Did American Airlines Miss A Chance At Boston Logan?

Aggressive Delta’s move to establish a hub at Boston Logan hub raises a question: Why didn’t American decide to grow at Logan?

On the one hand, it’s obvious: American has a perfectly adequate, major trans-Atlantic hub in Philadelphia and also flies trans-Atlantic, to a lesser extent, from its hubs at New York Kennedy, Charlotte and Miami.

Moreover, American is focused on growing in Dallas, Charlotte and Washington National, airports where it dominates.

Meanwhile, Delta already has major trans-Atlantic hubs at Kennedy and Atlanta. Additionally, in the second quarter, Delta already had 34% more trans-Atlantic revenue than American.

Nevertheless, in June, Delta announced that it will build a Boston hub. On its July earnings call, the carrier said it will grow the Logan operation by more than 40% to 200 daily departures over the next two years. Delta and its partners already fly from Boston to 18 international destinations, including Amsterdam, Dublin, Lisbon, Edinburgh and London. 

It is hard not to think that Delta is taking a more daring approach while American focuses on proven strategy.

For about a decade, Delta has been the darling of the airline industry. Its assets include a route planning guru, President Glen Hauenstein, who built United’s trans-Atlantic hub in Newark, oversaw Atlanta route restructuring during Delta’s bankruptcy and then decided to build a trans-Pacific hub in Seattle, basically from scratch.

Now, Hauenstein has set his sights on Boston.

Aviation consultant Robert Mann said American’s stasis at Logan “is part and parcel of what American Airlines network strategy seems to be.”

The American approach has been, “If they can’t be number one at a place, they don’t even compete,” Mann said.

The clearest example is a 2011 deal between Delta and US Airways, then run by the same management team, headed by Doug Parker, that has run American since the 2013 merger with US Airways. In that deal, US Airways traded 132 takeoff and landing slots at New York LaGuardia to Delta in exchange for slots at Washington National airport, cash and a few other considerations.

The deal fortified each carrier’s dominance at one airport while weakening its presence at the other.

Of course, it is valuable to dominate National, long regarded as perhaps the country’s leading hub in terms of profit margin. At the same time, US Airways gave up an opportunity to have a major presence in New York, the world’s largest aviation market.

Now, Delta is in the midst of a $4 billion LaGuardia renovation as it competes with United, which has a Newark hub, to be the principal airline of New York.

Largely because of Newark, United is the number one trans-Atlantic carrier, with $1.93 billion in second quarter trans-Atlantic passenger revenue, compared with $1.88 billion at Delta and $1.4 billion at American. United also has a second major trans-Atlantic hub at Washington Dulles.

At Boston Logan, American currently has 82 daily departures to 13 destinations at Boston. That compares to 175 daily peak departures by JetBlue and 140 by Delta and its partners.

From 2001 through 2009, American had Logan’s biggest market share. Then it started to cut back, even as JetBlue started to grow. JetBlue became the number one Logan carrier in 2010 and has stayed there ever since.

“American Airlines is slipping away from Boston,” was the lead sentence in a January 2013 story in The Boston Globe.

“Logan International Airport’s biggest carrier for most of the past decade has shrunk to the fifth-largest, carrying just 11% of the airport’s passengers last year, down from a peak of 21% in 2004,” The Globe said.

“The carrier now flies to just six cities nonstop from Boston, down from 33 in 2003,” The Globe said. “At the end of March, the number of American nonstop destinations out of Boston will fall even further when the carrier cuts its only remaining international flight, to London.”

American got a second chance at Boston in 2013, when it merged with US Airways, which at the time was number three in Boston. Once the two airlines combined, American grew to number two in 2016 and 2017, then fell back to number three in 2017 and 2018.

That isn’t the sort of place where American sees opportunity.

Over the past two years, the carrier has repeatedly said that it is focused on growth at the hubs where it is a clear number one.

At a 2018, investor conference American President Robert Isom laid out the strategy that has already brought American’s daily departures at Dallas Fort Worth to about 900. Isom said hubs in Charlotte, Dallas and Washington National are the airline’s most profitable, producing pre-tax margins of 13.1%, ahead of the system average of 7.5%.

 “We love our network,” Isom said. “We love all of our hubs. We’re going to focus today on these three.”

In 2019, American gained access to 15 new gates at Dallas, enabling another 100 daily departures. In 2020, American will gain access to seven gates in Charlotte, enabling another 75 daily departures. In 2021, when a new regional terminal opens at Washington National, 14 gates currently restricted to 50 seat jets will be able to handle 76 seat gates.

Isom said competitors lack the capacity for expansion at their most profitable hubs. “This is unique to American,” he said. “We have the ability to grow in the places that make the most sense.”

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I began covering airlines during the Eastern strike. I was a reporter for six newspapers -- Miami Herald, Charlotte Observer, Sacramento Bee, Fresno Bee, Toledo Blade a

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