American Airlines sharpens focus on business travel
Carrier sets sights on premium traffic; Deal with JetBlue helps reel them in
April 14, 2010, 5:58 p.m. EDT By Christopher Hinton, MarketWatch
NEW YORK (MarketWatch) -- American Airlines is sharpening its focus on the premium-travel market as the economy recovers and corporations increase their travel budgets, committing billions to buy new jets and upgrade its business-class cabins.
"We love all our customers, but some travel far more frequently than others and pay for premium cabins, and we are focused on getting them the best experience with minimum hassle, and a network that is targeted to their value," said American Executive Vice President Daniel Garton, in an interview.
The Fort Worth, Texas-based carrier is one of the world's largest airlines, but ranks No. 1 for premium traffic, represented most by business travelers willing to pay for the extra comfort and service, especially on the already high-margin international routes.
But competition for those prime passengers is getting fierce, with Delta Air
Lines and Continental Airlines on American's tail to expand their market share in the global market.
To improve its position, American is pursuing a partnership with Japan Airlines to boost its transpacific market share and British Airways to strengthen its transatlantic business.
The airline recently announced it was teaming up with New York-based JetBlue Airways to add more U.S. destinations to its network to attract international business travelers seeking connections beyond the Northeast.
It's also committed some $4 billion over the next four years to replace its aging MD-80 fleet with new Boeing Co. 737-800 jets and upgrade the interiors of its long-haul 767s and narrow-body 757s, according to Garton.
Garton said the airline is also waiting "patiently" for its first Boeing 787 Dreamliner, scheduled for delivery in 2012.
Meanwhile, the airline has spruced up its long-haul business-class cabins, adding deep reclining seats, quality food choices and expanded entertainment services.
"American Airlines has always been highly regarded by business travelers," said Kevin Mitchell, head of the Business Travel Coalition, an industry group.
"Pre-flight meals, airline clubs, comfortable seats, power for laptops, good onboard service, entertainment systems are all valued by business travelers on long-haul flights," he said.
But at the end of the day, business travelers want to get to their destination, albeit refreshed and ready to go to work. And while American is struggling to get its alliances and partnerships in line to enhance its offers, some rivals are making gains.
Year-to-date through March, international traffic at Continental surged 11% with sharp gains in its transpacific and transatlantic markets as it added new destinations, while American's international traffic was up just 1.7%.
Garton concedes that other airlines have a wider breadth of service than American -- hence the recent deal with JetBlue -- but its hub operations are also in the world's top premium markets: Dallas/Fort Worth, New York, Miami, and Los Angeles.
And that gives them a certain edge.
"In the markets that are most important, we have it covered, particularly for the business traveler," Garton said.
Having more daily flights to London's Heathrow, the world's busiest airport at one of the centers of global finance, is far more valuable than a route to Venice, he added.
And size matters. Pointing to Heathrow, New York's JFK, Tokyo's Narita Airport, and Los Angeles International, Garton said, "if you compare them to some of these other markets for premium customers, it's unbelievable how much larger they are."
Christopher Hinton is a reporter for MarketWatch based in New York.