American Aims to Reassert Its Presence on West Coast

American Airlines formally launched its buildup of West Coast service Wednesday in a bid to recapture a bigger share of a market now dominated by United Airlines and Southwest Airlines, and in turn boost its transcontinental business.

American said that between Saturday and July 2, it will add 20 flights involving 19 cities, including new service between San Jose and airports in San Diego and Orange County.

American’s actions are unlikely to have a major impact on fares in West Coast markets, said Michael Boyd, president of Boyd Group, an airline consulting firm in Englewood, Colo.

“You have an enormous amount of air fare competition already in the West, led by Southwest,” which specializes in low fares, he said. “A couple of flights on American between San Jose and San Diego isn’t going to change things much.”

The carrier’s plan to reassert itself in California and elsewhere along the West Coast--a market it virtually abandoned in 1993 when the company was ailing financially--began last fall when it agreed to buy regional airline Reno Air for $124 million. The deal was completed in February.

Although the Reno Air deal sparked a heated dispute between American and its pilots that’s still unresolved, the airline is pressing ahead with plans to reposition Reno Air’s service as part of its Western expansion.

However, this first step does not involve Reno Air, which continues to fly as a separate carrier, American spokesman Al Becker said. “Everything we’re doing over the next several months is with American’s airplanes and people,” he said.

American, the nation’s second-largest airline and the main unit of Fort Worth-based AMR Corp., is trying to gain back much of the passenger traffic--especially the more profitable business traffic--it’s lost in the West to United and Southwest.

“It’s been kind of like Coke and Pepsi in California with United and Southwest, and now you have American coming in like RC Cola,” said Brian Harris, an analyst with Salomon Smith Barney Inc. in New York.

United, the biggest U.S. carrier and a subsidiary of UAL Corp., made a massive investment in the West in the mid-1990s by creating its Shuttle by United. Shuttle not only enabled United to better challenge low-fare king Southwest for intra-California traffic, it also boosted United’s ability to feed passengers to its more lucrative transcontinental and transpacific flights.

The benefit is not only direct--with Shuttle passengers changing planes and boarding long-haul United flights--but also indirect through United’s frequent-flier program, Harris said.

“Passengers get vested in United’s program via the Shuttle and then they’re more inclined to choose United on a transcontinental flight at a later date,” he said.

American, too, wants to offer additional short-hop service along the West Coast to enhance its appeal to corporate fliers who typically pay higher fares than leisure travelers and thus generate higher profit margins.

“American must have a strong West Coast presence,” said spokesman Becker. “It’s not only a key part of our route network, it’s a key part of our long-term success as an airline.”

United, meantime, isn’t sitting still in the West. Among other things, the carrier is about to complete a $260-million upgrade of its terminal facilities at Los Angeles International Airport, which is the airline’s newest hub.

“We’ve worked very hard to establish great positioning on the West Coast,” United spokesman Andy Plews said. “We set the pace, and American is following behind.”

Starting Saturday, American said, it will start service between San Jose and San Diego, San Jose and Orange County, and Seattle and JFK Airport in New York. On June 1, service will start from Los Angeles to Paris and Seattle to Boston, among other routes, and it will launch flights from Los Angeles to Hartford, Conn., starting July 2.

American said one-way San Jose-to-San Diego fares with 14-day advance purchase will be $64, and up to $224 for same-day walk-up purchases, roughly in line with current Southwest fares.

American also stepped up its West Coast presence by entering a reciprocal frequent-flier program with Alaska Airlines and Horizon Air, both of which are units of Alaska Air Group Inc.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Local Fliers

Southwest Airlines and United Airlines dominate the market for passengers traveling within California, but American Airlines is now expanding its modest West Coast service. Market share for passenger traffic in the state from fourth-quarter 1997 through third-quarter 1998:

*

Southwest Airlines: 52%

United Airlines: 28.1

American Airlines/ Reno Air: 8.7

Other: 11.2

*

Note: Market share figures are for passengers who begin and end their trips in California.

Source: Roberts, Roach & Associates Inc.

Researched by JENNIFER OLDHAM/Los Angeles Times