A (3:01)

That is a lot, Brett. American, of course, has a relatively new Chief Commercial Officer, Nat Pieper, who came over from One World and before that had a senior role at Alaska. What you describe sounds like something that may have been set in motion before he came. Not something that can be done in a month, but how much do you think Nat is pushing stuff like this?

B (3:25)

Yeah, I'm not really sure. You know, a lot of this, it has to have been in motion for a while. I suppose it's possibly had an impact on timing, but really, this is a lot of inside baseball stuff that's driven by network people. When you think about how this is being put together and the work that's being done. And Nat is not a network person, so I would be surprised if he had a big impact on this.

A (3:49)

Well, that makes sense. You are, of course, a network nerd. So why don't you take us in detail now? Some really nerdy cranky stuff. What do you got? What's most interesting to you?

B (4:02)

I say we start with dfw. Does that work?

A (4:05)

Sure, let's do it. I don't think it's a stretch to say that DFW is American's most important hub. Why would American move from 9 to 13 banks? 13 is a lot and add block time while it does it. What's the rationale here?

B (4:23)

Well, I mean, we don't really know the rationale from American. They did put out a press release on this touting how great it's going to be. But to me, the way I look at this is that American is just clearly not happy with its operational performance. It's not going great. This is the thing American is supposed to do, right? Last summer was very bad, so they're going to spread things out. And now, instead of having peaks and valleys in those nine banks, and same basic number of flights will be spread across 13. So the peaks will be lower, there'll be fewer valleys. Gives it a little more operational flex there.

A (4:59)

Brett, do you ever wonder if there are actually no new ideas in the airline industry? What's old is new, what's new is old. It goes back and forth. It all sounds very familiar. Right? So when American went to its rolling hub before the US Airways merger, the rolling hub and dfw, the idea then was to just have a constant FL flow of aircraft instead of Peaks and valleys. And then I know people thought maybe I would go the day without saying Scott Kirby. I can't. But then Scott Kirby came in and said, this is a ridiculous way to run a hub. Let's peek it back up. And then they. They picked it back up.

B (5:35)

Yeah, they. They did do that. But listen, I have been told, my understanding, this is not what's happening here. These are real banks. They're just more of them. Some of this is from stretching out the flight. Some is also about changing the nature of the banks. So American has some west banks and some east banks, but they also have some omnidirectional ones that go in all directions. So those go away. They split those up into a west and an east bank. So that explains some of this. But, yeah, look, it certainly gets closer to the idea of a rolling hub, but. But it seems that that is not what's happening here in the truest sense of the word.

A (6:17)

Brett, answer a question for me that I've had for many, many years. Right? All these hubs, if they're not omnidirectional, they're east and west. But don't a lot of people go north and south? People in Kansas City or Tulsa going through dfw, maybe going down to Mexico? How do airlines handle that sort of thing? How's American going to handle them?

B (6:39)

This may be the first time you've ever thought of the good people of Tulsa and Kansas City.

A (6:44)

Yeah, I've never been to either place, but I want them to be taken care of. You know what I mean? How do they fit in?

B (6:50)

All right. It is true. So they will still have the same number of flights. Right. But they'll just have to be slotted into the banks differently. And the reality is, the ones that are true north, south, those are gonna have the biggest impact from this schedule change. Because if there's no omnidirectional bank anymore, let's say the Kansas City flight will come in and it'll now have good directions going one way, but they'll have to wait longer to go the other way. So, yeah, those will have more of an impact than if people are purely from the west connecting to the east or purely from the east connecting to the west.

A (7:30)

But even overall, right. If you're de Peaking the hub and you're going to have more banks throughout the day, almost by definition, people are going to have to wait longer, not just from Kansas City or Tulsa, but even the east and west banks.

B (7:44)

Yeah, absolutely true. That's the idea here. This is not going to be how do we get the 25 minute connection in Phoenix or the 40 minute connection at DFW? They're going to have to spread that out just by nature of what they're doing. But those that are maybe north and neither east nor west, you know, they're just going to have a harder time. Because if you think about it, if you're in Vegas and you're looking to go via dfw, you're not going to connect back west, you're just going east. And same, let's say you live in Birmingham, Alabama, you're not going to go to DFW and connect back east. But if you're in Kansas City, it could go either way. So that just makes it more challenging to have it connect because it has to connect in all directions.

A (8:25)

All right, well, let's talk about connecting times. Almost by definition here, we expect that for a lot of travelers, they're going to have to wait a little bit longer at dfw. And this whole thing is kind of fascinating to me. I know the old way of thinking in the airline industry, and we still hear this a lot, is that the real goal here is to have the shortest elapsed time for whatever itinerary you sell, so you show up high at the top of the GDS or even some sort of online search. But I do wonder, Brett, if some of this has gone the way of maybe CDC's recommendations for vaccines here in the United States. Which is to say, if you stay with me here, people who fly airlines seem to want to do their own quote, research. So maybe it's just anecdotal, but I feel like I've noticed that people have become even less trustful of airlines, if that's possible, maybe because of what they see on social media. And then whether it's true or not, they hear stories about lost bags and missed connections. And people that I know, they always wonder if they can have a longer connection time. They're just a little bit nervous now. My wife is among these people. I, on the other hand, have a pretty boring life, Brett. And I prefer to live on the edge. I want a 30 minute connection any day. It's the only thing that really excites me in life.

B (9:52)

All right, first, do I need to point out the false equivalency here with the CDC recommendations on vaccines? Can we, can we just say this is not the same thing here, please?

A (10:02)

This is not a political podcast.

B (10:03)

Okay. All right, fine. But yes, I think you have taken on some of the nerdiness that you assigned to me. Like you call me out for using a spreadsheet to think about elite status qualification. I think you may be overthinking here what everyone does. There are people that will opt for longer connections. It happens. In fact, I was talking to a friend yesterday who was just asking me about that if there was a longer layover, they could take on something that they were trying to put together. But I think most people still don't investigate nearly as much as we do. They see the options that pop up, they look for a cheap price that fits a decent schedule and then they move on. So question is whether or not this will push Americans flights further down the list. Unless its fares are cheaper. You know, a longer total duration might do that. But then again, sites have gotten so much more sophisticated about how they rank options. This isn't the old school GDS world where it just kind of ranks it by duration. So I think it's a good experiment. I'll be really curious to see what the impact is. And in fact we were talking about this and Brian Zenotens who runs network for American, he was going back and forth with me and a couple others on Blue sky about this, talking about how they're thinking about it and so they're, they're looking at it as an opportunity to test a theory here.

A (11:26)

No, it is interesting. You're right. I used Google flights quite a bit and I don't think that it's always showing me the ranking of the shortest duration. It just has kind of the best. Right. And it decides what the best is. And maybe the best is a little bit longer.

B (11:41)

Yes, Top flights as they call them on Google flights.

A (11:45)

Indeed. All right, let's talk about another big move that American made in my hometown of Chicago. Looks like they're adding flights starting as soon as mid February and then they're ramping it up to summer peak pretty quickly. I can't assume, Brett, that this is all based on demand. Right. One of the new routes is Tri Cities Tennessee, which starts later this year. Maybe that area that I've actually never heard of is more popular than I thought. What's going on in Chicago?

B (12:18)

Well it's a, it's an all out war at this point. So first of all, the, there is not a lot of demand in Chicago in February. That's just kind of how things work, let alone for a whole bunch of new flights being added at a pretty late date actually. So this is really about fighting for that gate space.

A (12:39)

Ah yes, that thing again. So this goes back to the issue with United, where United added a lot of flying very quickly over the last two years, and then American shrunk, and then United had higher utilization. So then United got several new gates and American lost some. And if you don't have gates, you can't fly.

B (13:02)

Yeah, that's exactly right. So American had to decide what it wanted to do once it fell behind here, and it is now very clearly said it will fight hard for Chicago. Why is it flying so much in February? Because it needs to really hit those high utilization numbers so it can get gates back in the future. This is, shall we say, a bold move.

A (13:27)

A very bold move and probably a very expensive move as well. People may remember back in September at a conference, Scott Kirby told me that American is probably losing about $800 million a year in Chicago. He also told me that he thought American would walk away from that hub eventually. Let's be clear here. American said it's not losing nearly that much money and it was not going to walk away. It certain is not doing that. But however much money American lost last year in Chicago, I think we can safely assume that with these new flights starting in February, it will lose more in 2026, right?

B (14:10)

Yeah. If it did not lose 800 million last year, it's certainly trying this year. So we'll see. We'll see where that ends up. It's going to be costly. There's no way that when you add this much flying during what I call darkest winter before spring break, there's no way that's profitable. This is a strategic investment. It's about, we need the gates now so we can win in the future. I think it's a gamble. What do you think?

A (14:40)

Well, it's funny that you call it a strategic investment, because enough people in the airline industry have told me over the last 10, 15 years that if you ever hear an airline describe something as strategic, you know it's a bad move. Well, this certainly is a gamble in Chicago, but American was really boxed in by the things that United had done. Had American not grown, it was at the risk of becoming even less relevant in Chicago. And sometimes you become so much of an afterthought that it's kind of over for you. So we know that American will be number two in Chicago even after all of this. But there's a big difference between being a strong number two and a very weak number two. And American was on its way to being a very weak number two. So I'm not surprised that American is fighting in Chicago. This one is probably A topic for another podcast, but I would love to know what people at United are thinking here. Like, the easy thought is that United is mad because they're not gonna win Chicago and take it for themselves, and American is fighting back. But remember, people at United tend to think three moves ahead. And I suspect that there are some people at big offices in Chicago or conference rooms that are actually kind of laughing right now because they see what their competitor is doing. They can sort of calculate how much money American might lose doing this. And they probably think that for United in the long term, this is going to go well. And then the other thing that we have to remember is that not just that American, but all airlines only have so many resources. This is how American got into this mess in the first place, because it prioritized some very profitable hubs in Charlotte and Dallas, and it lost focus in Chicago. So now if American is focusing so much in Chicago, the question is, where are they not thinking about as much because you only have so many airplanes? And then if American isn't thinking about another market, maybe United wants to go in there and mess with American in a different place. Could that place be South Florida? Probably not. But wouldn't it be fun to see United poke at American in South Florida?

B (16:55)

Okay, now who's starting rumors here?

A (16:58)

First of all, I know that's my version of the your sun country takes over Detroit rumor thing. That never happened, by the way.

B (17:06)

What do you mean never happened? Spirit still exists. If it does not watch out for Sun Country. I'm just gonna say that I don't think it happens through mer. But anyway, I don't think anyone in Chicago at United is laughing right now because they're going to feel this pain as well. It may be, you know, less difficult for them from a financial perspective, but this is going to put pressure on Chicago. There's going to be a lot of money lost with all of this capacity that's come in. And you mentioned which markets, you know, could it be South Florida? I think what we've really seen is American has taken its foot off the gas in Charlotte, and you see fewer flights there, and they're moving, moving airplanes around elsewhere. So that's probably where the change is. And I don't think anyone's going to go challenge in Charlotte.

A (17:53)

No, probably not. But let's talk about Philadelphia. You mentioned that American is adding one more bank at night. This is not a massive transatlantic hub, but it's at this point the best one that American has. I'm not sure. Why would you split One bank into two. Do they really need another one? What's what, what's the reason for doing this?

B (18:16)

So commercially they don't, you know, obviously the bigger the bank, the better commercially you can flow more into it. But again, I think this is an operational issue. So Philly has at last check. I think this is the 2022 Master Plan update. They had 126 gates and 18 of those are international capable and widebody capable. This is a really seasonal hub, but in the summer There are easily 20 plus international flights scheduled in the afternoon peak. So there really isn't much room to grow there.

A (18:48)

All right, so I guess American doesn't have that many choices about what to do. It doesn't have the JetBlue partnership anymore. It has all those 321 XLRs coming. I am going to put you on the spot here because I'm a dumb west coaster here. Charlotte just doesn't fit the bill for this sort of stuff. Right.

B (19:09)

Well, I too am a dumb west coaster. But no, Charlotte is not a great transatlantic hub. It certainly works to fly transatlantic and they've, they've grown there. But if you think about as Delta does with a JFK or a Boston versus an Atlanta, Charlotte can support some, but there's a lot of backtracking from a huge piece of the population to have to go through there. So Philly is, is certainly a better hub to do that through.

A (19:37)

Well, let's go back to the 321 XLR. American is the first US airline to get those airplanes. They're not really going into Philadelphia now. Right. They're, they're in Boston, Los Angeles, New York and a little bit of San Francisco.

B (19:53)

It's mostly a New York airplane at this point. Although they're going to do that Boston LA flight, which we'll talk about, but, but it is mostly a New York airplane. That's going to have to, to change. So it, it's going to get to Philly. The whole point was that they could do more transatlantic to thinner markets or maybe more premium heavy without as much demand. Whatever it is, the XLR matters. And if they do have this constraint on the number of gates that are international capable, the only real way to fix that is to have more banks and try and do it that way. So I get this. I don't think it's a huge impact at this point. This may be more of a future proofing type of thing, laying the groundwork for the xlr, but I think that's where we are.

A (20:38)

All right, well, Brett, you and I recently toured an XLR when it had its first flight into Los Angeles. As a. As an aside, it was the first time that American Airlines invited me to actually do something in person in like six, seven years. Certainly since before the pandemic.

B (20:56)

Six, seven.

A (20:57)

Oh, we all have kids here. Pretty, Pretty funny. Certainly a very nice airplane, right, Brett? The only problem with this airplane, the brand, the colors, brown and a blue that doesn't match the blue on the livery or the advertisements or anything like that. If any of our listeners know why American chose those colors, especially the brown accents, please send me an email. But it is true. This is a very nice airplane and frankly, maybe too nice for Boston to Los Angeles.

B (21:31)

Yeah, it probably is, but it's a. It's a good airplane and it's way better than those awful A321Ts. And when I say awful, by the way, I mean from a commercial perspective. You know, these are the same size tubes, but the t only has 102 seats on the airplane. The XLR has 155, though. If you get stuck in the three seats in row 34 next to the lavs, may God have mercy on your soul.

A (21:58)

Yeah, I've never been that far back in that airplane or really any airplane. But going back to capacity, that is a major difference in capacity. I am curious, though. The XLRs are made to go very, very far. We're talking about a lot of domestic routes on which the NEO or even the A321 CEO can do. Shouldn't the XLR be flying longer flights?

B (22:25)

Yes and no. So, yes, they should be on long flights because this is an airplane that is pretty highly modified from the standard A321neo or even the LR. And so the whole point is for the range. But what American really likes about this airplane is that it can do both. Because the problem that it had with the T is that it had a dedicated fleet that could only fly domestic transcon routes that had enough premium demand for this really premium heavy configuration. So if demand dropped, those airplanes couldn't really do anything else. They couldn't get across the Atlantic. They couldn't do anything like that. And if demand soared, well, then kind of out of luck. I mean, American could put a wide body on jfkla, but that's a lot of capacity. And JFK isn't a giant hub for American the way that United has it. Newark or Delta, jfk, where, you know, they want to push through a lot more people. So it's harder for American to fill a really big airplane. And the standard domestic airplanes, they're just not premium enough for that route. So with the xlr, it has an airplane that can do both in one configuration. It is a little odd that the XLR is not being used for XLR things, but it will do both eventually and gives them some flexibility.

A (23:40)

I think this is the longest chat we've ever had about American Airlines in premium. I suppose that's a good sign. We can also go to the 787p that as you mentioned, is flying from Los Angeles and New York to London now. Or at least it will be soon. What's up there?

B (23:58)

Yeah, you should be happy about that. You can fly it out of lax. It is a nice airplane. I still think premium economy is the star of the show there, but then again, I'm weird and like cradle seats more than beds.

A (24:11)

Yeah, I'll add that to the list of reasons why you are weird. I have not seen the 787p. I hope to at some point, but when I do, you know that I won't be sitting in premium economy.

B (24:23)

Yeah, no, I know now. So American did have those airplanes flying down under during the winter, but for summer it's an all London airplane this year. And this is an airplane has fewer seats on board than the standard787.9, but it has a lot more premium. And London, of course, is a premium market.

A (24:42)

You don't say. Brett, I know that this is not the fourth installment of what's wrong with American, but don't we think executives could have realized that about London earlier? How long has United had its high J767s going into Heathrow?

B (24:57)

Yeah, it's been a minute though. United will be getting rid of those and probably putting its own high J787.9s on London eventually. But you know, it's really. It's kind of like when American put the A321T on Transcon a decade after United did the same thing with P.S. maybe that's the trend.

A (25:17)

All right, Brett, before we go, is there anything else that we need to focus on?

B (25:22)

Yeah, we missed one. American is moving the start of peak summer up a little to before Memorial Day instead of after.

A (25:30)

That makes a lot of sense. We've heard a bunch of airlines, Delta and Southwest especially, talking about how the summer peak has changed. Kids are getting out of school earlier in a lot of places, and then they're going back to school earlier, sometimes as early as early August. Quick aside, Brett, we just got my kids school schedule for next year. And I saw that they moved the start date of school back by a week. So we're not going to go back to school until late August. And the first thing I did was think about how cheap a flight is going to be if I take a vacation right before school starts because everyone else is going to be in school. That's my nerdiness.

B (26:13)

It's true. And we're, we're there too here in Long Beach. It's last week August, so it's a whole different world than those last couple weeks. But this, like you say, it's not a surprise, it's just something that they filed during the schedule palooza here. But, you know, that's how it goes.

A (26:31)

All right, but. But overall, it does seem like American is making quite a few moves to lay the groundwork for future growth. I have to assume it'll also have a better operation. I do think, Brett, a lot of these things are going to be very expensive. Adding block time is expensive. Going to a more rolling hub in DFW is probably expensive. Or at least you lose revenue that way. And then whatever is going on in o' Hare is not going to be cheap.

B (27:04)

Yeah, I think that's right. This does seem to be about making long term investments, sort of setting it up for future growth, maybe with a functioning operation, which by the way, I would never assume anything about a functioning operation until it actually happens. But America needs more to change right now. And that's kind of my guess is where Nat is focusing his time more immediately. This is more just about setting the stage. But it is a lot of change and we'll see how some of this pans out.

A (27:38)

You've been listening to the Air Show. If you have suggestions or questions for us, or if you're interested in sponsoring the podcast, go to our website, theairshowpodcast.com to get in touch.

B (27:51)

Leo Duran produced and edited this episode. Our theme music is by Joshua Moshe. Thanks for listening and we'll be back soon.