American Airlines Showing Less Interest in California Market : Transportation: The carrier has cut its capacity in the state by 40%. Rivals say the move helps support higher fares in the state.
American Airlines, the nation’s biggest airline, is an also-ran in California.
It moved into the state in a big way when it bought AirCal three years ago, but now, it appears, American has lost some interest in California--the nation’s biggest travel market. Consider:
* It leased four former AirCal Boeing 737s to Braniff Inc., taking the aircraft out of the California market.
* It dropped all intrastate flights from Oakland.
* It reduced by half the number of its daily flights to the Los Angeles basin from San Francisco.
These actions were part of American’s plan to cut its capacity in the busy California corridor by a whopping 40% during the past 18 months.
And, according to an executive at a competing airline, these cutbacks have helped support higher air fares that have recently come under fire in the state Legislature.
“When you reduce the number of seats, you can increase the fare,” said Richard Sweet, a marketing executive with Southwest Airlines in Los Angeles. Normally, that would chase passengers away, he said, “but American has very, very loyal frequent fliers, so the strategy works for them.”
According to industry information obtained by The Times, American isn’t the only airline cutting back in California. USAir--the state’s largest carrier since its 1987 purchase of Pacific Southwest Airlines--has trimmed its capacity in California by 25% during the past 18 months. USAir said there wasn’t enough demand to support so many flights on some of its north-south routes.
But American’s cutbacks are clearly the most drastic, and they come at a time when other airlines, such as United Airlines and Southwest, are putting more planes into California. Many in the industry expect that American, as a result of its cutbacks, will soon drop to No. 3 in the state, behind USAir and United Airlines.
American acknowledges that--as its actions suggest--California is not a top priority.
“There are things we need to do everywhere, and there simply aren’t enough airplanes to do it,” American spokesman Alton W. Becker Jr. said. “We had to make judgments about which markets were most important to us. We could not sustain the level of service in California and do other things in our system.”
Becker said American doesn’t plan to restore any California flights. “We’re satisfied with our service levels in California.”
American’s cutbacks are starting to attract attention from state legislators, who complain that Californians are not getting good air service.
David A. Roberti, a Democratic state senator from Los Angeles, has proposed legislation that would set up a state office “to protect consumers from these kinds of actions,” he said.
Roberti’s legislation, approved by the Senate about two weeks ago, would create an Office of Airline Consumer Protection to monitor complaints about airlines. Though the office would not have the power to regulate airlines, Roberti contends that informed consumers can force change on an airline, even if government can’t.
The legislators are particularly concerned about air fares, which have climbed dramatically in the last decade or so. The state Public Utilities Commission found that fares between the Los Angeles basin and the San Francisco Bay Area rose 40% in that time, while average air fares elsewhere in the nation declined.
The PUC said it did not have enough information to determine why fares rose so sharply here between 1978 and 1988, and no one has linked the 10-year climb in fares to American’s actions.
However, American’s reductions raise questions about its decision to pay $225 million for AirCal, which was a major carrier between the Los Angeles basin and the Bay Area. The corridor linking the five Los Angeles basin airports with the three in the Bay Area accounts for 80% of air travel within the state.
In 1986, AirCal alone had 252 daily flights within the state. Today, after taking an ax to AirCal’s schedule, American has only 92 flights in the California corridor.
Nonetheless, industry analysts and others familiar with American say the AirCal acquisition benefited American because it gave the Dallas-based airline hard-to-get gates at Orange County’s John Wayne Airport and greater exposure in California.
“I’ve always maintained that it was a good deal for AirCal and for American,” said David A. Banmiller, a former president of AirCal who joined American after the merger as a vice president involved with its international operations. Now an airline consultant in Orange County, Banmiller said the AirCal deal gave American “greater consumer exposure in the Western marketplace, . . . a chance to put more product on the shelf.”
The fact that American is reducing its presence in California doesn’t mean that the AirCal purchase was a bad deal, Banmiller said. “Airline schedules are continually adjusted to fit changing situations.”
In the past year, American has focused its attention primarily in the East. It has pulled aircraft out of California to develop a hub in Miami. American targeted Miami to take advantage of difficulties at rival Eastern Airlines, which was weakened last year by a machinists union strike and bankruptcy court proceedings.
This year, American plans to pour resources into Dallas-Ft. Worth, its headquarters. The airline recently announced a $276-million expansion there that would add 100 daily flights and 55 airport gates, although it faces opposition in Dallas from some who think that the move will increase airport congestion.
On the West Coast, American has concentrated on creating a route network within California to feed its hub in San Jose, where, according to a recent state PUC study, it controls 50% of the traffic. For example, flights headed to the Bay Area from Burbank and Long Beach go only to San Jose.
San Jose serves as the West Coast link in American’s route system, connecting with other major points, such as Dallas and Chicago. “Our strategy is to focus on hubs, and links to the hubs,” said Becker, the American spokesman.
Typical of this strategy is American’s plan to begin service to Honolulu from San Jose next month, or its longer range goal of providing service between San Jose and Tokyo.
“American is an east-west airline,” said Paul Turk, an analyst with Avmark, a Washington aviation consulting firm. “They look to California to feed their other routes.”
