Since its merger with US Airways, American has taken a cautious approach with new routes. It has expanded to major Asian and South Pacific markets out of necessity but otherwise hasn't taken too many chances. It is nice to see the airline considering adding India and Africa.
American Airlines, lacking the global footprint of its top two U.S. competitors, may expand to India and Africa once a second batch of Boeing 787 orders starts arriving next year, an executive told Skift this week in an interview in Dallas.
“That’s the airplane that is going to take us eventually to India and into Africa, and into markets which are very different from the ones that we have been in historically, but ones we believe will be very profitable,” said Vasu Raja, the airline’s vice president for planning.
This is a shift in philosophy. American long has been robust in only two international regions — Europe and Latin America. While Delta Air Lines and United Airlines added new global strengths after recent mergers, American did not, as US Airways was predominantly a North American and transatlantic airline.
Post-merger, American has filled some gaps, adding transpacific flights to Hong Kong, Sydney, and Auckland. But for the most part, American has stuck with markets it knew better, adding routes in Europe and South America.
But with 47 new Boeing 787s set to arrive over several years beginning in 2020, in addition to 42 others from an earlier order, Raja said he is thinking bigger, asking whether American should return to India and enter Africa for the first time.
He stressed no route announcements are imminent and did not say from which hubs American might fly. And he said some of the earliest deliveries are expected to replace older aircraft on existing Europe routes from Philadelphia.
But over time, he said, American intends to be more of a global airline.
“The future of American Airlines is to grow international,” he said. “It’s our job to figure out how we can go do that in a way that’s successful and profitable.”
Return to India
American has been in India before, with a money-losing route from Chicago between 2005 and 2012.
The route, Raja said, did not work for several reasons. First, American used a Boeing 777-200, with too many seats. Second, American lacked a competitive onboard product. Third, the airline often operated at poor times, with customers unable to make connections in Delhi.
If it returned, Raja said, American could use smaller aircraft with better economics and a superior onboard product. It would also seek improved flight times, so customers could connect to other flights. American also probably would not fly from Chicago, instead using a domestic hub where it can facilitate better connections, such as Philadelphia.
Perhaps more importantly, American would have better data. In late 2010, American won anti-trust immunity with British Airways and Iberia Airlines, allowing the carriers to share both revenue and information about customers. In effect, American has been flying, virtually, to India since then, taking customers to London, while British Airways carries them onward to India. It knows the market better.
“We’re able to de-risk and understand a market like India, Eastern Europe, places like that before we actually set metal into it,” he said. “Our startup curves are a lot smaller than what they used to be.”
Still, new challenge exist. The last time American flew to India, U.S. airlines didn’t have to contend with massive completion from three Gulf airlines — Etihad Airways, Emirates, and Qatar Airways. The trio, accused by U.S. airlines of taking illegal government subsidies, make considerable revenue shuttling passengers between the United States and India.
“U.S. carrier growth to India has drastically trailed that of most of the other nations on the globe at this point,” Raja said. “It absolutely does trouble us. But I’ll tell you, we hear it a lot from our biggest corporate accounts. … It’s something they continue to ask for. There’s definitely something there. We just need to figure out how we can make something like that work.”
Routes to India and Africa may come with big rewards — airlines tend to make the most money when they “discover” a lucrative route with no competition —but they’re inherently risky. Over the years American has lost “oodles of money” on long-haul routes that seemed important but never worked as planners envisioned. That includes Chicago to Beijing and Shanghai, both recently cut by American.
“With so many of the Chicago routes we added and cut over the years, we added something but didn’t build the apparatus to ensure its success,” Raja said. “The airplanes were there and the capital was committed, but the airline itself wasn’t organized about how you go about and make it successful. When you do market entry into India or to Africa, that requires a level of internal coordination and long-range commitment to go make that work.”
By contrast, when American expands in Europe and South America, it knows it has the infrastructure to make money quickly.
In South America, American has a known brand, allowing it to sell tickets not just to U.S. residents, but also to the local community.
“We’ll add a route like Miami to Cordoba (Argentina), or Miami-Pereira (Colombia) without very much hesitation at all,” he said. “In Latin America, the apparatus is built, and ours is probably the apparatus to beat. But that doesn’t exist for us in a place like Africa. We’ve never been there. Or a place like India. We’ve been there and quit.”
Nonetheless, American may have more opportunity in India and Africa than in Asia, where the airline is tiny compared to Delta and United. Both competitors have built powerful franchises in Asia going back decades (Delta inherited its from Northwest Airlines), and American is so far behind it may never catch up. For example, American is the only one of three not in Singapore, a prime business market.
U.S. airlines, though, are small in India and Africa. For now, United is the only major U.S. carrier in India, flying from Newark to Delhi and Mumbai. Delta has said it will return this year to Mumbai after four years out of the Indian market, but has not said from where it will fly.
Delta is the only U.S. airline in Africa, with flights to four cities. United ended its last route, to Lagos, in 2016.
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Tags: africa, airline innovation, american airlines, delta air lines, india, united airlines
Photo credit: American Airlines may use a new batch of Boeing 787s, like this one, to open new markets in India and Africa. 152205 / 152205