots makes a lot of sense given that US Airways wasn’t exactly using its slots to the fullest. In particular, US Airways employed a tactic known as “slot-sitting” which entailed offering extremely high frequency services between La Guardia and its hubs at Charlotte and Philadelphia, not for the purpose of profit-maximization, but rather to hold on to slots. Given American’s relative strength in the NYC market (it still holds the second largest corporate share of travel in the tri-state region, and will only be strengthened by the addition of the Shuttle), it makes sense to add in a few high fare business markets to expand the service portfolio.
On the flip side, the flights that are going away (Atlanta, Minneapolis, Cleveland), comprise the twelve slots being divested, and are serve other legacy hubs. They are among the larger business markets within the perimeter, but given the shift in corporate share from American to Delta in NYC over the past five years, chances are most frequent flyers who cared a lot about Atlanta and Minneapolis as outbound or inbound markets from NYC are with Delta now anyway. Cleveland is likely still competitive, but it’s a stagnant market economically and demographically, and as long as United maintains the status quo in Cleveland, the route won’t come back anytime soon.