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AA trying to shore up NY base

To fight JetBlue, it's introducing new routes and intensifying its marketing

10:30 AM CST on Thursday, February 22, 2007

By TERRY MAXON / The Dallas Morning News
tmaxon@dallasnews.com

For 80 years, American Airlines Inc. has operated in New York. Of late, though, its market share in the area has been eroding, primarily because of the rapid growth of youngster JetBlue Airways Corp.

Recognizing that it needs to protect its slice of the Big Apple, American plans to announce today that it's launching new routes from the New York area airports.

More important, though, the world's largest carrier wants to start spreading the news that it intends to defend the New York market.

TOPS IN NEW YORK
Top five carriers through the New York area's primary airports* in number of passengers in 2006:
Carrier Millions of passengers Market share
Continental 20.7 19.9%
American 14.8 14.2%
JetBlue 13.6 13.0%
Delta 8.6 8.2%
Continental Express 4.7 4.5%
*LaGuardia, Kennedy, Newark and Teterboro
SOURCE: Port Authority of New York and New Jersey

"It's important to be big in New York because it is the largest, most lucrative travel market in the world," said C. David Cush, senior vice president of global sales at Fort Worth-based American.

No. 1 may be a little ambitious. Continental Airlines Inc. last year carried 20.7 million passengers, for a 19.9 percent market share at New York's airports, primarily out of Newark, N.J.

American, the longtime No. 2 in the New York region, had a 14.2 percent market share, with 14.8 million passengers. But unless it acts aggressively to hold off JetBlue, it may soon be No. 3.

JetBlue, which began flying in February 2000, carried 13.6 million passengers in 2006, good for 13 percent of the market.

Measuring just domestic service, JetBlue is second only to Continental in the market, with 13.2 million passengers to Continental's 14.4 million. American is third, with 10.8 million domestic passengers.

In total traffic, JetBlue has surpassed American at John F. Kennedy International Airport, with 11.6 million passengers to American's 7.9 million last year. As its recent weather-related problems at JFK showed, a lot of New Yorkers depend on JetBlue to fly.

But while American's relative position has slipped, it's still powerful. The New York market is so big and fragmented that no carrier has an insurmountable lead, as opposed to most large cities that have one major airline that carries over half the traffic from the main airport.

Making it there

The size of the market makes it imperative that American try to deepen its roots.

"It's where you want to be," airline consultant Darryl Jenkins said, "just because there's so many people there. It's the biggest city in the United States, so you want a big presence there."

Mr. Cush said the New York area has to be emphasized because of all the potential business travelers who work or visit there.

"When you look at the corporate base out of New York, the number of Fortune 100 and Fortune 500 firms that are based there, obviously it's significant as a financial and media center," Mr. Cush said.

"It's critical not only from a New York point-of-origin standpoint, but also for all of our corporate business. Our corporate customers in Los Angeles and Dallas count on our New York service. It's really a critical cog in our entire corporate travel proposition."

American plans to launch service in April from New York's LaGuardia Airport to Cincinnati, a major hub for Delta Air Lines Inc. In September, it plans to start service from LaGuardia to Louisville, Ky., and from Kennedy to Las Vegas, American's first Vegas service from New York.

Atlanta – Delta's largest hub, which American began serving from New York with a mix of regional and mainline jets in 2005 – will be converted entirely to the larger jets. Raleigh-Durham will get a mix of regional jets and large jets, rather than the all-regional-jet service now offered.

From Kennedy, American intends to add another daily flight to San Francisco, five more weekly flights to Port-au-Prince, Haiti, and a couple more weekly flights to Caracas, Venezuela.

It has opened about half of its new $1.1 billion terminal at JFK, with the next phase opening in May. By then, its Boeing 767-300s flown on international routes will all have lie-flat seats in the business sections, and its Boeing 777s will get them.

On its Boeing 767-200s that fly on the trans-continental routes, American has added new first-class seats, upgraded business class and put in new passenger entertainment equipment.

And American plans to tell New Yorkers about its service more loudly than in the past, even though its advertising budget for New York was already its largest.

"What the people in New York will see is a much more visible, much more aggressive American Airlines," Mr. Cush said.

"This announcement is the first of what we feel will be a series of announcements over the rest of this year to position ourselves as the airline of New York, which is what we consider ourselves to be," he said.

"You can't become the airline of New York when you've only been in existence for seven years," Mr. Cush said in a pointed reference to JetBlue. "We're part of the fabric of the city. What people will see from us over the coming months is going in and reasserting that position."

Matching JetBlue

Mr. Jenkins said American hadn't been succeeding in simply trying to match JetBlue's prices. He applauded American's approach of emphasizing quality of service, with its first-class, business-class and coach sections and wide-body jets on its trans-continental service to Los Angeles and San Francisco.

"JetBlue did change things," Mr. Jenkins said. "There is no doubt about that. For years, JFK-LAX was like one of the great routes of the world. That's where you made most of your money, with those trans-cons. JetBlue entering into those trans-con markets out of JFK really did change the dynamics."

Mr. Jenkins said American may not have focused enough on New York in the recent past, particularly since the 2001 terrorist attacks.

"Since 9/11, the attention was basically on surviving," he said. "I think the attention now is moving to making money and growing. I don't know if they wavered in their attention, but certainly they were preoccupied with other things."

Another industry consultant, Julius Maldutis, said American's new focus on New York, including service quality, was a "very important strategic" move with the strong traffic outlook for 2007.

"Consumers now are judging airlines on the quality of their service, the whole package," Mr. Maldutis said. "While everyone cut their service, Continental was the only one that maintained it – giving pillows, meals and maintaining quality of service – and it was shown that that it was the right move. In my opinion, American's move is a very important, positive move, recognizing what their public wants."

On international service to Europe, American focuses its efforts on London's Heathrow Airport, where its passengers can connect to 83 destinations through business partner British Airways PLC, including 67 to Europe.

Continental and Delta have both added a number of international destinations from Newark and JFK. In June, Continental launches service to Athens, Greece, its 16th country and 29th city across the Atlantic.

Delta touts its service to 34 international airports from JFK, and that it has more flights to more places from JFK and La Guardia than any competitor. It plans to add flights to Bucharest, Romania; London's Gatwick Airport; and Pisa, Italy, this summer.

American serves only five European cities from JFK with its own service. However, Mr. Jenkins said American's reliance on Heathrow connections and British Airways is "a "perfectly legitimate strategy. It's one that pretty much guarantees that you'll make money."

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