Can American Hope to Catch Delta in New York?
NEW YORK ( TheStreet) -- While American (AMR) and US Airways (LCC) have been working on a merger and United (UAL) has been working on fixing a broken merger, Delta (DAL) has been working on capturing the world's largest travel market.
That is going to make it tough for the new American to make up ground in New York, where Delta has been expanding aggressively at both Kennedy and LaGuardia airports and where United's Newark hub remains the country's most profitable airport operation in terms of profit margin.
Still, being the world's largest carrier means having a major presence in New York. "The battle for New York isn't over yet," said aviation consultant Bob Mann. "If American had emerged alone from bankruptcy, I think it would have been largely over, but the US Airways/American tie-up means there may be a second campaign."
So far, US Airways has said little about its plans for New York. Asked in a recent interview how US Airways' Philadelphia and American's Kennedy hubs would be integrated, President Scott Kirby said the two "are complementary today (because) Kennedy is mostly a local market, serving customers to and from New York," while Philadelphia is both a large local market and a major connecting hub with 437 daily departures to 113 destinations, 86 of which are domestic.
By contrast, American's JFK operation offers 92 daily departures to 48 destinations, just 29 of which are domestic. A high percentage of its passengers originate locally. Delta today is the largest carrier at JFK in terms of capacity, with about 40% of the available seat miles, while JetBlue (JBLU) is the biggest in terms of departures, with an average of 112 daily and peak daily departures of 159.
Before the merger, American was looking to JetBlue to help expand its JFK connectivity. At the JP Morgan investor conference on Monday, JetBlue CEO Dave Barger said, "We look forward to deepening and expanding the relationship with American Airlines and we'll see how that plays out." American had envisioned a code-share agreement, in which the carriers can write tickets on one another's flights, and had insisted on providing for such an agreement in its contract with the Allied Pilots Association.
But the reality is that US Airways probably has limited use for a code-share agreement with JetBlue, conceived during the period when American was resisting a merger, because US Airways would prefer to use Philadelphia. Airline geeks enjoy discussing all of the barriers involved in connecting passengers between airlines at JFK (I was involved in three such discussions on Tuesday), but given the ease of connecting in Philadelphia, the discussions seem largely irrelevant.
American originally sought a contract with the Allied Pilots Association enabling code-shares equivalent to up to 50% of domestic available seat miles, but an initial tentative contract with US Airways reduced the amount to 4% and the eventual memorandum of understanding settled on 15%. Because if you have Philadelphia, who needs it?